Bloomberg News

U.S. Stocks Advance as Russell 2000 Reverses Amid Data

May 16, 2014

Housing Starts

A pump boom pours concrete into the foundation of a house being constructed at the Norton Commons subdivision in Louisville, Kentucky. The pace of U.S. home construction jumped in April to its highest level since November, Commerce Department figures showed today. Photographer: Luke Sharrett/Bloomberg

U.S. stocks rose, after the Standard & Poor’s 500 Index had its worst day in a month yesterday, as small-cap shares reversed declines amid a faster-than-forecast gain in the pace of home construction.

The Dow Jones Internet Composite Index jumped 0.5 percent after earlier falling 0.7 percent. Nordstrom Inc. jumped 15 percent as the luxury department-store chain reported quarterly results that exceeded estimates. Verizon Communications Inc. added 2.3 percent as Warren Buffett’s Berkshire Hathaway Inc. disclosed a stake. Chesapeake Energy Corp. sank the most in the S&P 500 after saying it will cut half its workforce.

The S&P 500 climbed 0.4 percent to 1,877.86 at 4 p.m. in New York, erasing its loss for the week. The gauge extended gains today after falling to its average price over the past 50 days, a level technical analysts consider significant. The Dow Jones Industrial Average added 44.50 points, or 0.3 percent, to 16,491.31. The Russell 2000 Index of small stocks jumped 0.6 percent, after earlier falling 0.7 percent. About 5.8 billion shares changed hands on U.S. exchanges, 13 percent below the three-month average.

“When you have sharp sell-offs, you have a lot of buyers on the sidelines waiting for that weakness,” James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees about $357 billion in assets, said by phone. “Certainly the housing numbers calmed a fair number of fears. People feel secure after a 1 percent sell-off and want to go long into the weekend.”

Housing Starts

A report today indicated the pace of U.S. home construction jumped in April to its highest level since November, exceeding all analysts’ forecasts and showing builders returned to sites after freezing temperatures restrained work earlier this year. A surge in construction of multifamily dwellings helped overcome slack demand for single-family homes.

Separate data showed consumer confidence fell this month after reaching a nine-month high in April. The preliminary reading of the Thomson Reuters/University of Michigan index of sentiment dropped to 81.8 from 84.1, economists surveyed by Bloomberg said.

Federal Reserve Chair Janet Yellen said the U.S. economy has further to go to achieve full health and predicted small businesses will play a vital role in the recovery.

Fed Watch

Job creation is “crucial to this process,” and small companies “are responsible for a large share” of new employment, Yellen said yesterday in Washington.

Fed policy makers said last month the economy is showing signs of picking up and the job market is improving. The central bank pared its monthly asset-buying and said further reductions in “measured steps” are likely. Interest rates will probably remain low until mid-2015.

Three rounds of monetary stimulus have helped fuel economic growth, sending the S&P 500 (SPX) surging as much as 180 percent from its 2009 low.

The Chicago Board Options Exchange Volatility Index (VIX), a gauge for U.S. stock volatility known as the VIX, dropped 5.5 percent to 12.44. The measure has lost 3.7 percent this week.

Nine of the 10 main S&P 500 groups rose today,with phone shares surging as Verizon advanced 2.3 percent to $49.07 for the biggest gain in the Dow. Berkshire held 11 million Verizon shares as of March 31, Buffett’s company said yesterday in a regulatory filing.

The acceleration in home construction resulted in an increase of just 0.4 percent for an S&P index of homebuilders as starts on projects such as condominiums and apartment buildings accounted for almost all of the April gain.

Nordstrom, Penney

Nordstrom jumped 15 percent to a record $70.55. The largest U.S. luxury department-store chain posted quarterly results that topped estimates, helped by sales at its lower-priced Rack outlets and online.

J.C. Penney (JCP:US) Co. rallied 16 percent to $9.73. The department-store chain that’s posted more than $2.5 billion in losses the past three years reported its first quarterly sales gain since 2011. While the company is still losing money, the first-quarter loss was narrower than analysts expected, and the retailer bolstered its finances with a larger credit line.

Autodesk Inc. added 8.1 percent to $51.67. The maker of architectural and engineering software predicted annual sales will climb as much as 6 percent this year, up from an earlier forecast for as much as 5 percent. First-quarter revenue of $593 million beat the $568 million average analyst estimate compiled by Bloomberg.

Red Lobster

Darden Restaurants dropped 4.3 percent to $48.49. The restaurant operator agreed to sell the Red Lobster seafood-restaurant chain to Golden Gate Capital for $2.1 billion, giving it an injection of cash and time to focus on reviving growth in its Olive Garden business.

Chesapeake Energy sank 4.7 percent to $27.64. The U.S. natural gas explorer that was on the verge of running out of cash two years ago plans to shrink its workforce by half to the smallest since 2006 in a rig spinoff by the end of next month.

World Wrestling Entertainment Inc. slumped 43 percent to $11.27 for the biggest drop since its debut in 1999. The company said its new online TV network that began operating Feb. 24 will need 1.3 million subscribers to make up for lost business. WWE predicted it will reach 1 million subscribers this year.

To contact the reporters on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net; Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeremy Herron, Jeff Sutherland


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Companies Mentioned

  • JCP
    (JC Penney Co Inc)
    • $11.2 USD
    • 0.40
    • 3.57%
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