Bloomberg News

S&P 500 Rise Most Since March as Tensions Ease on Ukraine

August 08, 2014

U.S. stocks rose, with the Standard & Poor’s 500 Index climbing the most in five months to erase a weekly loss, as signs that tensions are easing in Ukraine outweighed concern over crises in the Middle East.

Gap Inc. advanced 5.9 percent as the retailer’s earnings and revenue topped estimates. Coach Inc. added 5.4 percent to lead a rally in apparel companies. Zynga Inc. tumbled 1.4 percent after cutting its full-year outlook. News Corp. slid 1.6 percent after fourth-quarter earnings missed estimates as the company struggled in its transition from print to digital.

The S&P 500 jumped 1.2 percent to 1,931.59 at 4 p.m. in New York, the most since March 4. The Dow Jones Industrial Average climbed 185.66 points, or 1.1 percent, to 16,553.93. About 5.6 billion shares changed hands on U.S. exchanges, 2.6 percent below the three-month average.

“For the most part the market has been pretty resilient over the last week or so,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in an interview. “It has been able to shrug off a lot of negatives and not go lower than it had.”

The S&P 500’s rally erased declines in the previous four sessions and left the index 0.3 percent higher for the week. The gauge yesterday came within 60 points of wiping out its gains for 2014 as it closed below its 100-day moving average for the first time since April. The Dow bounced back after touching its average price in the past 200 days.

Ukraine De-Escalation

Stocks jumped after RIA Novosti reported that Russia seeks a de-escalation of the conflict in Ukraine. Equities extended gains as Interfax, citing Russia’s Defense Ministry, said military exercises held since Aug. 4 near the Ukraine border are over and forces are returning to areas of permanent deployment.

The S&P 500 had dropped 3.9 percent from a record on July 24 through yesterday as Russia amassed troops along Ukraine’s border and as conflict escalated between Israel and Hamas. Equity futures retreated early today as President Barack Obama approved air strikes in Iraq, and rocket attacks marked the end of a cease-fire between Israel and Hamas.

“When you see the geopolitical news in Russia and the Middle East, it’s horrible from a humanitarian point of view for U.S. equities, but how bad is it for U.S. economic fundamentals?” Michael Purves, chief global strategist and head of equity derivatives research at Weeden & Co. in Greenwich, Connecticut, said in a phone interview. “It’s pretty distant. We’ve had a big selloff since the highs in July and in my estimations, this has been a pretty orderly retreat spurred by overstretched market conditions.”

Excessive Declines

U.S. stocks climbed amid speculation that recent declines had been excessive. Almost 80 percent of stocks in the S&P 500 closed yesterday below their average price of the past 50 days, the most since 2012, according to data compiled by Bloomberg. All but one of the 10 main industries in the index was oversold, a report from Bespoke Investment Group LLC showed.

The S&P 500 has gone without a 10 percent correction since 2011. It trades at 17.5 times the reported earnings of its companies, after reaching a four-year high of 18.3 in June.

Data today showed the productivity of U.S. workers rose more than projected in the second quarter, rebounding from the biggest drop in more than three decades and helping to restrain labor costs.

Reports last week showed U.S. gross domestic product expanded at a 4 percent annual pace in the second quarter, confirming the Fed’s view that a first-quarter contraction was transitory. Employers in the U.S. added more than 200,000 jobs for a sixth straight month in July, the longest such period since 1997.

Volatility Gauge

The Chicago Board Options Exchange Volatility Index, known as the VIX, fell 5.3 percent to 15.77, extending a weekly decline to 7.4 percent.

All 10 major industries in the S&P 500 advanced. Utilities climbed 2 percent for the largest gain.

Consumer-discretionary shares added 1.6 percent, as Gap rallied 5.9 percent, the most since November. The biggest apparel-focused retailer in the U.S. reported preliminary second-quarter earnings and revenue that beat estimates.

Coach added 5.4 percent to lead a 1.9 percent jump in apparel makers.

Nvidia Corp. (NVDA:US) gained 8.8 percent after the maker of mobile-phone chips posted second-quarter adjusted earnings of 30 cents a share. Analysts on average had predicted 26 cents (NVDA:US).

Monster Beverage Corp. (MNST:US) advanced 6.7 percent after reporting quarterly earnings of 81 cents a share. That beat the 75-cent average estimate (MNST:US) of analysts in a Bloomberg survey.

News Corp

Zynga dropped 1.4 percent after the online game company posted second-quarter results at the low end of its forecast and cut its full-year outlook after deciding to delay new games.

News Corp., which split from billionaire Rupert Murdoch’s entertainment business last year, retreated 1.6 percent. Chief Executive Officer Robert Thomson is working to transform the company’s print properties into a digital business as well as expand around the globe. The news division, which publishes the Wall Street Journal and the New York Post, continued to face difficulty at a time when advertising is fleeing print in favor of digital destinations.

Of the S&P 500 companies that have reported quarterly results so far this season, 75 percent beat analysts’ estimates for profit, while 64 percent exceeded sales projections.

To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net; Lynn Thomasson at lthomasson@bloomberg.net Jeremy Herron


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Companies Mentioned

  • NVDA
    (NVIDIA Corp)
    • $19.08 USD
    • -0.36
    • -1.89%
  • MNST
    (Monster Beverage Corp)
    • $89.78 USD
    • -0.66
    • -0.74%
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