U.S. Stocks Gain on Bank Dividend Increases, Libya Cease-Fire
U.S. stocks advanced, paring a weekly decline, as the Federal Reserve cleared the way for lenders to boost dividends, Libya announced a cease-fire and central banks worked to support Japan’s economy.
The KBW Bank Index (BKX) of 24 companies rallied 1.1 percent as the Fed said some of the largest banks are strong enough to restart or increase dividend payments, buy back shares or repay government capital. Caterpillar Inc. (CAT) rose 1.9 percent after saying that retail machine sales jumped 59 percent worldwide. Nike Inc. (NKE) fell 9.2 percent as the world’s largest sporting goods company reported profit that missed analysts’ estimates.
The S&P 500 advanced 0.4 percent to 1,279.21 at 4 p.m. in New York, rallying for a second day. The gauge pared its weekly decline to 1.9 percent. The Dow Jones Industrial Average increased 83.93 points, or 0.7 percent, to 11,858.52 today.
“It’s a return to normalization,” said Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., which manages $341.3 billion. “The Fed is saying what investors want to hear. It’s allowing banks to create value to shareholders. In addition to that, we have positive news on the international front,” he said. “People will be moving back aggressively into stocks as soon as we get more clarity about Japan’s nuclear situation and the geopolitical unrest.”
The S&P 500 has fallen 4.8 percent from its 32-month high in February on concern Japan’s worst earthquake and surging oil prices will hurt the global economic recovery. The index had a three-day slump through March 16, sending the S&P 500 to the lowest valuation since November at 14.7 reported earnings, according to data compiled by Bloomberg.
The S&P 500 Financials Index gained 1.1 percent, the biggest rally among 10 industries, as 68 of its 81 stocks rose.
The Fed said some of the 19 largest U.S. banks will be able to restart dividend payments, buy back shares or repay government capital after “significant improvement” in their capital positions and the economy.
JPMorgan Chase & Co. (JPM), the second-largest U.S. bank by assets, raised its quarterly payout to 25 cents a share from 5 cents and authorized a $15 billion stock buyback. Wells Fargo & Co. (WFC) authorized the repurchase of 200 million shares and a special dividend of 7 cents a share, which will raise the first- quarter payout to 12 cents.
U.S. Bancorp, BB&T
U.S. Bancorp, Minnesota’s largest lender, raised its quarterly dividend to 12.5 cents a share from 5 cents. The bank authorized the purchase of 50 million shares through December. BB&T Corp. (BBT), the ninth-largest U.S. bank by deposits, said it will increase its dividend to 16 cents a share from 15 cents. SunTrust Banks Inc. (STI) said it will sell $1 billion in common stock and $1 billion in debt as it seeks to repay $4.85 billion in U.S. bailout funds.
KeyCorp., Ohio’s second-biggest bank, said it is selling $625 million in stock and also issuing debt to help repay a U.S. bailout. State Street Corp. (STT) raised its quarterly dividend to 18 cents a share from 1 cent a share. Citigroup Inc. (C) said it expects to be able to return capital to shareholders next year.
JPMorgan rallied 2.7 percent to $45.74. Wells Fargo added 1.5 percent to $31.83. U.S. Bancorp advanced 1.1 percent to $26.65. BB&T rose 0.5 percent to $27.01. SunTrust climbed 4.7 percent to $29.59. KeyCorp (KEY) jumped 0.8 percent to $8.92. State Street rose 2.2 percent to $44.37. Citigroup gained 1.1 percent to $4.50.
Goldman Sachs Group Inc. (GS) rose 2.7 percent to $159.96. The fifth-biggest U.S. bank by assets will buy back $5 billion of preferred stock sold to Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) at the height of the 2008 financial crisis and won approval from the Fed for a dividend increase and buyback.
Berkshire Hathaway Class B shares rallied 0.9 percent to $83.48.
Crude oil fell as Libya said it’s ceasing all military action and will start talks with the opposition, bolstering chances of a resolution to the conflict that has cut shipments from the country. Libyan Foreign Minister Moussa Koussa made the announcement in a televised news conference carried by Al Arabiya TV.
In Japan, the Nikkei 225 (NKY) Stock Average rallied 2.7 percent, paring its worst weekly performance since 2008. The Group of Seven nations jointly intervened in the foreign exchange market for the first time in more than a decade after Japan’s currency soared, threatening its recovery from the March 11 earthquake. G-7 finance chiefs said in a joint statement after a conference call they will “provide any needed cooperation” with Japan.
“We’ve put some money to work,” said Michael Mullaney, who manages $9.5 billion at Fiduciary Trust Co. in Boston. “There’s good news coming out of Libya because, of course, you don’t want to see a United States intervention. It’s also nice to see the coordination among the G-7 nations because a stronger yen is not in the best interest of the Japanese as they are restarting their economy.”
Caterpillar rose 1.9 percent to $105.06. The largest maker of construction equipment said February retail sales of machines jumped 59 percent worldwide for the three-month rolling period compared with the same months the prior year. The information was disclosed in a regulatory filing.
Cisco Systems Inc. (CSCO) rallied 0.8 percent to $17.14. The largest maker of networking equipment said its first cash dividend ever will be 6 cents a share, aiming to give a boost to investors after the shares fell 35 percent in the past year. The dividend will be paid April 20 to shareholders of record on March 31.
Nike retreated 9.2 percent to $77.59. The world’s largest sporting goods company reported profit that missed analysts’ estimates for the first time in 19 straight quarters, amid higher costs. Net income rose to $1.08 a share in the third quarter ended Feb. 28, the company said yesterday in a statement. That compared with the $1.12 average of estimates compiled by Bloomberg.
Investors who were optimistic before the crisis at Japan’s nuclear plant should stick with their outlook and buy U.S. equities as earnings expand, even after the biggest surge in volatility since May, according to UBS AG.
“Market volatility should come down,” Jonathan Golub, chief U.S. equity strategist at UBS, said in an interview on Bloomberg Television’s “In the Loop with Betty Liu.” “If you were optimistic before, looking at the fact that employment’s getting better, manufacturing’s getting better and the stock market is cheaper, I’d be a buyer at the current level.”
The VIX, as the Chicago Board Options Exchange Volatility Index is known, soared as much as 46 percent at the beginning of this week for the biggest three-day gain since May. It fell 7.3 percent to 24.44 today. Golub said the volatility jump isn’t a reason to change investment outlooks because fundamentals remain intact.
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