U.S. Stocks Rise on Speculation About Obama’s Job Growth Plan
U.S. stocks rose, giving the Standard & Poor’s 500 Index its biggest rally in two weeks, as investors speculated President Barack Obama’s plan to inject more than $300 billion into the economy will bolster growth.
All 10 groups in the S&P 500 advanced as gains were led by financial, energy and industrial shares. Bank of America Corp. (BAC) added 7 percent after a shakeup in management. Yahoo! Inc. climbed 5.4 percent as the most-visited U.S. Web portal ousted Chief Executive Officer Carol Bartz and announced a strategic review to boost growth. Nvidia Corp. (NVDA) jumped 8.1 percent as the maker of graphics chips forecast sales that beat estimates.
The S&P 500 rallied 2.9 percent to 1,198.62 at 4 p.m. in New York. The benchmark gauge for American equities fell 4.4 percent over the previous three days. The Dow Jones Industrial Average added 275.56 points, or 2.5 percent, to 11,414.86.
“The market is trying to feel the ground for a bottom,” Barry James, president of James Investment Research Inc. in Xenia, Ohio, said in a telephone interview. His firm oversees $2.5 billion. “It’s maybe going in the right direction with the president showing a little more of a pro-business, pro-growth concept. If they can agree to something in Washington that’s along those lines, we’ll be pretty happy.”
The Dow lost 4.1 percent in the first three days of this month. That’s the worst start to September since 2002 and the fourth-worst ever for the Dow, according to data dating back to 1896 compiled by Bloomberg. In the three instances in which the September starts were worse -- 1931, 1946 and 2002 -- the index posted full-year losses of at least 8.1 percent, the data show.
Stocks rose today as President Obama plans to unveil his proposals for promoting job growth in an address to a joint session of Congress tomorrow. He plans to propose sparking job growth by injecting more than $300 billion into the economy next year, mostly through tax cuts, infrastructure spending and direct aid to state and local governments.
The Fed said the economy grew at a slower pace in some regions of the country as shoppers limited their spending and factories curbed production. “Economic activity continued to expand at a modest pace, though some districts noted mixed or weakening activity,” the Fed said today in its Beige Book survey, which covers the second half of July until Aug. 26.
“The Beige Book is consistent with the mixed signals that we’re getting from economic indicators,” Walter Todd, who helps manage $940 million at Greenwood Capital in Greenwood, South Carolina, said in a telephone interview. “People will be waiting to hear what the president will say tomorrow. You’ve got to be somewhat nimble in this market and take advantage of opportunities as they arise.”
Federal Reserve Bank of Chicago President Charles Evans called for more stimulus to reduce a 9.1 percent jobless rate, including a commitment to keep interest rates low until unemployment falls to around 7.5 percent while holding medium- term inflation below 3 percent.
“Given how truly badly we are doing in meeting our employment mandate, I argue that the Fed should seriously consider actions that would add very significant amounts of policy accommodation,” he said in a speech in London.
The Morgan Stanley Cyclical Index of 30 companies most-tied to the economy rallied 3.4 percent. The Dow Jones Transportation Average, also a proxy for economic growth, added 3.4 percent. Chevron Corp. (CVX) advanced 3.9 percent to $99.29. General Electric Co. (GE) rose 3.6 percent to $15.80.
Bank of America gained 7 percent, the most in the Dow, to $7.48. The lender’s most richly compensated executive, Thomas K. Montag, may become a future candidate for the top job after a shakeup elevated him to co-chief operating officer at the money- losing bank.
Chief Executive Officer Brian T. Moynihan is counting on a new lineup to reverse the bank’s fortunes after he posted a record $8.8 billion quarterly loss, spent $30 billion to clean up faulty mortgages and sold $35 billion of assets and preferred shares to rebuild capital.
The KBW Bank Index (BKX) rallied 5.9 percent as all of its 24 stocks advanced. The gauge had tumbled 6.1 percent in two days as the U.S. sued 17 banks to recoup $196 billion spent on mortgage-backed securities bought by Fannie Mae and Freddie Mac. The Federal Housing Finance Agency accuses the banks of misleading Fannie Mae and Freddie Mac about the soundness of the mortgages underlying the securities.
Yahoo climbed 5.4 percent to $13.61. Bartz said in a memo to staff yesterday that she was fired by Chairman Roy Bostock by telephone. The company said Chief Financial Officer Tim Morse will be interim CEO. Under Bartz, who took over as CEO in January 2009, Yahoo has frustrated investors and failed to keep Google Inc. and Facebook Inc. from siphoning off Internet users and advertising revenue.
Nvidia jumped 8.1 percent to $14.25. Revenue will be $4.7 billion to $5 billion in the 12-month period that begins Jan. 30, Santa Clara, California-based Nvidia said in a statement yesterday. Analysts surveyed by Bloomberg estimated sales, on average, of $4.47 billion.
Apple Inc. (AAPL) was the most-held stock among the top 50 hedge funds in the second quarter, while Wells Fargo & Co. (WFC) and Merck & Co. were the companies most-owned by the biggest equity mutual funds, according to Citigroup Inc. (C)
Cupertino, California-based Apple has held the top position in the hedge-fund category since the third quarter of 2010, Tobias Levkovich, Citigroup’s chief U.S. equity strategist, wrote in a Sept. 6 note. It’s owned by 16 of the 50 largest U.S. hedge funds. Wells Fargo, based in San Francisco, and Whitehouse Station, New Jersey-based Merck were owned by 17 of the largest 50 mutual funds in the three months ended June 30.
“Apple retains the top spot for both growth and value hedge funds,” Levkovich wrote. “The overlap in top stocks for these two investment styles implies a degree of consensus within the hedge-fund world and possibly a break from some firms’ traditional investment styles.”
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