S&P 500 Erases Loss as Fed Minutes Show Stimulus Support

Aug. 22 (Bloomberg) -- Barry Bannister, a strategist at Stifel Nicolaus & Co., talks about the outlook for the U.S. equity market, Federal Reserve policy and the European debt crisis. Bannister speaks with Deirdre Bolton on Bloomberg Television's "In the Loop." (Source: Bloomberg)

The Standard & Poor’s 500 Index erased earlier losses as minutes from the Federal Reserve’s last meeting showed many policy makers favored more stimulus soon.

Apple Inc. rose 2 percent, pacing a recovery among technology companies. PulteGroup Inc. (PHM) jumped 3.9 percent as a report showed sales of existing homes climbed in July from an eight-month low. Dell Inc. (DELL) sank 5.4 percent after cutting this year’s profit forecast. Rival Hewlett-Packard Co. (HPQ) gained 1.6 percent in late trading after the world’s biggest computer maker reported profit and sales that matched analysts’ estimates.

The S&P 500 rose less than 0.1 percent to 1,413.49 at 4 p.m. in New York, after dropping as much as 0.5 percent earlier. The gauge briefly topped a four-year high yesterday. The Dow Jones Industrial Average lost 30.82 points, or 0.2 percent, to 13,172.76. Volume for exchange-listed stocks in the U.S. was 5.4 billion shares, 14 percent below the three-month average.

“The Fed minutes point slightly more in the direction of QE,” Seth Setrakian, the New York-based co-head of U.S. equities at First New York Securities, said in a telephone interview, referring to an additional round of stimulus known as quantitative easing. “It’s certainly seems to have a dovish tone, just a little bit more than what people thought before.” He said, “The market’s have become much more favorably inclined since the minutes came out.”

Many Federal Reserve policy makers said additional stimulus would probably be needed soon unless the economy shows signs of a durable pickup, according to the record of the Federal Open Market Committee’s July 31-Aug. 1 gathering released today in Washington. The S&P 500 has rallied 11 percent since June 1 on speculation global central banks will take action to stimulate growth.

Jackson Hole

Policy makers said after the meeting that they will step up record stimulus if needed to spur growth and cut a jobless rate stuck above 8 percent since February 2009. Chairman Ben S. Bernanke will have an opportunity to clarify his views in an Aug. 31 speech at a forum for central bankers in Jackson Hole, Wyoming, where he signaled a second round of bond buying by the Fed in 2010. Fed officials next meet on Sept. 12-13.

Stocks worldwide fell earlier today after a report said Japan’s trade deficit was 517.4 billion yen ($6.5 billion) in July as Europe’s sovereign-debt crisis and a slowdown in China dragged down exports.

Luxembourg Prime Minister Jean-Claude Juncker, the head of the euro group of finance ministers, said today in Athens he’s not advocating a third support package for Greece and that the country needed to press ahead with reforms it’s promised to European Union partners. Greek Prime Minister Antonis Samaras said earlier that his country needs “more air to breathe” in dealing with its debt crisis.

Greek Talks

German Chancellor Angela Merkel and French President Francois Hollande meet tomorrow to discuss the fiscal crisis, and both will talk separately with Greece’s Samaras later this week. Merkel signaled today she’s willing to discuss Greece’s request for more time to meet the terms of its international rescue, leaving the door open to potential concessions.

“The calendar is chock full of U.S. and European policy event risk over the next few weeks,” wrote a team led by Myles Zyblock, the Toronto-based chief institutional strategist at Royal Bank of Canada in a note dated today. “Given the prevailing optimism implied by market prices, we think there is room for policy disappointment.”

Apple, the world’s most valuable company, added 2 percent to $668.87. Technology companies rose 0.3 percent as a group after earlier falling as much as 0.7 percent.

Commodity shares had the biggest gain among 10 groups in the S&P 500 (SPX), rising 1 percent. Ten out of 11 members of the S&P Supercomposite Homebuilding Index (S15HOME) advanced as the gauge climbed 3.1 percent.

Homebuilders Soar

PulteGroup, the largest U.S. homebuilder by revenue, jumped 3.9 percent to $13.29 after sales of existing homes climbed 2.3 percent in July to a 4.47 million annual rate, according to data from the National Association of Realtors. The median forecast of 73 economists called for a rise to a 4.51 million pace.

DR Horton Inc. (DHI) added 4.1 percent to $19 and Lennar Corp. (LEN) rose 3.8 percent to $32.35. Toll Brothers Inc. (TOL), the largest U.S. luxury-home builder, jumped 3.8 percent to $33.01 after reporting third-quarter earnings that beat analysts’ estimates as revenue increased.

Discover, Sunrise

Discover Financial Services climbed 3.9 percent to $38.43. The Riverwoods, Illinois-based company announced a payment- processing deal with EBay Inc. (EBAY)’s PayPal unit. PayPal customers will be able to use their accounts at more than 7 million merchant locations that already accept Discover starting in 2013. San Jose, California-based EBay rallied 2.5 percent to $47.

Sunrise Senior Living Inc. (SRZ), the manager of retirement communities, surged 60 percent to $14.26. Health Care REIT Inc. (HCN), a Toledo, Ohio-based real estate fund that invests in housing and health-care properties, said it will buy Sunrise for $14.50 a share in an all-cash transaction. That’s 62 percent higher than Sunrise’s closing price yesterday. Health Care fell 2.7 percent to $58.14.

Dell fell 5.4 percent to $11.68, as the world’s third- largest maker of personal computers forecast third-quarter revenue that missed analysts’ estimates and cut its profit outlook by 20 percent. Competition from Apple Inc.’s iPad and an anemic global economic recovery is dragging down PC demand.

Hewlett-Packard

Hewlett-Packard lost 3.7 percent to $19.20 ahead of its earnings report, for the biggest decline in the Dow. Shares rebounded 1.6 percent to $19.51 at 4:50 p.m. New York time after the company reported profit excluding costs of $1 a share and $29.7 billion in sales for the third quarter, matching analysts’ predictions.

The company also cut the high end of its forecast for full- year profit, evidence of lackluster demand for personal computers and business-technology services and underscoring the turnaround challenge facing Chief Executive Officer Meg Whitman.

Industrial stocks posted the biggest losses out of 10 groups in the S&P 500, falling 0.4 percent. Caterpillar Inc. (CAT), the world’s largest maker of construction and mining equipment, retreated 1.7 percent to $88.72 after BHP Billiton Ltd. said it doesn’t expect to approve any spending on major projects this fiscal year.

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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