U.S. stocks rose, led by automakers and technology companies, as a Senate panel voted to authorize military action in Syria and the Federal Reserve said the economy maintained a “modest to moderate” pace of growth.
Ford Motor Co. and General Motors Co. rallied at least 3.5 percent after sales beat forecasts. Micron Technology Inc. and SanDisk Corp jumped more than 3.3 percent after a fire forced rival SK Hynix Inc. to suspend operations at a factory in China. Apple Inc. gained 2.1 percent as Cantor Fitzgerald LP initiated coverage of the shares with a buy rating and amid speculation that the company may team up with China Mobile Ltd.
The Standard & Poor’s 500 Index rose 0.8 percent to 1,653.08 at 4 p.m. in New York. The Dow Jones Industrial Average added 96.91 points, or 0.7 percent, to 14,930.87. About 6.1 billion shares changed hands on U.S. exchanges, in line with the three-month average.
“Managers actually are fairly bullish on the environment,” Arvin Soh, a New York-based portfolio manager with GAM, said by phone. His firm has more than $120 billion under management. “The view has been, ‘yes we have some serious issues with Syria, but at the end of the day, growth is improving.’”
The S&P 500 (SPX) briefly pared its gain after the Senate Foreign Relations Committee voted to authorize President Barack Obama to conduct a limited U.S. military operation in Syria, the first step toward congressional endorsement of the effort. Republican House Speaker John Boehner yesterday said he supports Obama’s call for military action. The full Senate is expected to consider the resolution on Sept. 9.
The Fed said today the economy continued to grow from early July through late August, even as borrowing costs increased. The central bank’s Beige Book survey of economic conditions in 12 Fed districts showed consumers spent more on travel and tourism, while manufacturing expanded “modestly.”
Fed officials have been scrutinizing data to determine the timing and pace of any reduction in its $85 billion in monthly bond buying. The central bank, which has said it may pare stimulus if the U.S. economy improves in line with its forecasts, will hold its next policy meeting on Sept. 17-18.
Figures from the Labor Department on Sept. 6 may show payrolls increased in August and the jobless rate held at 7.4 percent. A report from Automatic Data Processing Inc. tomorrow is expected to indicate that companies hired fewer workers than in July. A manufacturing gauge published yesterday reached a two-year high.
“The employment number is going to help drive the Fed,” Jim Landreth, a portfolio manager with 300 North Capital LLC in Pasadena, California, said by phone. His firm oversees $640 million. “The Fed is going to be careful. They don’t want rates to spike up again because housing has been one of the fundamental underpinnings of this recovery.”
The S&P 500 has lost 3.3 percent from a record on Aug. 2 amid speculation the Fed will scale back its bond buying. The stimulus has helped push the benchmark equity gauge up 144 percent from its March 2009 low. There have been signs that the housing recovery has begun to slow, including a drop in sales of previously owned homes in July, as yields on 10-year Treasury notes rose to a two-year high last month.
Citigroup Inc. downgraded U.S. equities to underweight today, saying valuations are “not as attractive as other parts of the world.” The firm upgraded the U.K. and emerging markets. These areas “appear the cheapest major regions across the world,” strategists including Robert Buckland and Tobias Levkovich wrote in a note.
Emerging markets have a trailing price-to-earnings ratio of 11.8 and the U.K. has a multiple of 13.3, the firm said. The benchmark gauge for U.S. equities trades at 15.9 times profit, according to data compiled by Bloomberg.
The Chicago Board Options Exchange Volatility Index (VIX), or VIX, slipped 4.4 percent to 15.88 today. The equity volatility gauge is down 12 percent this year.
All but two of 24 S&P 500 industry groups advanced. Automakers surged 3 percent for the best performance, as U.S. car and light-truck sales rose 17 percent to 1.5 million units, the most since May 2007, according to researcher Autodata Corp. That exceeded the average 14 percent gain estimated by 10 analysts in a survey by Bloomberg News.
Ford climbed 3.5 percent to $16.91 after posting a 12 percent increase. GM gained 5 percent to $35.85 as sales grew 15 percent.
Micron (MU) jumped 5.3 percent to $14.75 while SanDisk advanced 3.3 percent to $57.14. SK Hynix, the world’s second-largest maker of computer-memory chips, is ascertaining if there are any casualties and investigating the cause of the fire, which occurred at a plant in Wuxi, China.
Apple advanced 2.1 percent to $498.69. Cantor’s 12-month share-price estimate was $777 (AAPL), 59 percent higher than yesterday’s close of $488.58. The world’s biggest technology company announced a Sept. 10 event at which it will unveil new models of the iPhone. The next day, it will host an event in Beijing, spurring speculation that Apple may announce an agreement with China Mobile, according to Reuters.
Apple may sell more than 5 million iPhones to China Mobile in the December quarter, with the potential subscriber base at the Chinese wireless carrier reaching 38.7 million next year, Brian Marshall, an analyst with International Strategy & Investment Group, estimated in a note yesterday.
Networking-equipment makers rallied after Ciena Corp. posted profit and sales that beat analysts’ estimates. Ciena, which provides fiber-optic networking gear for carriers such as AT&T Inc., jumped 14 percent to $23.54. Phone stocks rallied 1.3 percent as a group, the most among 10 main S&P 500 industries.
Juniper Networks Inc. climbed 6.5 percent to $20.72 while JDS Uniphase Corp. increased 5.9 percent to $13.70.
J.C. Penney & Co. gained 6.1 percent to $13.50 after Glenview Capital Management LLC raised its stake in the department-store chain to 9.1 percent. Glenview joined J. Kyle Bass in boosting its Penney holdings, becoming the biggest shareholder in a bet the retailer will recover after Bill Ackman ended a revamp effort last month. Bass’s Hayman Capital Management LP holds 11.4 million shares.
Dollar General (DG) Corp. added 4.7 percent to a record $56.39. The discount retailer reported second-quarter adjusted profit of 77 cents per share, beating the 74 cents estimated by analysts in a Bloomberg survey. Competitor Dollar Tree Inc. rose 3.1 percent to $54.17.
E*Trade Financial Corp. rallied 8.1 percent to $15.71, the biggest gain in the S&P 500. The online brokerage said a subsidiary will pay a $100 million dividend to the parent company and plans to make similar payments every quarter.
Microsoft Corp. lost 2.2 percent, the most in the Dow, to $31.20. Morgan Stanley downgraded the world’s biggest software maker to equal weight, a rating comparable to neutral, from overweight, which is similar to buy. The company’s 5.44 billion-euro ($7.2-billion) deal to with Nokia Oyj’s devices unit brings execution risks and increased expenditure, the brokerage wrote in a note.
LinkedIn Corp. fell 2.9 percent to $238.93. The owner of the world’s biggest professional-networking website said in a filing it plans to sell 4.17 million shares of its Class A stock. LinkedIn estimated it will raise $1 billion from the sale, based on a closing price of $240.04 on Aug. 30.
SAIC (SAI) Inc. tumbled 4.9 percent to $14.41. The company, which provides scientific services for government agencies related to national security, posted second-quarter revenue that missed analysts’ estimates and cut its annual sales forecast.
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