U.S. stocks rose, halting the longest slump this year for the Standard & Poor’s 500 Index, as an unexpected drop in jobless claims overshadowed concern that a budget impasse could hurt economic growth.
EBay Inc. jumped 4.5 percent after agreeing to buy Braintree for $800 million to expand its mobile-transactions business. Bed Bath & Beyond (BBBY) Inc. added 4.5 percent after raising the low end of its earnings forecast. Eli Lilly & Co. fell 3 percent as its experimental drug ramucirumab failed to meet its goals for treating breast cancer in a late-stage trial. Hertz Global Holdings Inc. sank 16 percent after cutting its forecasts.
The S&P 500 rose 0.3 percent to 1,698.67 at 4 p.m. in New York, extending its third-quarter rally to 5.8 percent. The Dow Jones Industrial Average climbed 55.04 points, or 0.4 percent, to 15,328.30. About 5.3 billion shares changed hands on U.S. exchanges, 8.6 percent below the three-month average.
“Economic news have been reasonably good,” Mark Foster, chief investment officer who oversees $620 million at Kirr Marbach & Co. in Columbus, Indiana, said in a telephone interview. “On the negative side, we have the short-term budget issues and debt ceiling. I don’t think that’ll end up being a major issue. People just get somewhat immune to all of that.”
The benchmark index declined 1.9 percent during a five-day losing streak through yesterday, retreating from an all-time high on Sept. 18, when the Federal Reserve refrained from reducing the pace of stimulus. Investors have been watching economic reports to help determine whether growth is sufficient for the central bank to begin cutting bond purchases at its next meeting in October.
A Labor Department report today showed the number of Americans filing applications for unemployment benefits unexpectedly fell last week, indicating further progress in the labor market. The economy expanded at faster pace in the second quarter from the previous three months, with gross domestic product rising at a 2.5 percent annualized rate, the Commerce Department said.
A separate report added to signs that rising mortgage rates may have slowed housing market momentum. Fewer Americans signed contracts in August to buy previously owned homes, figures from the National Association of Realtors showed. Data yesterday indicated purchases of new homes rose in August, capping the weakest two months this year.
Investors are also weighing whether lawmakers can avoid a looming government shutdown, with the S&P 500 paring an earlier gain of as much as 0.7 percent after House Speaker John Boehner, an Ohio Republican, said he doesn’t expect his chamber to pass a stopgap spending bill expected from the Senate. He also said he does not expect a government shutdown to happen.
The Senate likely will not vote on its version of the bill until this weekend, leaving the House just one full workday to act before spending authority for the federal government expires on Oct. 1. The House and Senate are at odds over language that withdraws funding for the 2010 health-care law.
The Office of Management and Budget estimated 30 days of shutdowns in 1995 and 1996 cost more than $1.4 billion, or $2.09 billion in today’s dollars.
On another fiscal front, Treasury Secretary Jacob J. Lew told Congress yesterday that the extraordinary measures being used to avoid breaching the debt ceiling “will be exhausted no later than Oct. 17.” Failure to increase the debt limit could lead to a downgrade of the U.S. government’s credit rating.
The S&P 500 (SPX)’s losing streak through yesterday was the longest since Dec. 28, when lawmakers wrangled over impending automatic spending cuts and tax increases known as the fiscal cliff. The index dropped as much as 3.4 percent over the last two weeks of 2012 and then jumped 5 percent in January for the best start to a year since 1997 after a last-minute budget deal was struck.
“Washington has been dragging their feet as of late but eventually they’ll be forced into action,” said Patrick Spencer, head of U.S. equity sales for Robert W. Baird & Co. in London. “We’ve been down this road before. It’s quite natural and healthy to have pull-backs in a bull market. We’ll shift into a stronger gear with a settlement on the budget and what I think will be a very positive earnings season.”
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, rose 0.4 percent to 14.06 today. The measure has fallen 17 percent this quarter.
Nine of 10 main groups in the S&P 500 advanced, with phone stocks and producers of consumer-discretionary products rising 0.9 percent. Nike Inc., which reported better-than-estimated quarterly earnings after the market’s close today, rose the most in the Dow, climbing 2.1 percent to $70.34. The stock added 5.6 percent to $74.30 at 4:34 p.m. in New York.
EBay climbed 4.5 percent to $56.64, its biggest rally since January. The owner of electronic-payments service PayPal said it will bolster that business by buying Braintree, a global payments platform that works with online and mobile-only startups such as room-rental service Airbnb and online restaurant-reservation company OpenTable Inc.
Bed Bath & Beyond gained 4.5 percent to $77.54. The retailer predicted full-year adjusted earnings per share of $4.88 to $5.01, up from a previous range of $4.84 to $5.01.
Air Products & Chemicals Inc. added 2.3 percent to $109.78. The industrial gas producer said Chairman and Chief Executive Officer John E. McGlade (ADP) will leave and it will add three independent directors, less than two months after investor William Ackman’s Pershing Square Capital Management LP became the company’s largest shareholder.
J.C. Penney (JCP) Co. climbed 3 percent to $10.42, halting a six-day slide that peaked with a 15 percent plunge yesterday. The department-store chain repeated that it expects positive sales trends in the second half of the year, with some key items and sizes helping sales at stores and online. The shares have plunged 47 percent this year amid concern that it is running out of cash.
Eli Lilly fell 3 percent to $51.04. Lilly is counting on experimental drugs for Alzheimer’s, cancer and diabetes to revive growth as the company loses patent protection on some of its top products, including the antidepressant Cymbalta.
Hertz sank 16 percent, the most since May 2009, to $21.63. The rental-car company trimmed its forecast for full-year revenue and profit, citing weaker than anticipated car rentals at U.S. airports.
Jabil (JBL) Circuit Inc. lost 9.9 percent to $21.62 for the biggest retreat in the S&P 500. The electronics company that counts BlackBerry Ltd. as its second-largest customer said yesterday it will probably disengage from the struggling Canadian device maker in coming months. Jabil also forecast first-quarter profit below analyst estimates.
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