Breaking News

China October Manufacturing PMI 50.8; Est. 51.2
Tweet TWEET

U.S. Stocks Pare Gains Amid Rebalancing, Housing Data

U.S. stocks pared gains in the final minutes of trading before changes in MSCI indexes, offsetting a rally among homebuilders and technology shares. The Nasdaq Composite Index (CCMP) topped 4,000 for first time in 13 years.

Lennar Corp. and PulteGroup Inc. climbed at least 4.4 percent amid better-than-expected industry data. Apple rose 1.8 percent, pacing gains among technology companies. Tiffany (TIF) & Co. jumped 8.7 percent after profit topped analysts’ estimates and the jeweler boosted its forecast. Jos. A. Bank Clothiers Inc. 11 percent after Men’s Wearhouse Inc. offered to buy the apparel company for about $1.54 billion. Take-Two Interactive Software Inc. fell 5.4 percent as the gaming company said it bought back all 12 million shares held by Icahn Group.

The Standard & Poor’s 500 Index gained less than 1 point to 1,802.75 after earlier rising as much as 0.3 percent. The Dow Jones Industrial Average was little changed at 16,072.80. The Nasdaq Composite Index jumped 0.6 percent to 4,017.75, the highest close since September 2000. About 6.1 billion shares changed hands, in line with the three-month average.

“We’ve been riding a pretty good wave of momentum that’s taken the market higher than most people had expected at the beginning of the year,” Jeff Layman, chief investment officer of BKD Wealth Advisors in Springfield, Missouri, said by phone. His firm has $2.4 billion under management. “Much of that has been driven by multiple expansion, not underlying earnings growth. As we close out this year and get into 2014, that dynamic will probably change. We think it’ll be a return to focus on earnings growth.”

MSCI Changes

Stocks trimmed gains in the final 30 minutes of trading as investors sold U.S. equities to mimic changes in MSCI indexes that took effect at the close. Amendments to indexes can alter share prices as passively managed funds buy and sell stocks to mirror the benchmark gauges.

Apple, Oracle Corp. and Exxon Mobil Corp. are among companies that face the biggest decrease in weigdhting in the MSCI review, according to Societe Generale SA.

While the Nasdaq’s rally today pushed it 261 percent above its low of 1,114.11 in October 2002, the gauge still needs to advance 26 percent before reaching its all-time high of 5,048.62, set March 10, 2000, during the dot.com bubble.

The S&P 500 traded higher for most of today’s session, touching an intraday record of 1,808.42, as data showed the housing market sustained progress even as borrowing costs climbed.

Home Prices

The S&P/Case-Shiller index of property values indicated home prices in 20 U.S. cities rose by the most since February 2006 in the 12 months through September. A Commerce Department report counted more applications for home construction issued in October than at any time in the past five years.

In a separate report, confidence among U.S. consumers unexpectedly declined in November to a seven-month low as Americans grew more pessimistic about the labor-market outlook.

“We’re tending to move in a positive direction,” Kate Warne, a St. Louis-based investment strategist at Edward Jones & Co., said by phone. Her firm oversees $746 billion. “We’re getting data in a sweet spot. It’s positive but not so positive as to raise worries about the Fed moving sooner and yet it continues to show that the economy is gaining some traction.”

Policy makers have been scrutinizing data to determine whether the economy is strong enough to withstand a reduction in their $85 billion a month in bond purchases.

Fed Stimulus

Three rounds of Federal Reserve bond purchases have helped push the S&P 500 up more than 166 percent from a bear-market low in 2009. Four out of five investors expect the Fed to delay a decision to begin reducing the stimulus until March 2014 or later, according to a Bloomberg Global Poll on Nov. 19.

The S&P 500 has rallied 26.4 percent this year, challenging 2003 for the biggest annual gain since 1998, as economic data and corporate earnings have surpassed estimates. Companies in the gauge will report a 5.6 percent increase in profits for the current quarter and earnings will grow 9.9 percent next year, according to forecasts compiled by Bloomberg.

The index is trading for about 17 times its companies’ reported earnings. While the valuation is at the highest level since May 2010, it’s still below the multiples at the market’s two previous peaks, when the ratio reached 17.5 in October 2007 and 31 in March 2000, data compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index added 0.2 percent today to 12.81. The gauge of S&P 500 options known as the VIX is down 29 percent this year.

Tech Rally

Three of 10 S&P 500 industries gained, with technology and consumer-discretionary companies climbing at least 0.4 percent.

Apple jumped 1.8 percent to $533.40, the highest since January. China Mobile Ltd.’s selling of iPhone will provide a tailwind to Apple’s 2014 earnings estimates, according to Peter Misek, an analyst with Jefferies LLC.

Shares of Apple trimmed an earlier gain of as much as 2.4 percent as investors anticipated MSCI changes. Exxon Mobil slipped 0.9 percent to $94.27 while Oracle added 0.4 percent to $34.93 after rising as much as 1.1 percent.

An S&P index of homebuilders surged 4.1 percent as all its 11 members gained. Lennar climbed 5.1 percent to $36.05. PulteGroup advanced 4.4 percent to $18.95, the highest since July.

Tiffany rallied 8.7 percent to a record $88.02 for the biggest advance in the S&P 500. The world’s second-largest largest luxury jewelry retailer’s profit climbed and it boosted its annual earnings forecast as the rising U.S. stock market gave wealthy consumers the confidence to snap up higher-priced merchandise.

Suit Offers

Jos. A. Bank jumped 11 percent to $56.29 and Men’s Warehouse added 7.5 percent to $50.60. Men’s Wearhouse is turning the tables on Jos. A. Bank, which last month made an unsolicited $2.3 billion offer for its larger rival. Men’s Wearhouse rejected that bid, saying it undervalued the company, and the offer expired after a Nov. 14 deadline.

Hormel Foods Corp., the maker of Spam and Jennie-O turkeys, advanced 5.9 percent to a record $44.95 after the company reported quarterly earnings that beat analysts’ estimates and boosted its dividend to 20 cents a share, up from 17 cents.

Workday Inc. (WDAY) surged 13 percent to $82.60 after the maker of online human-resources software said it expects fourth-quarter revenue of as much as $138 million, exceeding the average analyst projection for $129 million.

Take-Two Interactive dropped 5.4 percent to $16.01. The maker of the “Grand Theft Auto” games bought the shares at yesterday’s closing price of $16.93. The New York-based company also said Icahn representatives Brett Icahn and Nelson Cho have resigned from its board. Icahn Group was Take Two’s largest shareholder.

Computer Maker

Hewlett-Packard Co. (HPQ) slipped 0.9 percent to $25.09. After the market’s close, the company reported quarterly revenue and profit that topped analysts’ estimates, boosted by corporate demand for servers, computers and networking equipment. The stock jumped 6.6 percent to $26.75 in extended trading.

Utilities dropped 1 percent for the worst performance among 10 S&P 500 industries. CenterPoint Energy Inc. slumped 5.2 percent to $23.58 and OGE Energy Corp. fell 6.9 percent to $35.32. The utility owners and partner ArcLight Capital Partners LLC said they plan to raise about $500 million next year in an initial public offering of Enable Midstream Partners LP.

10% Drop

Nuance Communications Inc. (NUAN) tumbled 18 percent to $13.10, the lowest in more than four years, after projecting full-year sales that missed analysts’ forecasts. The maker of speech-recognition software said it expects full-year 2014 adjusted revenue of $2.03 billion to $2.09 billion. Analysts on average had estimated $2.1 billion.

The S&P 500 will probably fall 10 percent in the next 12 months before rebounding to end 2014 at 1,900, according to Goldman Sachs Group Inc. The 1,900 forecast implies about a 5 percent advance from today’s level. The 25 months since the index’s last 10 percent drop is the longest stretch without such a decline since 2007, according to S&P.

“It will be less smooth sailing,” David Kostin, the bank’s chief U.S. equity strategist, said on Bloomberg Television’s “Market Makers” program. “The likelihood is we will have something that will prompt a reduction -- a retreat in the market. But overall the market should be rising, and that’s because the U.S. economy will be getting better.”

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Aubrey Pringle in New York at apringle1@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.