U.S. stocks rose, erasing most of yesterday’s drop, as improving manufacturing data tempered concern about the economy and Facebook Inc.’s $19 billion purchase of a messaging startup fueled optimism about deals.
Tesla (TSLA) Motors Inc. surged 8.4 percent after predicting sales of its Model S sedan will jump. Safeway Inc. rallied 2.1 percent as people familiar with the situation said the grocer is weighing a sale. Facebook gained 2.3 percent after agreeing to buy WhatsApp Inc., the fourth deal of at least $16 billion this year. Citrix Systems Inc. rose 5.9 percent as Evercore Partners Inc. said the company’s parts are worth more than the stock price reflects. Wal-Mart Stores Inc. slipped 1.8 percent as the largest retailer forecast profit below estimates.
The Standard & Poor’s 500 Index (SPX) rose 0.6 percent to 1,839.78 at 4 p.m. in New York after retreating yesterday following an early advance that took it within one point of its closing record. The Dow Jones Industrial Average increased 92.67 points, or 0.6 percent, to 16,133.23. About 6.4 billion shares changed hands on U.S. exchanges, in-line with the three-month average.
“The underlying strength of the U.S. consumer, of U.S. corporations, is still there,” James Liu, a Chicago-based global market strategist at J.P. Morgan Funds, which oversees about $400 billion, said by phone. “On the emerging markets side, the question is whether there is contagion for the U.S. market. And I think the answer that we’ve seen is no.”
The S&P 500 slumped as much as 5.8 percent after reaching a record on Jan. 15 as investor concern about the Federal Reserve’s reductions in stimulus fueled a rout in emerging markets. The benchmark gauge has rebounded 5.6 percent since.
Investors have been dismissing lower-than-forecast U.S. economic data over the past two weeks, pointing to harsh winter weather as a reason for unexpected weakness in reports from housing to hiring. The Bloomberg ECO U.S. Surprise Index, which measures how much recent data has beaten or missed economists’ estimates, fell to minus 0.423 today, the lowest since September 2011.
Fed Chair Janet Yellen last week said the economy has strengthened enough to withstand continued cuts to monetary stimulus, adding that only a notable change in the outlook for the economy would prompt the central bank to slow the pace of tapering.
The Markit Economics preliminary index of U.S. manufacturing increased to 56.7 in February, surpassing economists’ estimates, while Labor Department figures indicated fewer Americans filed applications for unemployment benefits last week. The Conference Board’s index of U.S. leading indicators, a gauge of the outlook for the next three to six months, rose in January in line with estimates, while the Philadelphia Fed’s Business Outlook Survey for February unexpectedly declined.
Hewlett-Packard Co. and 17 other companies in the S&P 500 report results today. Earnings beat analysts’ estimates at about 74 percent of the 433 companies in the benchmark index that have posted results so far this season, according to data compiled by Bloomberg.
The Facebook acquisition was the fourth major deal this year, with Comcast Corp.’s $45.2 billion purchase of Time Warner Cable Inc. the biggest. Actavis Plc announced Feb. 18 a $21 billion deal to buy Forest Laboratories Inc. and Suntory Holdings Ltd. agreed in January to pay $16 billion for Beam Inc.
“M&A is alive and well, corporate balance sheets remain strong,” John Carey, a fund manager at Pioneer Investment Management Inc., a Boston-based firm that manages about $220 billion worldwide, said by phone. “There may be some fluctuations in the market, but when people come back and focus on the underlying fundamentals here in the U.S., I think they’re going to keep coming back to stocks.”
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, slipped 4.6 percent to 14.79 today, following a two-day gain of 14 percent.
All 10 of the main industries in the S&P 500 rose today, as phone companies rallied 2 percent to lead gains. Verizon Communications Inc. climbed 3.4 percent to $48.12 and AT&T Inc. added 1 percent to $33.18, among the biggest advances in the Dow.
Safeway Inc. (SWY) added 2.1 percent to $35.32 as it considers a sale. CVC Capital Partners Ltd. and Leonard Green & Partners LP are among the firms in talks with Safeway about buying some or all of the grocery chain as it weighs a sale, people with knowledge of the matter said.
The second-largest U.S. grocery-store chain said it plans to distribute its remaining 37.8 million shares of the Blackhawk Network Holdings Inc. gift-card business to Safeway investors and explore ways to monetize its 49 percent stake in Mexican retailer Casa Ley SA.
Tesla jumped 8.4 percent to a record $209.97. The electric-car maker said Model S deliveries will increase to 35,000 this year as sales to China begin, from about 22,450 last year. Tesla posted fourth-quarter earnings of 33 cents a share excluding some items, exceeding the 26-cent average of analyst estimates compiled by Bloomberg.
Citrix rallied 5.9 percent to $60.59. The software maker may be able to increase value by repurchasing stock, starting a dividend or committing to operating margin expansion, according to an Evercore report. The company’s individual segments may be worth $65 a share, according to the report.
Facebook rose 2.3 percent to $69.63 as the world’s biggest social network said it will pay $12 billion in stock, $4 billion in cash and $3 billion in restricted shares for WhatsApp. It is the largest Internet deal since Time Warner’s $124 billion merger with AOL in 2001, according to data compiled by Bloomberg.
Wal-Mart dropped 1.8 percent to $73.52. Chief Executive Officer Doug McMillon, who took the post earlier this month, is trying to revive Wal-Mart’s U.S. same-store sales growth after lower food-stamp payments, higher taxes and struggles to keep shelves fully stocked contributed to four straight quarterly declines. Chief Financial Officer Charles Holley said today that the economic trends, as well as higher health care costs, will continue to hurt the domestic business.
Apple Inc. fell 1.2 percent to $531.15. The iPhone maker’s market share in China declined to 7 percent in the fourth quarter from 9 percent a year earlier, market researcher Canalys said in an e-mailed statement. Samsung Electronics Co. maintained its lead over competitors as it increased its market share to 19 percent from 17 percent, the research firm said.
The S&P 500 today recouped most of yesterday’s 0.7 percent slide triggered after minutes from the Fed’s January meeting showed policy makers may soon change their guidance for interest rates as unemployment falls toward a threshold for considering an increase in borrowing costs. Several officials also said that, barring an “appreciable change in the economic outlook,” they would favor reducing the pace of bond purchases by $10 billion at each meeting.
The Fed decided at its January meeting to press on with a second cut of $10 billion to its bond buying. Three rounds of stimulus have helped push the S&P 500 as much as 173 percent higher from a 12-year low in 2009.
The International Monetary Fund said yesterday the global recovery is still weak and “significant downside risks remain,” citing increasing political tensions from Ukraine to Thailand, China’s slowdown and the Fed’s tapering of its stimulus as reasons for falling stocks and currencies in emerging markets.
Equity futures slumped before the open of exchanges amid continued turmoil in emerging markets. The MSCI Emerging Markets Index dropped 0.9 percent as at least seven people died in new clashes after a truce declared last night by Ukrainian President Viktor Yanukovych and opposition leaders foundered.
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