U.S. Stocks Gain After Data Offset Rate-Rise Concerns

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Photographer: Jin Lee/Bloomberg

A trader works on the floor of the New York Stock Exchange.

U.S. stocks rose for the third time this week as reports on leading indicators and regional manufacturing fueled optimism in the economy, overshadowing concern that interest rates may rise in the middle of next year.

Microsoft Corp. gained 2.7 percent after Morgan Stanley said the company’s anticipated Office software for Apple Inc.’s iPad could deliver $1.2 billion a year in billings. AT&T Inc. jumped 3.4 percent to lead a rally in phone stocks. Guess? Inc. slipped 3.4 percent after its full-year earnings projection trailed analysts’ predictions.

The Standard & Poor’s 500 Index (SPX) gained 0.6 percent to 1,872.01 at 4 p.m. in New York. The Dow Jones Industrial Average added 108.88 points, or 0.7 percent, to 16,331.05. Both gauges erased most of yesterday’s declines. About 6.4 billion shares changed hands on U.S. exchanges, 3.2 percent less than the three-month average.

“People assessed what Yellen said yesterday during her press conference, which allowed clearer heads to prevail,” Robert Pavlik, chief market strategist at Banyan Partners LLC, which manages $4.5 billion, said in a phone interview. “There was an overreaction to the market yesterday, and you’re essentially getting it all back today. Plus you’ve seen a slight improvement in the economic news from this morning.”

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Janet Yellen, chair of the U.S. Federal Reserve, speaks during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, D.C. on March 19, 2014. Close

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Photographer: Andrew Harrer/Bloomberg

Janet Yellen, chair of the U.S. Federal Reserve, speaks during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, D.C. on March 19, 2014.

The equities benchmark fell 0.6 percent yesterday after Federal Reserve Chair Janet Yellen said the central bank’s stimulus program could end this fall and benchmark interest rates could rise about six months later. The Fed had previously said it would not raise rates for a considerable period, without specifying a time frame.

Fed Stimulus

Quarterly Fed forecasts also showed more officials predicting that the benchmark rate, now close to zero, will rise to at least 1 percent at the end of 2015 and 2.25 percent a year later. The central bank said it would trim its monthly bond purchases by $10 billion to $55 billion.

Three rounds of Fed stimulus and low interest rates have helped boost the equity gauge as much as 178 percent from a 12-year low as U.S. stocks enter the sixth year of a bull market. The S&P 500 has climbed back to within about six points of a record close reached March 7.

Yellen also said harsh winter weather was a significant reason for weakness this year in economic data from housing to jobs.

Data today showed the world’s largest economy will strengthen after the weather-induced slowdown in the first quarter, as the index of leading indicators rose more than forecast in February.

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Fed Chair Janet Yellen also said harsh winter weather was a significant reason for weakness this year in economic data from housing to jobs. Close

Fed Chair Janet Yellen also said harsh winter weather was a significant reason for... Read More

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Photographer: Daniel Acker/Bloomberg

Fed Chair Janet Yellen also said harsh winter weather was a significant reason for weakness this year in economic data from housing to jobs.

Data Watch

Another report indicated the number of Americans filing applications for unemployment benefits held last week near the lowest level in almost four months, a sign the labor market continues to strengthen.

The Philadelphia Fed’s manufacturing gauge rose to 9.0 in March from minus 6.3 the prior month. The average estimate was for an increase to 3.2. Separate data showed purchases of previously owned homes declined in February to the lowest level since July 2012.

“The market has digested and even discounted a bit what Yellen said, and put things into perspective,” Stephen Carl, principal and head equity trader at New York-based Williams Capital Group LP, said in a phone interview. “We have to see how the economy continues to move along. People are back focusing on signs of economic growth.”

Investors also watched the situation in Ukraine, where the government in Kiev said yesterday it plans to reinforce its eastern border with Russia and withdraw troops from Crimea, ceding control of the Black Sea peninsula as tensions remained high over Russian moves to annex the breakaway region.

U.S. Sanctions

President Barack Obama said today the U.S. is imposing financial sanctions on a wider swath of Russian officials and a Russian bank as he authorized further penalties that would directly target sectors of the economy.

The Chicago Board Options Exchange Volatility Index (VIX), a gauge for U.S. stock volatility, fell 4 percent to 14.52.

Nine of the 10 main industries in the S&P 500 advanced, with phone and bank stocks rising at least 1.7 percent. AT&T jumped 3.4 percent, the most since January 2013, to $34.09 to lead gains in the Dow.

The KBW Bank Index (BKX) jumped 2.2 percent before the results of annual reviews known as stress tests. After the market close, the Fed said 29 of the 30 largest banks subjected to the tests have sufficient capital to withstand a deep recession while continuing to pay dividends. Zions Bancorporation is the only lender that came in below one of the Fed’s main capital thresholds.

Stress Tests

All 30 banks, including Zions, exceeded the minimum in a separate scenario of rising interest rates, a sign of improved capital levels in the banking system since the 2008 financial crisis.

JPMorgan Chase & Co. rallied 3.1 percent to $60.11, the highest since 2000, during regular trading. After the close of markets, Zions fell 0.8 percent to $32.72 as of 4:39 p.m. in New York.

“You’re getting leadership from some of the areas that are going to benefit from the eventual rise in interest rates, such as financials,” Banyan’s Pavlik said.

Nike Inc. jumped 0.6 percent to $79.71 in late trading. After the market close, the world’s largest sporting-goods company posted third-quarter profit that topped analysts’ estimates as shoe sales gained in North America.

Teradata, Microsoft

Teradata Corp. had the biggest advance in the benchmark S&P index during regular hours, rising 4.6 percent to $48.20. The Dayton, Ohio-based company said it has been selected by NTT Docomo Inc., Japan’s largest wireless operator, to implement a marketing operations platform for its consumer credit-services business.

Microsoft increased 2.7 percent to $40.33, the highest since July 2000. Chief Executive Officer Satya Nadella is expected to debut a version of Office for the iPad at an event next week. Morgan Stanley maintained its equalweight view on the stock.

Guess declined 3.4 percent to $27.78 after forecasting earnings for fiscal-year 2015 of $1.40 to $1.60 a share, missing the average analyst estimate of $2.03 a share. The apparel maker predicted a first-quarter net loss of 5 cents to 9 cents a share.

To contact the reporters on this story: Joseph Ciolli in New York at jciolli@bloomberg.net; Callie Bost in New York at cbost2@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeremy Herron, Jeff Sutherland

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