U.S. Stocks Rise Amid German Bailout Ruling, Fed Bets
U.S. stocks rose, with benchmark indexes trading near four-year highs, as a German court cleared the way for Europe’s bailout fund and investors weighed prospects for stimulus measures from the Federal Reserve.
Apple Inc. (AAPL) rallied 1.4 percent, reversing an earlier decline, after introducing the iPhone 5. General Electric Co. and JPMorgan Chase & Co. (JPM) added at least 0.8 percent, pacing gains among the biggest companies. PulteGroup Inc. (PHM) advanced 6 percent as homebuilders rallied. Facebook Inc. (FB) climbed 7.7 percent after Chief Executive Officer Mark Zuckerberg said he’s addressing missteps that made it hard to reap the benefits of mobile advertising.
The Standard & Poor’s 500 Index added 0.2 percent to 1,436.56 at 4 p.m. in New York, near a four-year high set last week. The Dow Jones Industrial Average rose 9.99 points, or 0.1 percent, to 13,333.35 today. About 6.2 billion changed hands on U.S. exchanges today, 2.5 percent above the three-month average.
“All eyes are expecting some sort of quantitative easing,” Joseph Tanious, a New York-based strategist at JPMorgan Funds, which oversees $394 billion, said in a telephone interview. “Central bank accommodation has been what’s helped propel this market higher.” He said, “The tail risk is being eliminated in Europe. Getting the ruling from the German Constitutional Court reinforces that we’re stepping in the right direction.”
The Fed began a two-day meeting today amid speculation policy makers will provide more stimulus. The central bank will probably announce a third round of bond purchases tomorrow, according to almost two-thirds of economists in a Bloomberg survey. The central bank will also likely commit to hold interest rates close to zero into 2015, the survey showed.
Chairman Ben S. Bernanke and his colleagues on the Federal Open Market Committee will opt for further quantitative easing to support an economy that grew at less than 2 percent in the second quarter, according to economists. The unemployment rate has remained above 8 percent for 43 consecutive months. Since Aug. 1, the S&P 500 has climbed more than 4 percent amid expectations of further easing by the central bank.
“Bernanke has adopted a very important guideline, and that is if he’s going to be wrong in the next two or three years, it’s because he kept rates too low for too long,” John Manley, who helps oversee about $204 billion as chief equity strategist for Wells Fargo Advantage Funds in New York, said in a telephone interview. “You want to err on the side of the angels, and I think he feels the angels are saying pay low rates in interest at this time.”
Stocks rose earlier as Germany’s Federal Constitutional Court dismissed motions that sought to stop the government from contributing to the rescue facility known as the European Stability Mechanism. The legal challenge delayed efforts by Chancellor Angela Merkel and other euro-area policy makers to stem the region’s debt crisis. The judges ruled that parliament must approve any increase of the country’s 190 billion euros ($245 billion) of liabilities.
The S&P 500 briefly extended gains after Bloomberg News reported France is pressing Spain to snub German concerns and request help from the European Union to contain the euro-area financial crisis, according to three people familiar with negotiations.
Telephone, industrial and financial stocks led gains among 10 groups in the S&P 500 today. General Electric added 1.4 percent to $21.89, the highest since October 2008. JPMorgan, the largest U.S. bank by assets, advanced 0.8 percent to $39.92, while property and casualty insurer Travelers Cos. climbed 0.9 percent to a record $67.54.
Apple rose 1.4 percent to $669.79 after falling as much as 0.7 percent. The world’s most valuable company introduced a new version of the iPhone that boasts a bigger screen, faster chip and access to speedier wireless networks, an overhaul aimed at widening its lead over Samsung Electronics Co. and Google Inc.
Coming almost a year after the death of Apple co-founder Steve Jobs, the next iPhone is the first hardware redesign of the product since 2010. Technology stocks rose 0.4 percent as a group.
PulteGroup rallied 6 percent to $15.55 for the second- biggest gain in the S&P 500. Ten of 11 companies in the S&P Supercomposite Homebuilding Index rallied as Credit Suisse Group AG’s August survey of real estate agents showed momentum in prices is continuing and Goldman Sachs Group Inc.’s Hui Shan wrote in a note that housing starts are showing signs of improvement after staying at depressed levels since 2009.
Weyerhaeuser Co.’s Chief Financial Officer Patricia Bedient said at a UBS AG conference that she sees a slow, steady housing recovery.
Facebook, the world’s largest social-networking website, rose 7.7 percent to $20.93 after Zuckerberg said yesterday at the TechCrunch Disrupt conference in San Francisco that the company should generate more revenue from mobile devices than from desktop computers. Shares extended gains after Apple said the iPhone 5 has a built-in application for the social network that enables photo sharing and voice-activated posts.
The remarks helped allay concerns over Facebook’s ability to generate sales from users who increasingly socialize over handheld devices. The stock had plunged 49 percent since the May 17 IPO amid signs of slowing growth and executives’ silence over plans to turn the tide. Zynga Inc. (ZNGA) jumped 10 percent to $3.07 after Zuckerberg also said business with the largest maker of social games is strong.
Kohl’s Corp. (KSS) jumped 3.4 percent to $53.77. Deutsche Bank AG’s Charles P. Grom lifted his rating on the third-largest U.S. department store to buy from hold, citing valuations and improving same-store sales.
The S&P 500 will climb another 2 percent before the benchmark U.S. equities gauge reaches a resistance level near 1,450 to 1,460, according to Bill McNamara, a technical analyst at Charles Stanley & Co. in Joenkoeping, Sweden.
Gains are set to continue as the measure is trading above key short-term moving averages, including the 21-day mean, and has held on to last week’s advance, which pushed it to the highest since 2008, McNamara said.
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