U.S. Stocks Rise on Economic Reports Amid Draghi Comments
U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a fourth day, as reports on jobless claims and factory orders were better than forecast and the European Central Bank said it stands ready to buy bonds.
All 10 industry groups in the S&P 500 advanced. Financial and commodity shares rose the most, climbing at least 1 percent, as Bank of America Corp. (BAC) and Consol Energy Inc. (CNX) rallied more than 3.3 percent. Gap Inc. (GPS) and Target Corp. (TGT) gained among retailers after monthly same-store sales topped estimates. Ryder System Inc. (R) jumped 6 percent amid an analyst upgrade.
The S&P 500 increased 0.7 percent to 1,461.40 at 4 p.m. in New York. The benchmark index for American equities has rallied 1.4 percent this week. The Dow Jones Industrial Average rose 80.75 points, or 0.6 percent, to 13,575.36 today. Volume for exchange-listed stocks in the U.S. was 6.1 billion shares, or 2.2 percent above the three-month average.
“In the last several weeks, we have coordinated global monetary stimulus, and that’s starting to show up in the change of trends in American economic statistics,” Douglas Cote, chief market strategist at New York-based ING U.S. Investment Management, said in a phone interview. His firm oversees about $165 billion. “Employment, manufacturing, services and consumer sentiment have all gone from weakening to strengthening.”
U.S. stocks rose as Labor Department figures showed applications for jobless benefits increased 4,000 to 367,000 in the week ended Sept. 29. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey. Orders placed with U.S. factories fell 5.2 percent in August, the Commerce Department said. The median forecast of economists in a Bloomberg News survey called for a decline of 5.9 percent.
Tomorrow’s government jobs report may show that the economy created 115,000 jobs last month and the unemployment rate increased to 8.2 percent from 8.1 percent, economists forecast.
The S&P 500 has rallied 16 percent this year as central banks from the U.S. to China took steps to stimulate economic growth. The Federal Reserve last month announced a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labor markets “improve substantially.”
Fed policy makers said they could change the size of the central bank’s monthly asset purchases to reduce the risks associated with the program, such as disrupting financial markets and spurring inflation, according to the record of the Federal Open Market Committee’s Sept. 12-13 gathering released today in Washington.
ECB President Mario Draghi said the bank is ready to start buying government bonds as soon as the necessary conditions are fulfilled. The ECB kept interest rates unchanged at a historic low of 0.75 percent.
“The jobless claims report was OK and Draghi is signaling he will do whatever it takes, so I’m not expecting him to take his foot off the accelerator,” Philip Orlando, the New York- based chief equity strategist at Federated Investors Inc. which oversees about $370 billion, said in a phone interview. “Every data point in the U.S. will be viewed through a market prism and a political prism now.”
Mitt Romney challenged President Barack Obama in their first debate last night and polls conducted in the immediate aftermath by CNN and CBS News both indicated voters thought Romney had won the encounter at the University of Denver. Romney has said he wouldn’t appoint Bernanke to a third term, while his running mate, House Budget Committee Chairman Paul Ryan of Wisconsin, has said he doesn’t want the Fed to provide additional stimulus.
Some traders pointed to a bullish bet on the S&P 500 in the options market as helping to fuel today’s rally. One investor bought 11,000 calls expiring tomorrow to buy the index at 1,465, 1 percent above yesterday’s closing level, Chris Rich, head options strategist at JonesTrading Institutional Services LLC in Chicago, said in an interview.
The bullish options surged 196 percent to $3.70 and the call was the most-traded contract on the benchmark gauge today with more than 24,000 contracts changing hands.
“People are blaming the move higher in the S&P 500 on the options trade,” Rich said. “Everyone was talking about it.”
Companies that are most tied to economic swings led the gains as the Morgan Stanley Cyclical Index climbed 1.2 percent.
Financial shares rose 1.5 percent for the biggest advance among 10 S&P 500 groups. Bank of America rallied 3.3 percent to $9.41, while Citigroup Inc. (C) gained 2.6 percent to $34.96.
American International Group Inc. (AIG) rose 2.2 percent to $34.95. Daniel Loeb’s $9.3 billion Third Point LLC hedge fund added shares last quarter, betting the stock will rise as the U.S. cuts a stake acquired in the insurer’s rescue. AIG shares have “significant upside,” the fund said in a letter to investors.
Coal producers rallied as analysts forecast an end to four straight quarters of declines, the fuel’s longest slump in seven years, and Romney said in the debate last night that he likes coal.
“Mitt Romney made a point to single out coal as an important part of the U.S. energy policy,” Michael Dudas, an analyst with Sterne Agee & Leach Inc. in New York, said in a phone interview. “The view is that Obama has been negative toward coal relative to the regulatory efforts that the administration has put forth. A potential Romney victory is more positive for energy in general, and coal in particular.”
Consol Energy, the largest U.S. coal miner by market value, surged 5.6 percent to $31.38. Peabody Energy Corp. (BTU) advanced 4.2 percent to $22.73.
Gap gained 1 percent to $37.10. Same-store sales at the biggest U.S. specialty-apparel retailer climbed 6 percent in September, beating the average estimate for a 5.3 percent gain from analysts surveyed by researcher Retail Metrics Inc.
Target added 0.9 percent to $63.65. The second-largest U.S. discounter posted a 2.1 percent increase in same-store sales, topping the 2 percent projection.
Ryder climbed 6 percent to $41.56. The truck-leasing company’s efforts to lower costs will help earnings, Alexander Brand, an analyst with SunTrust Robinson Humphrey, said in a note, raising the stock’s rating to buy from neutral.
Sprint Nextel Corp. (S) decreased 2.1 percent to $5.09. The third-largest U.S. wireless carrier is in the early stages of evaluating whether it should make a counter offer for MetroPCS Communications Inc. to top Deutsche Telekom AG’s bid to combine it with T-Mobile USA, said three people familiar with the offer.
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