U.S. Stocks Extend Records on Apple Deal, IMF Outlook
U.S. stocks rose, with benchmark indexes extending all-time highs, as Apple Inc. rallied and the International Monetary Fund indicated it would raise its outlook for the economy.
Apple jumped 3.8 percent after the company struck a deal to sell its iPhones through China Mobile Ltd., the world’s largest phone company. T-Mobile US Inc. (TMUS) added 2.8 percent after people familiar with the situation said SoftBank Corp. Chief Executive Officer Masayoshi Son is exploring a deal for Sprint Corp. to buy the majority of the wireless-phone provider next year. Micron Technology Inc. slid 3.1 percent after Bank of America Corp. downgraded its rating on the stock.
The Standard & Poor’s 500 Index added 0.5 percent to 1,827.99 at 4 p.m. in New York. The Dow Jones Industrial Average advanced 73.47 points, or 0.5 percent, to 16,294.61. The Nasdaq Composite Index jumped 1.1 percent to 4,148.90. About 5.5 billion shares changed hands on U.S. exchanges, 9.8 percent below the three-month average.
“It’s a cauldron of bullish factors,” Donald Selkin, who helps manage about $3 billion as the New York-based chief market strategist at National Securities Corp., said by phone. “There’s the seasonal factor, the IMF raising its forecast and the Fed saying they’re going to keep the federal funds rate low.”
The Dow jumped 3 percent last week and the S&P 500 climbed 2.4 percent as the Federal Reserve said it will reduce the pace of bond buying amid faster-than-estimated economic growth. The S&P 500 has advanced 28 percent in 2013, putting it on course for its biggest annual rally since 1997. Three rounds of monetary stimulus have sent the equities benchmark up 170 percent from a 12-year low in 2009.
The IMF is raising its outlook for the U.S. economy, as a budget deal in Washington and the Fed’s plan to taper its bond buying ease doubts about the future, IMF Managing Director Christine Lagarde said yesterday in an interview broadcast today on NBC’s “Meet the Press.” The IMF predicted in October that the world’s largest economy would expand 2.6 percent next year. Lagarde didn’t set out any new projections.
A report last week indicated the U.S. economy expanded at a 4.1 percent annualized rate in the third quarter, as consumers stepped up spending on services and companies invested more in software. The reading was the strongest since the final three months of 2011 and up from a previous estimate of 3.6 percent, according to the report.
Data today showed that consumer spending rose in November by the most in five months as Americans took advantage of store discounts during the year-end shopping season, giving the world’s largest economy a lift.
A separate report showed the the Thomson Reuters/University of Michigan final index of consumer sentiment in December climbed to 82.5 from 75.1 a month earlier. The median forecast of 61 economists in a Bloomberg survey called for 83 after a preliminary reading of 82.5.
The S&P 500 has gained 1.2 percent so far this month. December has been the second-best month for U.S. equity returns, according to data compiled by Bloomberg that starts in 1928. The average gain for the month is 1.5 percent, more than twice the overall monthly mean of 0.6 percent. The last December retreat for the S&P 500 was in 2007.
“This is a very good seasonal period of time for the markets,” Eric Green, director of research and fund manager at Penn Capital Management, said by phone. The Philadelphia-based firm oversees about $7 billion. “Most of the economic data points suggest stronger growth going forward.”
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, fell 5.5 percent to 13.04.
Eight of 10 main S&P 500 groups advanced today, with technology stocks rallying 1.5 percent to pace the gains. Facebook Inc. surged 4.8 percent to a record $57.77 as the company began trading as a member of the S&P 500 today.
Today’s surge in technology shares helped the Nasdaq surpass 4,120, a level that represents a recovery of 76.4 percent of the index’s decline during the bursting of the Internet bubble. The threshold is seen by Fibonacci analysts as the last obstacle for a full recovery. The benchmark gauge, which plunged 78 percent from its peak of 5,048.62, set on March 10, 2000, would need to climb about 22 percent to reclaim its record.
Apple rose 3.8 percent to $570.09, the highest close since Dec. 4, 2012. The company, ending six years of negotiations, struck a deal that will give both the U.S. phone maker and China Mobile a means to fight declining share in the market of 1.2 billion wireless subscribers.
China Mobile will sell the iPhone 5s and 5c models in its stores from Jan. 17, the companies said in a statement that provided no financial terms. Apple’s stores in the country will also offer the phones for China Mobile’s network.
T-Mobile advanced 2.8 percent to $31.86. SoftBank’s Son has discussed financing a bid with banks such as Credit Suisse Group AG, Mizuho Bank Ltd. and Goldman Sachs Group Inc., people familiar with the matter said.
Son, who is looking for about $20 billion to finance a bid, has also met with Deutsche Bank AG and JPMorgan Chase & Co., while receiving advice from the Raine Group LLC, said the people, who asked not to be identified because the discussions are private. Those six banks helped finance and advise on SoftBank’s purchase of Sprint.
An S&P index of homebuilders rallied 4 percent to the highest level in five months as all 11 members advanced. KB Home gained 7.6 percent to $18.19 after Citigroup Inc. upgraded the shares to neutral from sell, citing strengthening demand. PulteGroup Inc. added 5.9 percent to $19.71.
Darden Restaurants Inc. (DRI) rallied 6.4 percent to $54.35 for the biggest gain in the S&P 500. The owner of Olive Garden and LongHorn Steakhouse slid 3.5 percent last week after announcing it will separate the Red Lobster seafood chain.
The plan falls short of activist investor Barington Capital Group LP’s proposals for a bigger shakeup, including ways to profit from its real estate. Starboard Value LP, which disclosed a stake in the company today, also said Darden’s proposal is inadequate.
Jos. A. Bank Clothiers Inc. (JOSB) slid 1.3 percent to $56.29. The retailer rejected a $1.54 billion takeover offer from Men’s Wearhouse Inc. as too low and said it would continue to seek its own acquisitions. Men’s Wearhouse dropped 0.9 percent to $51.55.
Micron Technology (MU) slid 3.1 percent to $21.49. An analyst at Bank of America Corp. downgraded the memory chipmaker to underperform from neutral, citing increasing competition.
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