S&P 500 Hits 2-Week High as Retail Sales Fuel Fed Bets
U.S. stocks rose, pushing the Standard & Poor’s 500 Index to a two-week high, as a slowdown in retail sales boosted speculation the Federal Reserve won’t be forced to raise rates sooner than anticipated.
Amazon.com Inc. climbed 2.2 percent after ChannelAdvisor Corp. said the retailer’s same-store sales rose 40 percent in July. Vertex Pharmaceuticals Inc. jumped 3.9 percent to lead gains among health-care stocks. King Digital (KING) Entertainment Plc plummeted 23 percent trading after posting worse-than-forecast sales and cutting its 2014 outlook. Macy’s Inc. lost 5.5 percent after profit fell short of estimates.
The S&P 500 gained 0.7 percent to 1,946.72 at 4 p.m. in New York, the highest since July 30. The Dow Jones Industrial Average climbed 91.26 points, or 0.6 percent, to 16,651.80, also the highest in two weeks. About 5.1 billion shares changed hands on U.S. exchanges, 11 percent below the three-month average.
“There is some feeling that events overseas are beginning to cool down a little bit but also the retail numbers might suggest that the Fed is not going to be so aggressive in raising rates any time soon,” Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $110 billion, said in a phone interview. “That has been the backbone of the market for the past five years.”
Retail sales were little changed in July, the worst performance in six months, as car demand slowed and tepid wage growth restrained U.S. consumers. The slowdown in purchases followed a 0.2 percent advance in June, the Commerce Department reported today in Washington.
Recent data have shown U.S. gross domestic product expanded at a 4 percent annual pace in the second quarter, confirming the Fed’s view that a first-quarter contraction was transitory. Employers in the U.S. added more than 200,000 jobs for a sixth straight month in July, the longest such period since 1997.
The economic strength had created concern that the Fed may be forced to act on rates sooner than anticipated, as the central bank remains on pace to wind down its monthly bond purchases in October. Fed Chair Janet Yellen has said officials will keep its benchmark low for a “considerable time” after the bond buying ends.
Three-rounds of bond purchases and record-low interest rates have helped push stocks higher by as much as 194 percent from a bear-market low in 2009.
The S&P 500 last closed at a record on July 24 before tumbling 3.9 percent on concerns that geopolitical crises from Ukraine to Israel and Iraq could derail the global economy. The gauge closed today 2.1 percent below its all-time high.
In Iraq, Kurdish forces fought to retake positions overrun last week by Islamic State fighters in the northern part of the country, while a political standoff between President Fouad Masoum and Prime Minister Nouri al-Maliki continued.
Ukrainian officials said today they’d refuse entry to a truck convoy that Russia says is loaded with humanitarian assistance for rebel-held eastern areas, while pledging to send their own aid to the embattled region.
“The many geopolitical issues are a little quieter or on the back burner at the moment,” Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion, said in a phone interview. “It’s given investors an opportunity to take a look and see if they want to add to positions, and it looks like that’s what they’re doing today.”
Four companies, including Macy’s and Cisco Systems Inc. report earnings today. About 75 percent of those that have posted results this season have beaten analyst estimates, while 64 percent have exceeded sales projections, data compiled by Bloomberg show.
The Chicago Board Options Exchange Volatility Index, which usually moves in the opposite direction to the S&P 500 (SPX), slid 8.7 percent to 12.90 today.
All 10 main S&P 500 groups advanced today, with health-care and information technology stocks advancing at least 1.1 percent for the best performances. Vertex Pharmaceuticals Inc. added 3.9 percent for the biggest advance in the S&P 500 while Intel Corp. jumped 2.9 percent to lead gains in the Dow.
Health Care REIT Inc. added 2.3 percent to $64.95 as it agreed to buy HealthLease Properties Real Estate Investment Trust and formed a partnership for additional properties to expand in senior care.
InterMune Inc. jumped 14 percent to $52.06, the most since October 2000, after reports the company had received takeover bids from some of Europe’s biggest drugmakers, including Sanofi and Roche Holding AG.
Amazon.com climbed 2.2 percent to $326.28. ChannelAdvisor said the company’s rate of sales growth has increased each month this year.
EBay Inc. slipped 0.9 percent to $52.94. Its July sales grew by 9.7 percent, down from a 12 percent gain in June, according to ChannelAdvisor.
Macy’s sank 5.5 percent to $56.47 for its biggest slide in two years. The second-largest U.S. department-store company’s earnings missed estimates after discounts meant to lure shoppers eroded profit margins. The Cincinnati-based company, which operates about 840 stores, cut its full-year forecast for comparable-sales growth.
Macy’s led clothing and accessories retailers lower. Fossil Group Inc. tumbled 5.6 percent for the biggest drop in the S&P 500. Tiffany & Co., Kohl’s Corp. and TJX Cos. (TJX) dropped at least 1.5 percent.
FleetCor Technologies Inc. added 9.8 percent to $142.10. The provider of fuel cards agreed to buy Comdata Inc. for $3.45 billion.
King Digital tumbled 23 percent to $13.99. The maker of the Candy Crush Saga video game said yesterday that gross bookings - - the value of virtual merchandise sold -- will fall in the third quarter. It also reported second-quarter adjusted revenue that missed analysts’ projections.
SeaWorld Entertainment Inc. dropped 33 percent to $18.90, the lowest since its debut in April 2013. Third-quarter earnings missed estimates as controversy over treatment of captive whales in its theme-park shows hurt attendance, the company said.
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