S&P 500 Advances Before Fed Statement Amid EarningsAlex Barinka and Nick Taborek
The Standard & Poor’s 500 Index rose, heading for its biggest monthly gain since January, as investors analyzed corporate earnings and awaited results from the Federal Reserve’s two-day meeting.
Eastman Chemical Co. and Goodyear Tire & Rubber Co. jumped more than 6.3 percent as earnings topped estimates. Mosaic Co. and Agrium Inc. plunged at least 5.4 percent after OAO Uralkali ended limits on potash production and said the price of the soil nutrient may fall 25 percent. Coach Inc. lost 7.9 percent as discounts and weak handbag sales hurt revenue in North America.
The S&P 500 added less than 0.1 percent to 1,685.96 at 4 p.m. in New York, after swinging between gains and losses during the trading session. The Dow Jones Industrial Average fell 1.38 points to 15,520.59 today. About 5.9 billion shares changed hands, 7.7 percent below the three-month average.
“We’re waiting again to hear what the Fed has to say because everybody’s on tenterhooks,” Sarah Hunt, an associate fund manager and analyst who helps oversee $4.5 billion at Purchase, New York-based Alpine Woods Capital Investors LLC, said in a phone interview. “Earnings have been a mixed bag but I would say mostly positive.”
The S&P 500 is heading for a 5 percent advance this month, as companies from Facebook Inc. to Visa Inc. reported better-than-estimated earnings. The benchmark index surged 149 percent since March 2009, driven by three rounds of bond purchases by the U.S. central bank. The gauge fell in June, after seven months of increases, on concern the Fed will begin to reduce its $85 billion of monthly bond purchases.
The Federal Open Market Committee, which has said it may start paring stimulus should the U.S. economy meet the central bank’s forecasts, started a two-day meeting today. The Fed will probably maintain its benchmark interest rate at 0.25 percent, economists predict. Policy makers will begin to reduce the central bank’s bond-purchase program in September, a Bloomberg survey of economists shows.
Home prices rose in May by the most in more than seven years as the recovery in U.S. residential real estate gained momentum, a report showed today. The S&P/Case-Shiller index of property values climbed 12.2 percent from May 2012, after advancing 12.1 percent a month earlier. The median projection of 31 economists surveyed by Bloomberg called for a 12.4 percent advance.
“The Fed is going to be very measured. They let the genie out of the bottle and said that tapering is going to begin,” Douglas Cote, chief market strategist at ING U.S. Investment Management in New York, said in a telephone interview. His firm oversees $185 billion. “Housing is a pillar of the economy right now because of how it’s related to the consumer and how it’s related to jobs.”
The Conference Board’s index of U.S. consumer confidence decreased to 80.3 in July from 82.1 a month earlier, data from the New York-based private research group showed. Investors will get further clues to the state of the economy later this week with the release of data on U.S. gross domestic product and the monthly labor report.
President Barack Obama, prodding Congress to consider fresh economic proposals after two years of gridlock, called for restructuring business taxes so long as the initial revenue generated goes toward job creation in a speech today in Chattanooga, Tennessee.
Investors are also watching earnings reports. Of the 305 companies in the S&P 500 that have posted quarterly results so far, 72 percent have exceeded analysts’ estimates for profit and 55 percent have topped sales projections, data compiled by Bloomberg show.
Technology shares rose the most among 10 main industries in the S&P 500 today. Western Union Co. jumped 4.5 percent to $17.75, the highest level since October, as the world’s biggest money-transfer business reported profit that exceeded analysts’ estimates. Cisco Systems Inc. advanced 1.3 percent to $25.67 for the largest increase in the Dow.
Eastman Chemical climbed 6.3 percent to $79.75 after the biggest U.S. producer of chemicals from coal said it expects full-year earnings of $6.40 to $6.50 a share, compared with its previous forecast of $6.30 to $6.40. Analysts on average projected $6.34 a share.
Goodyear jumped 8.9 percent to $18.56. The largest U.S. tiremaker said second-quarter earnings were 76 cents a share. Analysts surveyed by Bloomberg had estimated 48 cents a share.
Herbalife Ltd. increased 0.9 percent to $60.04 after the nutrition company reported second-quarter profit that exceeded analysts’ estimates and said earnings this year will be as much as $4.95 a share, up from a previous projection of a maximum of $4.80.
Sprint Corp. advanced 7.3 percent to $6.16. Chief Executive Officer Dan Hesse predicted the carrier would begin adding monthly contract customers in 2014 after the shutdown of its ill-fated Nextel network last month. Sprint posted a loss of $1.6 billion, or 53 cents, for the second quarter, wider than the 31 cents estimated by analysts.
Pitney Bowes, rose 13 percent to $16.60, the most in the S&P 500. The provider of postal meters and other equipment agreed to sell its management-services unit to Apollo Global Management LLC for about $400 million in cash.
Phone stocks fell 1.5 percent, the most among 10 industries in the S&P 500. Raw-materials producers slid 0.3 percent.
Mosaic plummeted 17 percent to $43.81 and Agrium lost 5.4 percent to $86.50. Uralkali, the world’s largest potash producer, upended the $20 billion-a-year industry by abandoning limits on production that underpinned prices and halting cooperation with Belarus that controlled supplies from the former Soviet Union.
The decision sent shares of potash producers plunging as much as 27 percent from Israel to Germany to Canada and the U.S. as investors speculated a flood of supplies will lead to lower prices for potash, a soil nutrient that strengthens plant roots.
Coach tumbled 7.9 percent to $53.30. The largest U.S. luxury handbag maker said fiscal fourth-quarter profit fell 12 percent. Sales at stores open at least a year in North America sank 1.7 percent in the quarter, and Chief Executive Officer Lew Frankfort said in a statement that he wasn’t satisfied with handbag sales.
Health Management Associates fell 11 percent to $13.30 after receiving additional subpoenas from regulators regarding certain emergency room operations that supplement earlier ones from 2011. Community Health Systems Inc., the second-largest U.S. hospital chain, said today it has agreed to buy Health Management for $3.9 billion in cash and stock.
The sale came amid pressure from Glenview Capital Management LLC, which owns about 15 percent of Health Management. Glenview proposed ousting the company’s board and management because of its “substandard strategic and financial approach.” Community Health slipped 3.5 percent to $45.58.
Xylem Inc. tumbled 10 percent to $25.54. The water company spun off by ITT Corp. lowered full-year revenue forecasts citing weaker demand.
Nasdaq OMX Group Inc. fell 1.7 percent to $32.46 after Goldman Sachs Group Inc. advised selling the shares, saying the company’s diversification strategy will reduce profit margins and may cause the exchange operator to miss earnings forecasts.
NYSE Euronext added 0.7 percent to $41.70. The U.S. exchange operator being bought by IntercontinentalExchange Inc. reported earnings that beat estimates as revenue from derivatives trading rose and costs fell.