U.S. Stocks Gain as Middle East Shares Slump, Metals DropLu Wang and Stephen Kirkland
U.S. stocks rose for a second day, led by chipmakers and automobile companies, and Treasuries fell as the Federal Reserve said the economy maintained a “modest to moderate” pace of growth. Shares in the Middle East sank as the U.S. moved closer to a military strike against Syria.
The Standard & Poor’s 500 Index increased 0.8 percent to 1,653.08 at 4 p.m. in New York. Benchmark gauges in Abu Dhabi, Saudi Arabia, Kuwait and Dubai lost more than 2 percent. The S&P GSCI gauge of 24 commodities dropped 0.7 percent as metals led losses. Ten-year Treasury yields increased four basis points to 2.90 percent, while the Bloomberg U.S. Dollar Index retreated for the first time in six days. The Australian dollar rose against 15 of 16 major peers after the economy accelerated.
Micron Technology Inc. paced a rally in chipmakers as a fire forced a Korean competitor to suspend operations at a factory in China, while General Motors Co. and Ford Motor Co. climbed after monthly U.S. sales growth exceeded estimates. The Fed’s Beige Book survey showed consumers spent more on travel and tourism while manufacturing expanded, as investors searched for clues to the central bank’s plans for stimulus. Stocks maintained gains as a Senate panel authorized a limited military strike in Syria.
“Managers actually are fairly bullish on the environment,” Arvin Soh, a New York-based fund manager with GAM, said by phone. His firm has more than $120 billion under management. “The view has been, ‘yes we have some serious issue with Syria, but at the end of the day, growth is improving.’”
The S&P 500 gained 0.4 percent yesterday after a report from the Institute for Supply Management showed manufacturing grew faster than forecast last month. The Labor Department will probably say Sept. 6 that U.S. payrolls rose by 180,000 in August, up from 162,000 in July, according to the median estimate of 85 economists in a Bloomberg survey.
Nine of the 10 main S&P 500 industries advanced today, with only utility shares retreating.
Micron jumped 5.3 percent to help lead a gauge of S&P 500 chipmakers up 2.7 percent. SK Hynix Inc., the world’s second-largest maker of computer-memory chips, suspended operations at a factory that makes dynamic random-access memory chips for mobile phones and personal computers. Apple Inc. advanced 2.1 percent after Cantor Fitzgerald LP initiated coverage of the shares with a buy rating and a 12-month price estimate of $777, 59 percent higher than yesterday’s close.
Ford jumped 3.5 percent and GM added 5 percent. Sales of cars and light trucks rose 15 percent for GM, 23 percent for Toyota Motor Corp. and 12 percent for Ford, according to company statements. The results compared with average estimates for gains of 11 percent by GM, 15 percent for Toyota and 10 percent for Ford in a survey by Bloomberg News.
Benchmark indexes held their gains as the Senate Foreign Relations Committee voted to authorize President Barack Obama to conduct a limited U.S. military operation in Syria, the first step toward congressional endorsement of the effort. The resolution, approved 10-7, supports use of force in a “limited and specified manner against legitimate military targets” during a 60-day period following enactment, with a possible 30-day extension at Obama’s request. The resolution doesn’t authorize use of U.S. ground troops in combat.
The S&P 500 has lost 3.3 percent from its last record on Aug. 2 amid speculation the Fed will scale back its bond buying. There have been signs that the housing recovery has begun to slow as yields on 10-year Treasury notes rose to a two-year high last month. The stimulus helped push the benchmark equity gauge up more than 150 percent from its March 2009 low.
Citigroup Inc. downgraded U.S. equities to underweight today, saying valuations are “not as attractive as other parts of the world.” The firm upgraded the U.K. and emerging markets. These areas “appear the cheapest major regions across the world,” Tobias Levkovich, Citigroup’s chief U.S. equity strategist, said in a note.
The Chicago Board Options Exchange Volatility Index, or VIX, slipped 4.4 percent to 15.88 today. The equity volatility gauge is down 12 percent this year.
The Stoxx Europe 600 Index rose 0.2 percent, erasing an earlier 0.7 percent slide, with gains led by telephone and construction-related companies. A gauge of travel and leisure shares slid 1.6 percent for the biggest decline among the 19 industry groups in the index. Ryanair Holdings Plc tumbled 11 percent after Europe’s largest discount airline said full-year profit may fall short of its forecast range amid greater competition on prices and increased capacity. EasyJet Plc, Europe’s second-biggest low-cost airline, slid 5.1 percent.
ProSiebenSat.1 Media AG retreated 5 percent after Lavena, a holding company for investments owned by KKR & Co. and Permira Advisers LLP, said it is selling more than 760 million euros of shares in the German broadcaster.
The MSCI Emerging Markets Index added 0.4 percent as India’s S&P BSE Sensex index climbed 1.8 percent, rebounding from yesterday’s biggest decline in more than two weeks. Benchmark gauges in Indonesia and the Philippines lost at least 1.9 percent.
The Bloomberg GCC 200 Index, made up of stocks from the Gulf Cooperation Council, slid 1.8 percent for its biggest drop in more than a week. Dubai’s main gauge lost 3.7 percent, dropping 7.8 percent in three days.
West Texas Intermediate oil declined 1.2 percent to $107.23 a barrel while Brent crude slipped 0.7 percent to $114.91. Copper dropped for the first time in three days and zinc, aluminum, gold and silver fell at least 1.3 percent.
The Aussie dollar climbed 1.2 percent to 91.77 U.S. cents, the highest since Aug. 19.
The pound advanced for a sixth day versus the euro after a gauge of U.K. services output reached the highest level since 2006. The pound climbed 0.2 percent to 84.52 pence per euro and reached 84.27, the strongest level since May. The British currency rose 0.5 percent to $1.5635.
The U.S. dollar weakened against all 16 major peers except the yen. It was down 0.3 percent at $1.3213 per euro after touching $1.3139 yesterday, the strongest since July 22.
Italy’s 10-year yield rose seven basis points to 4.42 percent after a report showed the nation’s service sector shrank more last month than economists forecast. Former Prime Minister Silvio Berlusconi may consider withdrawing his support for the coalition government before a debate starts on whether to oust him from the Senate following his conviction for tax fraud, the Repubblica newspaper reported.