U.S. Stocks Rally, Dollar Drops From 12-Year HighMichelle F. Davis
U.S. stocks climbed, after equities had their biggest two-day selloff in six weeks, as banks rose and an unexpected drop in retail sales bolstered the case for keeping interest rates low.
Morgan Stanley, American Express Co. and Citigroup Inc. added at least 2.7 percent as they announced dividend payments and details on share buybacks after approval from the Federal Reserve following stress tests. Intel Corp. slid after cutting its first-quarter revenue outlook.
The Standard & Poor’s 500 Index advanced 1.3 percent to 2,065.95 at the close in New York, after losing 1.9 percent in the previous two sessions. The gauge climbed back above its average price for the past 50 days. The Dow Jones Industrial Average rallied 259.83 points, or 1.5 percent, to 17,895.22. Both indexes posted their strongest gains in a month. The Nasdaq Composite Index rose 0.9 percent.
“I think this is a question of the bad news is good news, which is a reversal of what we had Friday when we got killed,” Donald Selkin, the chief market strategist at New York-based National Securities, which oversees $3 billion, said in a phone interview. “The only reason it’s good is in policy because it throws a wet blanket over the surety of them raising rates.”
Concern the Fed may start raising interest rates amid a pickup in the economic recovery has weighed on equities this year. Policy makers next meet on March 17-18.
Sales at U.S. retailers unexpectedly decreased in February for a third consecutive month as inclement weather and low wage gains restrained shoppers.
The 0.6 percent drop followed a 0.8 percent decrease in January, Commerce Department figures showed Thursday in Washington. The median forecast of 86 economists surveyed by Bloomberg called for a 0.3 percent gain.
The number of Americans filing for unemployment benefits declined more than forecast last week, returning to a level consistent with an improving labor market. Initial claims dropped 36,000 to a three-week low of 289,000, a Labor Department report said.
A preliminary report on Friday will show consumer sentiment held steady this month, economists forecast. Consumer spending accounts for about 70 percent of the U.S. economy.
The dollar weakened versus the euro for the first time in three days as investors questioned whether gains of more than 2 percent this week will prompt the Fed to soften its stance on the timing of an interest-rate increase.
“The weakness in the market has been based on that strong dollar,” Selkin said. “The dollar’s a little weaker today so maybe that’ll help.”
The dollar’s rise to a 12-year high versus the euro has helped drag American stocks down 2.4 percent since a record on March 2, amid concern earnings growth will be lower than investors project.
The rising dollar hurts technology companies disproportionately as it reduces the value of foreign-currency earnings when they are repatriated back to the U.S.
Technology is the biggest industry in the S&P 500 with a 20 percent weighting, accounting for 19.3 percent of the index’s operating earnings last year, data compiled by S&P Dow Jones Indices show.
Intel fell 4.7 percent to its lowest since July after the world’s largest chipmaker said first-quarter sales will be less than forecast, citing lower-than-anticipated demand for corporate computers and weakening economies, particularly in Europe.
Semiconductor companies in the benchmark index declined 1.3 percent after yesterday snapping a six-day losing streak. Intel’s lower sales outlook also weighed on Microsoft Corp., with its shares falling 2.3 percent.
The Chicago Board Options Exchange Volatility Index dropped 8.6 percent to 15.42, the biggest drop in a month. The gauge, know as the VIX, rose 14 percent last week, its biggest jump in five weeks.
Nine of 10 main groups in the S&P 500 advanced Thursday. Financial companies led gains, up 2.2 percent, and consumer discretionary added 2 percent. About 6.5 billion shares changed hands on U.S. exchanges, 5.4 percent below the three-month average.
Morgan Stanley rose 6.1 percent after boosting its payout to 15 cents a share, from 10 cents, and saying it will buy back as much as $3.1 billion of its own stock.
American Express climbed 2.7 percent after unexpectedly raising its dividend. The company also increased the amount of authorized share repurchases to $6.6 billion.
Citigroup added 3.3 percent after Fed approval to pay 5 cents a share in dividends and buy back as much as $7.8 billion of stock during the next five quarters, up from $1.2 billion over the past four.
Mattel Inc. rose 4.2 percent after Wednesday reaching its lowest level since August 2011. Shares had dropped 7.3 percent since March 2. Tiffany & Co. climbed 2.5 percent after hitting its lowest in more than a year on Tuesday. The luxury retailer’s shares had slid 7.1 percent since March 2.
Walt Disney Co. advanced 4.2 percent to a record amid its biggest gain in more than a month, after the company said it will release three “Star Wars” films during the next two years and 11 more Marvel movies in the next four years.
Charter Communications Inc. climbed 5.9 percent after people with knowledge of the matter said the cable company is in talks to acquire billionaire Si Newhouse Jr.’s Bright House Networks.
Acadia Pharmaceuticals Inc. tumbled 22 percent, the most in more than five years, after postponing a new drug application and saying its chief executive officer retired.
Peabody Energy Corp. fell 4.9 percent to a 12-year low, and Consol Energy Inc. slid 3.8 percent to its lowest since 2013 after Bank of America analyst Timna Tanners cut the coal companies to underperform from neutral, citing lower coal price estimates.
Drilling companies Nabors Industries Ltd. and Helmerich & Payne Inc. fell at least 1.6 percent as West Texas Intermediate oil prices retreated to a six-week low.