July 22, 2017

Strategies: Forecast for a 20,000 Dow Still Holds

LAST July, when the Dow Jones industrial average was still stuck below 12,900 and investors were seeking safety in bonds, Seth J. Masters made a startling argument.

Mr. Masters, the chief investment officer of Bernstein Global Wealth Management, said that people were so traumatized by the financial crisis that they were seriously underestimating the stock market. In fact, the chances were quite good that by the end of the decade, the Dow would rise more than 7,000 points and reach 20,000, he said.

In some important ways, he said, stocks at that moment had become safer than bonds. “This argument may seem provocative,” he told me back then. “But that’s only because market conditions are so unusual, and so many people have become so pessimistic.”

Last week, Mr. Masters made essentially the same argument, but it sounded much less provocative. In fact, after months of soaring prices, new stock market records and minuscule bond yields, it may even be the Wall Street consensus.

“It seems we’re somewhat ahead of schedule but I think we’re still on track for Dow 20,000 by the end of the decade,” Mr. Masters said last week. “The odds have just gotten better.” And despite the stock market’s recent meteoric rise, he said, stocks still look relatively cheap, certainly compared with bonds.

“It’s not that the expected return on stock right now is really that high,” he said. “It’s that the return on government bonds is indubitably very low.”

That unfavorable verdict on bonds is no accident. In a sense, it’s the policy of the Federal Reserve. Ben S. Bernanke, the Fed chairman, says he is trying to make traditionally riskier assets like stocks relatively attractive, increasing investors’ wealth and in that way stimulating the economy.

As far as the bond market goes, the yield on a benchmark 10-year Treasury note was only 1.5 percent when I spoke to Mr. Masters in July, and it is about 1.9 percent now. To put those yields in perspective, the average for 10-year bonds since 1962 has been more than 6.5 percent, according to quarterly Bloomberg data. In other words, since last July, bond yields have risen by the tiniest bit, and they remain extraordinarily low, on a historical basis.

For bond investors, particularly retirees, these low yields pose a serious dilemma. “This situation creates great problems for people trying to live off the income they can get from bonds,” Mr. Masters said. (I’ll explore this issue further in a future column.)

For now, it’s worth noting that the problem for income-seekers will sort itself out eventually when bond yields rise and prices fall. But that shift is likely to inflict considerable harm on unwary investors.

That day of reckoning keeps receding, however, as global economic growth and inflation remain constrained. That alone tends to keep bond rates low. Furthermore, government spending cuts like the budget sequestration in the United States have reduced economic growth substantially, in the view of the International Monetary Fund and other forecasters.

And as long as unemployment is high and inflation is low, the Fed says it will continue to keep short-term interest rates near zero — and buy $85 billion a month in long-term bonds and other securities. Other central banks have made similar promises. At least for a while, then, historically low interest rates seem likely to persist, for short-term bills as well as for long-term bonds.

The likelihood of low bond yields helps explain the relatively high stock market returns expected by Mr. Masters. And a new study suggests that those yields are the main factor behind the bullish stock market consensus of financial analysts on Wall Street and in academia.

Fernando Duarte and Carlo Rosa, two economists at the Federal Reserve Bank of New York, described their study last week in “Are Stocks Cheap? A Review of the Evidence,” a posting on the New York Fed’s Liberty Street Economics blog. They analyzed 29 separate economic models and found that most predicted extremely high stock returns for the next five years. Why? There are many wonky reasons but in the end, they said, it is “mainly due to exceptionally low Treasury yields at all foreseeable horizons.”

Article source: http://www.nytimes.com/2013/05/12/your-money/forecast-for-a-20000-dow-still-holds.html?partner=rss&emc=rss

S.&P. 500 Reaches Another Record

The Standard Poor’s 500-stock index closed at another record high Monday, pushing further above 1,600 as financial shares led the way after Bank of America’s settlement with MBIA.

Apple’s advance helped lift both the S.P. and the Nasdaq.

Bank of America said it would settle claims with MBIA for $1.6 billion, lifting shares of both companies as well as the S.P. financial sector index, which gained 1 percent. MBIA shares jumped 45.4 percent to $14.29 and Bank of America shares rose 5.2 percent to $12.88.

Apple shares were also among the top gainers after Barclays raised its price target on the stock. Apple shares shot up 2.4 percent to $460.71, leading both the Nasdaq composite index and the benchmark S.P. 500 higher.

The day’s gains followed a strong run in stocks since the start of the year. Supportive monetary policies that have kept interest rates low as well as solid earnings have helped to keep the market up. The S.P. 500 has gained 13.4 percent since Dec. 31.

“As long as you continue to have decent earnings reports and the support from central banks around the world providing liquidity, it’s going to be hard to derail this market, at least in the short term,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

The Dow Jones industrial average dipped 5.07 points, or 0.03 percent, to 14,968.89 at the close. But the Standard Poor’s 500 inched up 3.08 points, or 0.19 percent, to finish at a record 1,617.50. The Nasdaq composite index gained 14.34 points, or 0.42 percent, to close at 3,392.97.

During the session, the S.P. 500 also reached an all-time intraday high of 1,619.77.

Although weak economic data from the euro zone and China has caused concerns over the global growth outlook, Friday’s stronger-than-expected United States employment report fueled the gains that drove both the Dow and the S.P. 500 to record levels.

Warren Buffett, the chief of Berkshire Hathaway, said on Monday that low interest rates have made bonds “terrible” investments, but stocks are “reasonably priced,” and he continues to shy away from sectors such as media, where he cannot predict which will thrive in the long run.

But some analysts suspect the rally has little strength to keep going on.

The market “is discounting a tremendous amount of good news now, which I don’t think is going to be substantiated, and I don’t think it’s allowing for any possibility of bad news,” said Uri Landesman, president of Platinum Partners in New York.

Earnings have been mostly higher than expected, with 68.5 percent of companies surpassing estimates so far. At the same time, second-quarter estimates have fallen as outlooks remain more negative than positive.

Among Monday’s reports, Tyson Foods posted a weaker-than-expected quarterly profit and cut its full-year sales forecast. Its shares declined 3.3 percent to $24.10.

In contrast, Humana jumped 2.1 percent to $75.49 as one of the S.P. 500’s biggest percentage gainers. JPMorgan upgraded the stock to “overweight.”

But Johnson Johnson shares slid 1.3 percent to $84.68, weighing on the blue-chip Dow average.

General Motors stock also declined. The Treasury said it would begin another round of sales of G.M. stock acquired during the government’s bailout of the auto sector, and shares slipped 0.9 percent to $31.82.

Article source: http://www.nytimes.com/2013/05/07/business/daily-stock-market-activity.html?partner=rss&emc=rss

Markets Edge Higher

Stocks slowly drifted higher on Monday, appearing to resume a rally that pushed major indexes to record highs last week on improving earnings and reassuring signs about the economy.

In afternoon trading the Standard Poor’s 500-stock index was 0.3 percent higher, the Dow Jones industrial average rose 0.1 percent, and the Nasdaq composite rose 0.5 percent.

Apple shares were among the top gainers, up 2.3 percent and bolstering the Nasdaq composite index and benchmark S.P.

Market watchers said there is more room for stocks to rise as investors use weakness in the market as an opportunity to add to positions.

“There were some negative sentiment heading into earnings and concerns about the spring slowdown or ‘sell in May and go away,’ ” said Todd Salamone, director of research at Schaeffer’s Investment Research in Cincinnati. “Also economic numbers were weak. We don’t see that now. We’ve hit this sweet spot in economic data where numbers are better-than-expected. But on an absolute basis, they won’t make the Fed unwind their support for stimulus.”

Although weak economic data from the euro zone and China has caused concerns over the global growth outlook, Friday’s surprisingly strong jobs data fueled gains that took the indexes to record levels.

Many analysts say they expect a correction by stocks, which markets have largely avoided this year because traders use any weakness as an opportunity to add to positions.

A number of bellwether names rallied on Monday, with Bank of America up 3.9 percent. Humana jumped 2.9 percent as the S.P.’s biggest percentage gainer. JPMorgan upgraded the stock to “overweight.”

But Johnson Johnson shares were down more than 1 percent, weighing on the blue-chip Dow average.

BMC Software agreed to be acquired by a private equity group led by Bain Capital and Golden Gate Capital Corp for about $6.9 billion. Shares were flat.

Tyson Foods reported a steep drop in its second-quarter earnings, hurt as customers switched to chicken from beef to save money. The stock dropped 4.4 percent.

Overseas, European shares closed down about 0.1 percent as investors took profits following a rally in the previous week. Volumes were light as London and Tokyo markets closed for a holiday.

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The dollar was up 0.3 percent at 99.88 yen, extending Friday’s 1 percent gain. The yen has fallen steadily since the Bank of Japan announced a massive plan last month to boost the Japanese economy.

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On Friday the S.P. closed above 1,600 points and the Dow briefly traded above 15,000 for the first time ever, with a number of bellwether companies hitting 52-week highs. For the week, the Dow rose 1.8 percent, the S.P. gained 2 percent and the Nasdaq rose 3 percent in its biggest weekly climb since the first week of the year.

Article source: http://www.nytimes.com/2013/05/07/business/daily-stock-market-activity.html?partner=rss&emc=rss

Stocks Rise as Appetite for Risk Grows

Stock rose on Monday, buoyed by the formation of a broad coalition government in Italy which ended two months of political uncertainty and bolstered an appetite for risky assets, while better-than-expected housing data raised market optimism.

In afternoon trading the Standard Poor’s 500-stock index rose 0.9 percent, Dow Jones industrial average rose 0.9 percent, and the Nasdaq composite gained 1.1 percent.

Wall Street was following European shares, which moved higher on Monday after Italy finally formed a government, although analysts saw the gains dwindling in the near term.

Feeding risk into markets, the United States dollar fell against a major basket of currencies, while commodities like spot gold rose.

“The market is moving up as the Italian political situation is finally unlocked and that’s offering some hope. You can see that boosting risk trade here,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

In macroeconomic news, data from the Commerce Department showed that personal income rose 0.2 percent, slightly higher than expected, while contracts to purchase previously owned homes in the United States rose in March as the housing market continued to pick up pace this year.

The Labor Department’s nonfarm payrolls report for April is due on Friday.

“We have key economic data, especially the employment report later in the week, and we are also going to hear from the E.C.B. and the Fed later, so earnings takes a back seat this week,” Mr. Cardillo said.

So far, the S.P. 500 is up 0.8 percent this month.

Data showing weak growth in the United States has raised expectations the Federal Reserve will keep its pace of bond buying at $85 billion a month during its policy-making meeting announcement on Wednesday, while the European Central Bank is widely expected to announce an interest-rate cut when it meets on Thursday.

In Europe, a resolution of Italy’s two-month political stalemate through the formation of a new coalition government at the weekend boosted sentiment on the bonds of heavily-indebted euro zone governments and the share market.

Italy’s five- and 10-year borrowing costs fell to their lowest level since October 2010 at a bond sale on Monday, while secondary market yields dropped 10 basis points to 3.97 percent.

The main Italian share index, the FTSE MIB, ended the session up 2.2 percent, and the broad FTSE Eurofirst 300 index of top European shares gained 0.5 percent, adding to its 3.7 percent gain last week.

The market saw little reaction to data showing confidence in the euro zone’s economy falling for a second straight month in April, which only added to poor German business confidence data revealed last week.

Germany’s DAX closed up 0.8 percent while France’s CAC 40 was 1.5 percent higher.

Asian indexes were generally higher, although trading volumes were low with markets in Japan and mainland China closed for a holiday. In Hong Kong the Hang Seng ended the session up 0.2 percent.

Article source: http://www.nytimes.com/2013/04/30/business/daily-stock-market-activity.html?partner=rss&emc=rss

Social Media’s Effects On Markets Concern Regulators

That is the question the financial industry and government regulators are trying to answer after a Twitter hoax on Tuesday that claimed President Obama was injured in an explosion at the White House. That report caused the Dow Jones industrial average to drop temporarily by 150 points, erasing $136 billion in market value.

The markets recovered in minutes, but the episode has heightened concern among regulators about the combination of social media and high-frequency trading.

The vulnerability, in part, stems from the Securities and Exchange Commission’s decision this month to let companies and executives use social media sites like Twitter and Facebook to broadcast market-moving news.

High-frequency trading systems are designed to make trades based on keywords within milliseconds. The hoax message also went out on a new feature on Bloomberg’s financial data terminals that delivers select Twitter posts to hedge funds, investment banks and other users.

On Tuesday, the Commodity Futures Trading Commission plans to hold a public meeting in Washington with a couple of dozen high-frequency traders to discuss whether there should be additional safeguards to protect against the effects of social media on markets.

Even as markets rebounded on Tuesday, some investors lost money on the quick decline while others made money if they bet on a sharp drop.

“In 2010, we passed Dodd-Frank, the big financial reform bill, but nowhere in there do they mention high-speed trading or technology,” said Bart Chilton, a member of the trading commission. “That’s how quickly markets are morphing. Now, here we are three years later, woefully unprepared.”

The false report (“Breaking: Two Explosions in the White House and Barack Obama is injured”) was posted on Tuesday after Syrian hackers broke into The Associated Press’s Twitter feed.

Immediately, the mood shifted on the floor of the New York Stock Exchange.

“It was nine, 10, 11 seconds and it was fast and then the question was ‘Why’?” said Andrew Frankel, co-president of the brokerage firm Stuart Frankel Company.

He said traders realized shortly after that the post was a hoax since the television screens showing Bloomberg and CNBC had nothing about an explosion at the White House. Still, the episode recalled the 2010 “flash crash,” when an automated trading program caused the Dow to sink more than 600 points, and it left a deep skepticism of social media on the trading floor.

“You look at how quickly that happened and now everyone wants to release corporate earnings on Twitter,” Mr. Frankel said, in between calling out, “Sell!” to his team. He added: “The concern is ‘How do you know what’s right and what’s not? How do you know what’s hacked and what isn’t?’ ”

Spokesmen for Twitter and The A.P. declined to comment.

Even though Syrian hackers remain the prime suspects, the trading commission is now investigating 28 different futures contracts and specifically examining the five-minute period before and after The A.P.’s Twitter account was hacked. It is looking to see if there were anomalous trades, and investors who benefited from them.

“To think it was all lost because of this hack attack is very disconcerting,” Mr. Chilton of the commission said. “We would be irresponsible if we turned a blind eye to these debacles.”

The decision to allow market information on social media came after Reed Hastings, chief executive of Netflix, had posted on Facebook that the service had exceeded one billion hours of streamed video a month, sending its stock price up.

“We appreciate the value and prevalence of social media channels in contemporary market communications, and the commission supports companies seeking new ways to communicate,” the S.E.C. said on April 2.

Two days later, Bloomberg introduced a feature on its financial data terminals that incorporates a stream of relevant Twitter posts delivered to investors. All of Bloomberg’s more than 310,000 subscribers, who pay at least $20,000 a year for access to the terminals, now have access to those posts, which the company says are clearly identified as Twitter messages.

“The S.E.C.’s decision reflects the reality that we were dealing with in that this information is being distributed by companies and investors are consuming it and we needed to get it on the terminal,” said Brian Rooney, the company’s core product manager for news, adding, “We’re not in a world where people live in a vacuum.”

At the same time, the use of algorithms designed to peruse millions of sources of information like blogs and social media to analyze and execute trades is only becoming more widespread.

Article source: http://www.nytimes.com/2013/04/29/business/media/social-medias-effects-on-markets-concern-regulators.html?partner=rss&emc=rss

Bits Blog: Investigations Expand in Hacking of A.P. Twitter Feed

Three federal agencies are now investigating an incident Tuesday in which hackers hijacked the Twitter account for The Associated Press and momentarily erased $136 billion from the stock market after they posted a fake Tweet reporting that there had been explosions at the White House that injured President Obama.

A group calling itself the Syrian Electronic Army claimed responsibility for the attack on Twitter, but the Federal Bureau of Investigation is investigating who was behind the attack, and the Securities and Exchange Commission and the Commodity Futures Trading Commission are investigating the impact of the attacks on the market.

“We have standard operating procedures whenever there are market developments, and this is no exception,” said John Nester, an S.E.C. spokesman. “These procedures start with getting the facts about what occurred. We do not limit ourselves to looking at the catalyst for an event, but also its repercussions, to determine whether any further inquiries or actions are warranted.”

The A.P.’s account was the fourth prominent Twitter account of a media organization to be hacked in recent months — accounts for CBS, NPR and the BBC have all been hijacked by hackers recently — but the A.P. incident had the most serious impact. Within seconds of the fake A.P. post, the Dow Jones Industrial Average nosedived, dropping 150 points, before recovering five minutes later. High-frequency trading algorithms that are designed to make trades based on certain headlines served as a catalyst.

The C.F.T.C. is now investigating trading in 28 futures contracts that took place over that five-minute period, according to CNBC. A C.F.T.C. spokesman did not immediately return a request for comment but John Chilton, an commissioner with the agency, told CNBC Wednesday that “We need certain rules of the road for technology and that’s particularly true with the advent of social media.”

Mr. Chilton, who referred to high frequency traders as “cheetahs,” noted that there was no “kill switch” in their technology to prevent them from acting on misinformation. “We need to set up basic rules of the road,” Mr. Chilton said. “We should not just accept technology blindly.”

The timing of the A.P. on Twitter comes just two weeks after Bloomberg announced that it would start incorporating Twitter feeds into its financial information terminals. The new feature allows traders to monitor social media buzz and market-moving news from their Bloomberg terminals. Ironically, Bloomberg introduced the service, in part, to prevent the spread of misinformation on Twitter after an erroneous tweet suggested that Syrian President Bashar al-Assad was dead last August, creating a surge in crude oil prices.

The incident Tuesday also raised questions about security on Twitter. Logging on to Twitter requires the same process for a company as for a consumer — just one user name and one password — and security experts say Twitter could do more.

Until now, Twitter has resisted incorporating two-factor authentication, a verification approach that can, for example, send a second, one-time password via text message to users’ mobile phones to keep attackers from hijacking their accounts with a single, stolen password. Microsoft rolled out two-factor authentication last week. Apple added it in March. Both Google and Facebook have offered the service for years.

“It’s a very established baseline,” Mark Risher, co-founder of Impermium, an Internet security start-up that aims to help social networks, said Tuesday. “But there are costs, and user friction is introduced. You could put four deadbolts on your front door, but it’s going to be a pain every time you go to the drugstore. That said, why not offer it? I don’t have a good answer for that.”

Article source: http://bits.blogs.nytimes.com/2013/04/24/investigations-expand-in-hacking-of-a-p-twitter-feed/?partner=rss&emc=rss

Energy Stocks Rebound, Advancing the Markets

The stock market edged higher on Monday as energy stocks got a lift from recovering oil prices.

The energy sector climbed 1 percent, making it the biggest gainer in the Standard Poor’s 500-stock index. Crude oil rose 92 cents, to $89.19 a barrel, on Monday.

The broader market managed only a modest advance as investors focused on the outlook for company profits at the start of a big week for earnings on Wall Street.

About a third of the companies in the S. P. 500 index, including Exxon Mobil and Apple, will report earnings this week. While the reports have been good, concerns remain about the outlook for the rest of the year.

“Most of the companies seem to be coming in ahead of earnings expectations, but the thing that’s still problematic is the revenue line,” said Bill Stone, chief investment strategist at PNC Wealth Management. “To me it’s just symptomatic of the global economy continuing to sputter along.”

Of the companies that have reported earnings, 67 percent have exceeded analysts’ expectations, exceeding the 10-year average of 62 percent, according to S. P. Capital IQ. Analysts expect earnings to rise by 2 percent in the first quarter, down from the 7.7 percent increase in the fourth quarter.

On Monday, Halliburton, the oil services company, gained $2.08, or 5.6 percent, to $39.29 after it said that it lost $18 million in the first quarter, pulled down by $637 million in charges related to its role in the 2010 Gulf of Mexico oil spill. The loss was smaller than analysts had expected.

The Dow Jones industrial average rose 19.66 points, or 0.1 percent, to 14,567.17. The S. P. 500 closed up 7.25 points, or 0.5 percent, higher at 1,562.50.

The stock market is coming off its biggest weekly drop since November. Last week the S. P. 500 and the Dow each lost 2.1 percent, paring their advances after a strong start to the year.

The Nasdaq composite index gained the most of the three major indexes, rising 27.50 points, or 0.9 percent, to 3,233.55. Apple, which reports its earnings after the market close on Tuesday, rose 2.1 percent, or $8.14, to $398.67.

Microsoft rose $1.07, or 3.6 percent, to $30.83, after ValueAct Capital, an activist investor, disclosed that it had acquired a nearly $2 billion stake in the company.

In the bond market, interest rates eased. The price of the 10-year Treasury note rose 3/32, to 102 24/32, while its yield slipped to 1.70 percent from 1.71 percent late Friday.

Article source: http://www.nytimes.com/2013/04/23/business/daily-stock-market-activity.html?partner=rss&emc=rss

Stocks Mixed in Early Trading

Stocks were mixed on Monday as an assortment of corporate earnings pointed to an uncertain growth outlook, which could lead to more volatile trading ahead.

In afternoon trading the Standard Poor’s 500-stock index gained 0.2 percent, and the Dow Jones industrial average lost 0.2 percent, while the Nasdaq composite rose 0.5 percent.

While a majority of S.P. 500 companies that have reported earnings so far have topped analysts’ expectations, as is typical, a number of high-profile disappointments have raised questions about whether the market’s steep run so far this year may be out of gas.

General Electric and McDonald’s both fell for a fourth straight day, extending declines from Friday, when both companies reported lackluster results. G.E. is down more than 8 percent over the last four sessions and on Monday, it fell 2.1 percent, while McDonald’s lost 1.2 percent.

“Weak corporate outlooks have added to the growth fears that are making investors more risk averse,” said Eric Green, senior portfolio manager at Penn Capital Management in Philadelphia. “Ultimately, we think cyclical names will lead the market higher, but in the short term, the decline could continue.”

Last week was marked by heightened volatility, with the Chicago Board Options Exchange’s Volatility Index — the VIX, also known as the fear index — jumping 24 percent, the biggest weekly gain this year. The VIX was up 1.9 percent at 15.26 at midday on Monday, off its intraday high of 16.00.

The swings were largely driven by weak corporate earnings and signs of slowing growth from China, which contributed to a precipitous drop in commodity prices. The week’s decline fueled talk that the market’s long-awaited pullback had arrived, though the S.P. remains up 9 percent on the year.

The Nasdaq held in modestly positive territory on strength in Microsoft, which jumped 3.5 percent after CNBC reported that ValueAct Capital had taken a $2 billion stake in the company.

Netflix was the S.P.’s top percentage gainer, up 4.9 percent. The online movie rental company is set to report its results after the market closes.

The National Association of Realtors said existing home sales slipped 0.6 percent last month to a seasonally adjusted annual rate of 4.92 million units. Economists polled by Reuters had expected home resales to rise to an annual rate of 5.01 million units.

Caterpillar cut its outlook for 2013 early Monday, and but shares rose 2.7 percent by early afternoon. Halliburton, which reported a $1 billion charge related to talks to settle claims involving the 2010 Gulf of Mexico oil spill, rose 4.7 percent.

Italy’s blue-chip shares led European stocks higher, heartened by signs of progress in breaking a long political stalemate after a week of broad market losses.

The Japanese yen weakened toward 100 to the dollar on Monday and shares rose after the Group of 20 meeting of nations accepted Japan’s bold stimulus policies, helping to counter the gloom over the global growth outlook.

In its communiqué after a two-day meeting, the G-20 avoided any direct criticism of Japan’s policies and appeared to accept the need to reflate the world’s third largest economy as part of efforts to invigorate a shaky global economic recovery.

The Nikkei index in Tokyo ended the day 1.9 percent higher. Elsewhere in Asia, markets were mixed, with the Hang Seng in Hong Kong 0.1 percent higher, while the Shanghai composite 0.1 fell percent.

European stock markets were on course for a second straight daily gain, helped up by a jump in Italy’s blue-chip index after the country’s long-running political crisis moved a step closer to resolution.

Milan’s FTSE MIB index gained as much as 2 percent on hopes the re-election of Italy’s 87-year-old president, Giorgio Napolitano, would see a new government emerge within days, ending two months of political stalemate.

The broad FTSEurofirst 300 index ended the trading day up 0.2 percent, while Paris’s CAC 40 closed unchanged and Frankfurt’s DAX gained 0.2 percent.

Oil also rebounded, extending its gains into a third day as low prices brought buyers back into the market. Benchmark light, sweet crude gained 0.3 percent, to $88.30 a barrel.

Article source: http://www.nytimes.com/2013/04/23/business/daily-stock-market-activity.html?partner=rss&emc=rss

Wall Street Bounces Back

Inflation data, which reinforced expectations that the Federal Reserve will keep its stimulus in place, added to bullish sentiment.

The price of gold jumped after its record daily drop in dollar terms on Monday. U.S.-listed shares of Randgold Resources climbed 1.8 percent to $70.29. The SP 500 materials index rose 1.5 percent, leading the index higher.

The market’s advance followed the SP 500’s drop of more than 2 percent drop on Monday, giving the index its worst one-day percentage loss since November 7. The index is up 10 percent since the start of the year after enjoying a strong first-quarter run.

“It’s a relief rally, and investors … are looking, as they have after any pullback we’ve had in the past several months, to take advantage of it and buy,” said Alan Lancz, president of Alan B. Lancz Associates Inc., an investment advisory firm based in Toledo, Ohio.

Coca-Cola Co shares rose to $42.41, their highest since 1998, and gave the biggest boost to the Dow after a higher-than-expected profit and a deal to unload some distribution territory to five independent U.S. bottlers. ID:L2N0D30HG The stock was up 5.3 percent at $42.23 in late afternoon trading.

The stock of another Dow component Johnson Johnson touched a record high of $83.50 after the healthcare company reported better-than-expected first-quarter earnings. JJ shares shot up 1.7 percent to $83.13.

SP 500 earnings are now expected to have risen 1.8 percent in the first quarter, based on actual results from 42 companies and estimates for the rest.

The Dow Jones industrial average was up 116.49 points, or 0.80 percent, at 14,715.69. The Standard Poor’s 500 Index was up 16.57 points, or 1.07 percent, at 1,568.93. The Nasdaq Composite Index was up 37.34 points, or 1.16 percent, at 3,253.83.

Analysts’ positive views on basic materials companies also helped the sector. The materials index had dropped more than 5 percent in the two previous sessions combined.

On Monday, a drop in the price of gold and other commodities triggered a sharp selloff in stocks. But U.S. stock indexes fell further late in the session after news of two fatal explosions near the finish line of the Boston Marathon.

The SP 500’s slide on Monday took the index back to a range it had held for about a month. Tuesday’s gains set it on track to close above its 14-day moving average

International Paper and Vulcan Materials were among the top performers in the materials sector after bullish analysts’ notes.

Further supporting equities, data showed the U.S. Consumer Price Index fell in March for the first time in four months, giving the Federal Reserve room to maintain its monetary stimulus to speed up economic growth.

Intel Corp, up 2 percent at $21.81, and Yahoo Inc, down 0.1 percent at $23.96, are due to report after the bell.

The semiconductor index was up 1.7 percent.

(Additional reporting by Rodrigo Campos Editing by Kenneth Barry, Nick Zieminski and Jan Paschal)

Article source: http://www.nytimes.com/reuters/2013/04/16/business/16reuters-markets-stocks.html?partner=rss&emc=rss

Major Indexes Decline as Growth in Manufacturing Slows

The stock market got off to a slow start in April, edging lower on Monday after a week when the Standard Poor’s 500-stock index eclipsed its nominal high.

The main catalyst was slowing growth in manufacturing last month. The decline in the Institute for Supply Management’s benchmark manufacturing index for March was worse than economists had forecast. Stocks started falling shortly after the report was released at 10 a.m. and stayed lower the rest of the day.

The Dow Jones industrial average closed down 5.69 points, or 0.04 percent, at 14,572.85. The S. P. 500 dropped 7.02 points, or 0.5 percent, to 1,562.17.

Industrial companies fell 1 percent, the most in the S. P. 500. Caterpillar, which makes construction and mining equipment, declined $1.33, or 1.5 percent, to $85.64, and 3M, which makes Post-it notes, industrial products and construction materials, fell 66 cents, or 0.6 percent, to $105.65.

Investors have raised their expectations for the American economy as the market has climbed this year, said Joe Kinahan, chief derivatives strategist at TD Ameritrade. The Dow is up 11.2 percent in 2013; the S. P., 9.5 percent.

“The numbers have to be outstanding in order to drive the market higher,” Mr. Kinahan said. “It’s a different mind-set when we’re at these levels.”

The S. P. 500 ended the first quarter at a high of 1,569.19, surpassing its previous record close of 1,565.15 on Oct. 9, 2007. The index has recaptured all of its losses from the financial crisis and recession. The Dow broke its high, also set in 2007, on March 5.

The market has risen this year because of optimism that housing is recovering and that employers are starting to hire again. Strong company earnings and continuing stimulus from the Federal Reserve have also increased demand for stocks.

Small stocks fared worse than large ones Monday. The Russell 2000 index, a benchmark of small-company stocks, fell 1.3 percent to 938.78, paring its gain for the year to 10.5 percent. It was the index’s biggest decline in more than a month. The Nasdaq composite index fell 28.35 points, or 0.9 percent, to 3,239.17.

April is historically the second-strongest month for stocks, behind December, Deutsche Bank analysts said in a report released Monday. The S. P. 500 has gained an average of 1.4 percent in April, based on returns since 1960.

The last meaningful setback for stocks started before the elections last November. The market slid 6 percent from Oct. 1 through Nov. 15 before the vote and immediately afterward over concerns that Congress and the administration would be unable to enact measures to continue economic growth.

Evidence that growth was continuing, despite political discord in Washington, has kept stocks on an upward trajectory since then, leaving investors waiting for dips to add to their holdings.

”I’d love to have some sort of a pullback here because I’d think it’s an opportunity,” said Scott Wren, an equity strategist at Wells Fargo Advisors. “But it doesn’t feel like we’re going to have one in the near term.”

Among the stocks on the move, Tesla Motors, the electric car company, rose $6.04, or 16 percent, to $43.93 after it said Sunday night that first-quarter sales have exceeded 4,750 Model S sedans, above its previous forecast of 4,500.

DFC Global, a finance company that lends to consumers who lack bank accounts, fell $3.60, or 22 percent, to $13.04 after slashing its earnings estimate for its fiscal year because of loan defaults in its business in Britain.

American Greetings rose $1.95, or 12 percent, to $18.05 after the company agreed to be taken private for about $602 million by a group led by some of its top executives.

In the bond market, interest rates eased slightly. The price of the Treasury’s 10-year note rose
5/32, to 101 16/32, while its yield slipped to 1.84 percent, from 1.85 percent late Thursday. (The bond and stock markets were closed Friday in observance of Good Friday.)

This article has been revised to reflect the following correction:

Correction: April 1, 2013

An earlier version of this article, and its capsule summary, misstated the day when the Standard Poor’s 500-share index reached a new closing high. The high was reached last Thursday, not Friday.

Article source: http://www.nytimes.com/2013/04/02/business/economy/daily-stock-market-activity.html?partner=rss&emc=rss