By Inyoung Hwang - Dec 16, 2011 5:18 AM GMT+0700
U.S. stocks rose, snapping a three- day decline in the Standard & Poor’s 500 Index (SPX), as data on jobless claims and manufacturing signaling a strengthening economy overshadowed concern over Europe’s debt crisis.
Utilities, health-care and consumer staples had the biggest gains out of 10 S&P 500 groups, advancing at least 0.9 percent. FedEx Corp. (FDX), the operator of the world’s biggest cargo airline, jumped 8 percent after earnings beat analysts’ estimates on increased holiday orders. Novellus Systems Inc. (NVLS) surged 16 percent as Lam Research Corp. (LRCX) agreed to acquire the company.
The S&P 500 rose 0.3 percent to 1,215.75 at 4 p.m. New York time, paring an earlier rally of 1.1 percent as oil declined and financial companies erased gains. The Dow Jones Industrial Average added 45.33 points, or 0.4 percent, to 11,868.81.
“The news on the U.S. front is surprisingly positive and provides some counterbalance to the uncertainty in Europe,” Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4 billion in Raleigh, North Carolina, said in a telephone interview. “We’re focusing increasingly on the domestic economy which looks to be on the recovery track.”
The S&P 500 lost 3.5 percent during the first three days of this week after posted its first back-to-back weekly gain since October. The benchmark stock measure slumped on Dec. 13 after the Federal Reserve refrained from taking new actions to bolster growth at the world’s largest economy. The central bank said the U.S. economy is maintaining its expansion even as the global economy slows.
Jobless Claims
Global stocks extended gains this morning after Labor Department figures showed initial jobless claims fell by 19,000 to 366,000 last week, the fewest since May 2008. The median of 47 economists had projected 390,000, according to a Bloomberg News survey.
Two reports showed manufacturing in the New York and Philadelphia regions expanded more than forecast in December. The Federal Reserve Bank of New York’s general economic index accelerated to the highest level in seven months, to 9.5 from 0.6 in November. Readings higher than zero signal expansion among companies in the region, which covers New York, northern New Jersey and southern Connecticut. The Federal Reserve Bank of Philadelphia’s index, covering eastern Pennsylvania, southern New Jersey and Delaware, increased to 10.3 from 3.6.
Equities pared early gains after International Monetary Fund Managing Director Christine Lagarde said at an event in Washington that Europe’s “crisis is not only unfolding, but escalating” and cannot be resolved by one group of countries.
‘Get a Sense’
“Investors are trying to get a sense of not only how the economy is performing but also looking at what happens with policy, what happens in Europe,” Kevin Caron, a market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co., said in a telephone interview. His firm has about $108 billion in client assets.
FedEx jumped 8 percent, the biggest rally since April 2009, to $83.47. The company, considered an economic barometer because it delivers goods ranging from pharmaceuticals to financial documents, posted a quarterly profit that beat analysts’ estimates as U.S. consumers increased holiday orders from online retailers. FedEx also ordered 27 Boeing Co. (BA) 767 jet freighters to retire some of its older planes. Boeing increased 1 percent to $70.61.
Novellus Surges
Novellus Systems surged 16 percent to $40.37 for the biggest gain in the S&P 500. Lam Research agreed to buy the maker of machinery used in semiconductor production for about $3.3 billion in stock, valuing it at $44.42 a share. Lam Research fell 8.4 percent to $36.17.
Financial companies were unchanged as a group after rallying as much as 1.6 percent after Spain sold more debt than it had planned. Shares in the group erased their gains as the Securities and Exchange Commission appealed a District Court judge’s decision to reject its proposed $285 million settlement with Citigroup Inc. (C) The New York-based bank slumped 0.5 percent to $25.92, after earlier rising as much as 3.3 percent.
Michael Kors Holdings Ltd., the clothing company founded by the designer of that name, rose 21 percent to $24.20 in its trading debut. The company sold 47.2 million shares yesterday for $20 apiece to raise $944 million, 19 percent more than planned.
Technology and energy companies in the S&P 500 posted the only declines among 10 groups, falling at least 0.2 percent. First Solar Inc. (FSLR), the world’s largest maker of thin-film solar panels, slumped 6 percent, the biggest drop in the S&P 500, to $31.45. The company was downgraded to “neutral” from “outperform” by Robert W. Baird & Co. Chevron Corp. (CVX) slid 0.9 percent to $99.67, as the price of crude oil tumbled to its lowest level in six weeks.
Options Expiration
Tomorrow is the expiration of futures and options contracts on indexes and individual stocks, an event known as quadruple witching, which occurs once every three months.
The S&P 500 has slumped 3.3 percent in 2011 and 11 percent from its high on April 29. The index posted losses in six of the past seven months through November. The gauge’s decline this year may mean there are lower odds the measure will rally during the last two weeks of 2011, if history is any guide, according to Nautilus Capital LLC.
Since 1928, the benchmark index has rallied at year-end 60 percent of the time when it had fallen year to date, compared with 80 percent when it was up for the year, data from Nautilus show. The S&P 500 produced an average gain of 1.3 percent during the last two weeks of the year.
Hedge Funds
Stocks favored by hedge funds fell more than the S&P 500 during the first three days of the week. A Goldman Sachs index of companies that appear most often in funds’ top 10 holdings lost 4.5 percent in the first three days of the week, a period in which the S&P 500 fell 3.5 percent. The index rose 0.4 percent today.
Hedge funds selling assets because of client redemptions may have exacerbated declines for equities and reinforced market volatility, according to Eric Green, a Philadelphia-based fund manager at Penn Capital Management. His firm oversees about $6 billion.
“The hedge fund exposure continues to go down -- it’s year end, they’re squaring positions off, they’re preparing for redemptions,” Green said in a telephone interview. “The volatility is pretty extreme, the market is getting whipped around on nothing and most of them want to shut things down. They probably have to sell more things than buy because they have net redemptions.”
To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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