By Rita Nazareth - Feb 16, 2012 10:58 PM GMT+0700
Feb. 16 (Bloomberg) -- David Kotok, chief investment officer at Cumberland Advisors Inc., talks about investment strategy and global central bank policy. Kotok also discusses Comcast Corp. authorizing a $6.5 billion stock buyback and increasing its annual dividend 44 percent to 65 cents a share. He speaks with Tom Keene and Sara Eisen on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
U.S. stocks advanced, following a two-day decline in the Standard & Poor’s 500 Index, as better- than-estimated housing, manufacturing and jobless claims data outweighed concern about a Greek debt default.
Microsoft Corp. (MSFT) and American Express Co. added at least 1.6 percent to pace gains in the Dow Jones Industrial Average. General Motors Co. (GM) advanced 4.3 percent after the automaker posted the biggest profit in its 103-year-history. NetApp (NTAP) Inc. increased 5.8 percent as the maker of data-storage products reported revenue that beat analysts’ estimates. Morgan Stanley (MS) tumbled 1.6 percent as it is among the financial companies that may be downgraded at Moody’s Investors Service.
The S&P 500 rose 0.3 percent to 1,346.67 at 10:57 a.m. New York time, after falling as much as 0.2 percent earlier. The Dow increased 51.42 points, or 0.4 percent, to 12,832.37 today.
“We’re more important to Europe than Europe is to us,” Liz Ann Sonders, the New York-based chief investment strategist at Charles Schwab Corp., said in a telephone interview. Her firm has $1.68 trillion in client assets. “U.S. economic numbers have been much better than expected. I’m pretty optimistic, but I don’t think we’re going to boom. The debt overhang puts a lid on how fast the U.S. economy can grow.”
Stocks rose as a report showed that manufacturing in the Philadelphia region expanded in February at the fastest pace in four months as new orders and sales picked up. Claims for jobless benefits unexpectedly dropped last week to the lowest level in four years. Builders broke ground on more homes than forecast in January, helped by warmer weather and adding to signs the U.S. residential real estate market is stabilizing.
Europe’s Woes
European governments are considering cutting interest rates on emergency loans to Greece and using contributions from the European Central Bank to plug a new financing gap in the second bailout program for Athens, two people familiar with the discussions said.
Benchmark gauges fell earlier today as Europe’s creditor countries struggled to bridge divisions over Greece’s bailout yesterday, delaying a decision on 130 billion euros ($170 billion) of aid until Feb. 20. Ratings for global banks may be cut as global lenders face risks of rising funding costs amid Europe’s debt woes, Moody’s said.
Twenty nine out of 30 companies in the Dow gained today. Microsoft, the world’s largest software maker, gained 2.1 percent to $30.68. American Express (AXP) added 1.6 percent to $52.32.
GM surged 4.3 percent to $26.01. North America earnings before interest and taxes more than tripled for the year to $7.19 billion. The automaker’s Europe business, including the Opel brand, lost $747 million for the year.
New Customers
NetApp rallied 5.8 percent to $42.20. The maker of data- storage products said revenue in the third quarter was $1.57 billion, above the average analyst estimate of $1.56 billion. The company said it won a record number of new customers and significantly increased the amount of units shipped.
Morgan Stanley dropped 1.6 percent to $18.66. Its credit rating may be cut by as many as three levels by Moody’s, which is reviewing 17 banks and securities firms with global capital markets operations. Goldman Sachs Group Inc. (GS), JPMorgan (JPM) Chase & Co. and Citigroup Inc. (C) are among companies that may be downgraded by two levels, Moody’s said in a statement, adding that the “guidance is indicative only.” Bank of America Corp. (BAC) may be lowered by one grade.
Goldman Sachs fell 0.4 percent to $112.69. JPMorgan rose 0.6 percent to $37.61. Citigroup declined 0.1 percent to $31.70. Bank of America gained 0.5 percent to $7.82.
Amazon Sinks
Amazon.com Inc. (AMZN) sank 4 percent to $177.17. The shares fell after Scott Devitt, an analyst at Morgan Stanley, cut the rating to “equal-weight,” meaning the total return is expected to be in line with the average total return of the analyst’s industry or industry team’s coverage universe, on a risk-adjusted basis, over the next 12-18 months.
CBS Corp. (CBS) dropped 1.9 percent to $29.01. The owner of the most-watched U.S. television network posted fourth-quarter sales that missed analysts’ estimates as advertising declined.
J.M. Smucker Co. (SJM) slumped 8.5 percent to $71.50. The maker of Folgers coffee forecast 2012 earnings excluding some items of $4.65 a share at most. On average, the analysts surveyed by Bloomberg estimated profit of $5.
Price swings by the S&P 500 have narrowed to a nine-month low following the measure’s biggest rally to start a year since 1997. The distance between its intraday low and high has averaged 0.86 percent since Feb. 2, a 10-day level last seen on May 5, according to data compiled by Bloomberg.
Out of Steam
Volatility (SPX) has diminished after the S&P 500 advanced 6.8 percent in 2012. When the 10-day average swing was this low in May, the index had just peaked on April 29 and went on to slump 19 percent through October. The current narrowing signals the rally may be running out of steam, said Katie Stockton, chief market technician at Greenwich, Connecticut-based MKM Partners.
“It reflects a loss of momentum, which had been very strong until last week,” Stockton wrote in an e-mail.
The S&P 500 yesterday reversed its gain after hitting 1,355.87, near its July intraday peak of 1,356.48. Stocks have rallied this year as companies reported earnings that beat analysts’ estimates for the 12th straight quarter and better- than-expected data on manufacturing and employment bolstered optimism about the world’s largest economy.
The market has gone without the S&P 500 losing at least 0.7 percent for 33 consecutive days, the longest streak since January 2011, according to data compiled by Bloomberg.
Yesterday’s reversal “could put some real pressure on the bulls as they try to avert a follow-through down session.” Frank Cappelleri, a market technician at Instinet Inc. in New York, wrote in an e-mail.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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