Thursday, June 18, 2015

U.S. Stocks Rise Amid Plunge in Home Sales, Fed Gathering

U.S. stocks rose, with the Standard & Poor's 500 Index posting its first two-day rally in three weeks, as investors watched Federal Reserve officials for signals on stimulus cuts after data showed home sales plunged.

Microsoft Inc. rallied 7.3 percent after Chief Executive Officer Steve Ballmer said he would retire within 12 months. Nasdaq OMX Group Inc. added 1.2 percent after the shares slid the most in more than four months following a trading disruption yesterday. D.R. Horton Inc. sank 2.9 percent to pace declines in an index of homebuilder stocks. Pandora Media Inc. slumped 13 percent as its sales forecast missed estimates.

The S&P 500 climbed 0.4 percent to 1,663.47 at 4 p.m. in New York. The gauge added 1.3 percent in the past two sessions in the first back-to-back advance since Aug. 2. The Dow Jones Industrial Average rose 46.62 points, or 0.3 percent, to 15,010.36. About 4.9 billion shares changed hands on U.S. exchanges today, 21 percent below the three-month average.

"The macro picture is very important," Jim Russell, the senior equity strategist for U.S. Bank Wealth Management, said in an interview from Cincinnati. His firm oversees $110 billion. "Investors are trying to figure out how markets will respond to rising rates and what it will mean for the consumers and the business climate. This weekend's meeting in Jackson Hole is a focus although we don't expect big announcements."

The S&P 500 gained 0.5 percent this week, snapping a run of two losing weeks, as investors weighed whether the economy is strong enough to prompt the Fed to curb its monthly bond purchases. Minutes from the central bank's July meeting released Aug. 21 showed almost all policy makers agreed with plans to slow the pace if the economy continues to improve in line with forecasts.

Fed Debate

Three Fed regional bank presidents, who spoke today from a monetary policy conference in Jackson Hole, Wyoming, differed over the timing for reducing the bond buy! ing, with one backing a tapering next month if the economy remains strong and two others saying policy makers should take time to assess economic data.

"We can take our time" on slowing purchases, St. Louis Fed President James Bullard said. San Francisco's John Williams told CNBC he wants to "taper our purchases later this year" if the economy doesn't flag, while Atlanta's Dennis Lockhart said he "would be supportive" of slowing purchases next month if the expansion holds up.

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Data today from the Commerce Department showed purchases of new U.S. homes plunged in July by the most in more than three years and previous months were revised down, a sign that growth in the industry may be taking a pause as mortgage rates rise. Yields on 10-year Treasury notes have risen toward a two-year high.

'Little Softer'

"Home sales are a big part of this recovery story in the U.S.," Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $180 billion, said in an interview. "The fact that there are rising interest rates looks like it may be starting to bite into new home sales. That's probably going to cause the economy be a little softer in the second half."

The monetary support helped push the S&P 500 (SPX) up as much as 153 percent from its March 2009 low. Speculation about the stimulus has whipsawed stocks since May, when Chairman Ben S. Bernanke, who is not at the conference, first indicated cuts could start this year.

The S&P 500 tumbled 5.8 percent from a record high on May 21 through June 24. It then rebounded as much as 8.7 percent to close at its latest record of 1,709.67 on Aug. 2. The index closed today 2.7 percent below the all-time high.

Volatility Gauge

The Chicago Board Options Exchange Volatility Index, or VIX, dropped 5.3 percent to 13.98! . The equ! ity volatility gauge fell 2.7 percent in the past five days to halt two consecutive weeks of advances.

Nasdaq halted trading of its listed stocks for three hours yesterday because a computer problem left some investors without quotes and the company did not want to have "information asymmetry," Chief Executive Officer Robert Greifeld said in interviews today.

Nasdaq shares rose 1.2 percent to $30.83 after retreating 3.4 percent yesterday. The exchange operator will probably not have to spend large sums on damages, Wells Fargo & Co. analysts led by Christopher Harris wrote in a note. Nasdaq suspended trading in the stocks, so investors probably didn't lose money as a result of mismanaged orders.

Greifeld told CNBC that Nasdaq has "no liability" from the outage and said yesterday's share decline was a buying opportunity.

Ballmer Exit

Microsoft rallied 7.3 percent to $34.75 for the biggest gain in the Dow. Ballmer, who has struggled to adapt to an era of declining personal-computer sales, will retire after more than a decade leading the world's largest software maker.

Autodesk Inc. jumped 7.7 percent, the most since October 2011, to $38.91. The software maker was upgraded to buy from neutral by B Riley & Co. after its sales and profit topped estimates in the second quarter.

The S&P Supercomposite Homebuilding Index sank 3.1 percent, with all 11 members declining. PulteGroup Inc. retreated 1.6 percent to $16.06 and D.R. Horton slid 2.9 percent to $18.73.

Pandora Media slumped 13 percent to $18.91, its steepest slide this year. The biggest online radio service forecast third-quarter profit that will miss analysts' estimates as the company invests to expand its sales staff.

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