U.S. stocks rose, following the Standard & Poor’s 500 Index’s biggest gain in three weeks, as investors watched Federal Reserve officials for signals on stimulus cuts after data showed home sales plunged in July.
Microsoft Inc. rallied 6.9 percent after Chief Executive Officer Steve Ballmer said he would retire within 12 months. Nasdaq OMX Group Inc. added 1 percent after the shares slid the most in more than four months following a trading disruption yesterday. D.R. Horton Inc. sank 3.7 percent to pace declines in an index of homebuilder stocks. Pandora Media Inc. slumped 11 percent as its sales forecast fell short of estimates.
Aug. 23 (Bloomberg) — Federal Reserve Bank of Atlanta President Dennis Lockhart talks about the prospect of the central bank starting tapering its bond-buying program as soon as next month. He speaks with Michael McKee from Jackson Hole, Wyoming, on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)
The S&P 500 rose 0.2 percent to 1,660.87 at 1:59 p.m. in New York. The Dow Jones Industrial Average added 23.28 points, or 0.2 percent, to 14,987.02. Trading in S&P 500 stocks was 6.4 percent lower than the 30-day average at this time of day.
“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 (SPX) has gained 0.3 percent this week 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.
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 buying, 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.
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.
“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 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 finished yesterday 3.1 percent below the all-time high.
The Chicago Board Options Exchange Volatility Index, or VIX, dropped 3.1 percent to 14.30. The equity volatility gauge has fallen 0.6 percent in the past five days and is on track 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 rose 1 percent to $30.77 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.
Microsoft rallied 6.9 percent to $34.63 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 9.6 percent to $39.97. 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 3.2 percent, with all 11 members declining. PulteGroup Inc. retreated 1.9 percent to $16.01 and D.R. Horton slid 3.7 percent to $18.57 for the biggest drop in the S&P 500.
Pandora Media slumped 11 percent to $19.26, 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.