U.S. stocks rose, after equities slipped to a two-month low
yesterday, as a rally in energy and financial shares overshadowed
declines in Sprint Corp. and Time Warner (TWX) Inc. amid merger news. Peabody Energy Corp. jumped 2.4 percent to pace gains among energy companies after the group plunged 2.1 percent yesterday. Bank of America Corp. climbed 2 percent as the company raised its dividend. Sprint slid 17 percent after a person with knowledge of the matter said it ended talks to acquire T-Mobile US Inc. Time Warner tumbled 11 percent after Rupert Murdoch’s 21st Century Fox Inc. withdrew its unsolicited takeover bid for the company.
The Standard & Poor’s 500 Index rose 0.3 percent to 1,925.69 at 11:09 a.m. in New York. The gauge erased losses after
dropping below its average level for the past 100 days. The Dow Jones Industrial Average added 44.20 points, or 0.3 percent, to 16,473.67. Trading in S&P 500 companies was 32 percent above the 30-day average for this time of day.
“There’s cash sitting on the sidelines looking for an opportunity to go back in,” Kevin Caron, who helps oversee $170 billion at Stifel Nicolaus & Co. in Florham Park, New Jersey, said in a phone interview. “It may just be that there are some value investors who are stepping in and starting to nibble here. The correction we’ve seen so far has been enough to get at least some investors’ attention.”
The S&P 500 slid 1 percent yesterday to the lowest level since May as tensions escalated over Ukraine. The benchmark gauge has lost 3.1 percent since reaching a record of 1,987.98 on July 24. It tumbled the most since June 2012 last week as companies around the globe posted disappointing results, Argentina defaulted and Banco Espirito Santo SA was ordered to raise capital.
Ukraine Crisis
Russian President Vladimir Putin is showing no sign of backing down over Ukraine, and said his government has proposed retaliatory measures after the U.S. and the European Union tightened sanctions last week. NATO Deputy Secretary General Alexander Vershbow said that Russia has amassed about 20,000 troops along its border with eastern Ukraine.Stocks have also been weighed down by concerns that the improving economy may force the Federal Reserve to raise interest rates sooner than expected. Data last week showed U.S. gross domestic product expanded at a 4 percent annual pace in the second quarter, confirming the Fed’s view that a first-quarter contraction was transitory.
The S&P 500 has soared 184 percent since the start of the bull market in March 2009, boosted by three rounds of central bank stimulus and better-than-forecast corporate earnings. The benchmark equity gauge has gone without a 10 percent correction since 2011. It trades at 17.4 times the reported earnings of its companies, after reaching the highest level since 2010 in June.
Earnings Season
Keurig Green Mountain Inc. and Prudential Financial Inc. are among 25 S&P 500 companies reporting earnings today. About 75 percent of those that have posted results this season have beaten analysts’ estimates for profit, while 64 percent exceeded sales projections, data compiled by Bloomberg show.Profit probably rose 9.4 percent in the second quarter, while sales gained 4.2 percent, according to analyst estimates compiled by Bloomberg.
The Chicago Board Options Exchange Volatility Index, which usually moves in the opposite direction to the S&P 500, fell 5.3 percent to 15.97 today. The VIX soared 34 percent last week, the most since January.
Seven out of 10 major industries in the S&P 500 advanced. Energy companies rallied 0.7 percent for the biggest gains, and financial companies rose 0.5 percent.
Raised Dividend
Bank of America gained 2 percent to $15.30. The second-biggest U.S. lender raised its quarterly dividend to 5 cents a share and dropped plans to buy back stock after the Fed approved its resubmitted capital plan for 2014.The dividend increase, from 1 cent per share, was postponed in April after the Charlotte, North Carolina-based company said it made an error in its original Fed submission. The central bank said today it didn’t object to the company’s revised plan.
Activision Blizzard Inc. advanced 2.4 percent to $22.90. The largest U.S. video-game maker posted second-quarter results that beat analysts’ estimates, citing online sales of World of Warcraft and Diablo titles. The company also raised its full-year forecast.
Molson Coors Brewing Co. gained 5.4 percent to $70.85. The company reported second-quarter earnings and revenue that surpassed analysts’ projections. AOL Inc. rose 5.6 percent to $41.20 after revenue topped forecasts.
Sprint, Groupon
Sprint slid 17 percent to $6.03. Regulatory concerns outweighed the potential benefits of a merger with T-Mobile US that would combine the third and fourth-largest U.S. wireless carriers, according to the person with knowledge of the matter. Sprint also named Marcelo Claure, the founder of mobile-phone distributor Brightstar Corp., as its new chief executive officer.T-Mobile retreated 7.5 percent to $31.36.
Groupon (GRPN) Inc. slumped 18 percent to $5.82. The company forecast third-quarter earnings of no more than 2 cents a share, excluding some items, compared with the average analyst estimate of 3 cents a share.
Time Warner dropped 11 percent to $75.50 as Murdoch’s Fox withdrew its $75 billion offer. The billionaire chairman of Fox gave up after Time Warner’s board refused to engage in talks and Fox’s stock price slid 11 percent since the offer became public. Time Warner also reported earnings that beat estimates and said it plans to buy back $5 billion of its shares.
Twenty-First Century Fox climbed 4.9 percent to $32.84.
Walgreen Co. (WAG) retreated 12 percent to $60.89. The biggest U.S. drugstore chain said it will pay about $5.29 billion in cash plus $10 billion in Walgreen stock for the shares in Alliance Boots it doesn’t already hold. Walgreen owns 45 percent of Bern, Switzerland-based Alliance Boots, which has pharmacy and beauty stores in Europe.
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