U.S. Stocks Rise as Investors Sift Through Economic Data

Thursday, 18 October 2012
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Published in United States Economy

U.S. stocks advanced, erasing an earlier loss in the Standard & Poor’s 500 Index (SPX), as a rise in jobless claims was offset by better-than-estimated data on leading indicators and Philadelphia manufacturing.

Travelers Cos. gained 3.8 percent as earnings more than doubled on lower claims costs tied to natural disasters. Supervalu Inc. (SVU) jumped 3.9 percent as the grocery store chain said it has received interest from several parties amid a strategic review. Philip Morris International Inc. (PM), the world’s largest publicly traded tobacco company, dropped 2.8 percent as earnings trailed analysts’ estimates.

Positive-Pullback

The S&P 500 rose 0.2 percent to 1,463.19 at 12:28 p.m. in New York, after climbing 2.3 percent during the first three trading days of the week. The Dow Jones Industrial Average gained 22.91 points, or 0.2 percent, at 13,579.91 today. Trading in S&P 500 companies was 11 percent above the 30-day average at this time of day.

“The market is digesting some strong gains earlier in the week and the disappointing jobless claims number,” Jim Russell, the Cincinnati-based chief equity strategist at U.S. Bank Wealth Management, which oversees about $113 billion, said in a phone interview. “The data cadence is two steps forward, one step back right now with a positive bias. It does appear as if things are firming up at the margin for the U.S. economy and the Philly Fed report confirms that.”

U.S. stocks slumped early in the trading day as Labor Department figures showed more Americans than forecast filed applications for unemployment benefits last week, reflecting an unwinding of adjustments for seasonal swings at the start of a quarter.

Leading Indicators

Equities pared declines as the index of U.S. leading economic indicators rose in September by the most in seven months, boosted in part by a jump in permits for home construction that’s helping underpin the expansion.

Manufacturing in the Philadelphia region expanded in October for the first time in six months, a sign the industry may be starting to stabilize. The Federal Reserve Bank of Philadelphia’s general economic index rose to 5.7 in October from minus 1.9 in September. A reading of zero is the dividing line between expansion and contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

Economic issues including jobs are central to the race for the American presidency. Gallup’s daily tracking of registered voters conducted Oct. 10 through Oct. 16 showed President Barack Obama with 46 percent and Republican challenger Mitt Romney with 48 percent support. The margin of error is two percentage points.

Policy Issues

“Everything seems paused until we get clarity on the election since there are a lot of economic policy issues that need to be resolved before the end of the year,” Thomas Nyheim, a Wilmington, Delaware-based fund manager for Christiana Trust, which oversees about $13 billion, said in a telephone interview.

The S&P 500 has rallied 16 percent so far this year as economic data topped estimates, companies posted better-than- expected earnings and the Fed announced a third round of bond purchases.

As many as 28 companies listed on the S&P 500 release results today, according to data compiled by Bloomberg. Of the 95 companies in the benchmark index that have reported since Oct. 9, 70 posted earnings that exceeded analyst estimates, while 23 missed them, the data showed

Travelers Climbs

Travelers climbed 3.8 percent to $74.10 for the biggest gain in the Dow. Chief Executive Officer Jay Fishman, 59, has bought back shares, raised rates for coverage and changed policy terms to improve shareholder returns as near record-low interest rates pressure income from the investment portfolio. Property- casualty insurers have benefited from fewer natural disasters this year after record losses in 2011.

MGM Resorts International (MGM) jumped 2.1 percent to $11.15. MGM China Holdings Ltd., a venture between Pansy Ho and MGM Resorts, won a land grant to develop a second casino resort in Macau. The approval allows MGM China to build on the city’s increasingly popular Cotai strip, where the operator doesn’t have a presence.

Supervalu increased 3.9 percent to $2.12. The third-largest U.S. grocery store chain said it has received a “number of indications of interest” as it conducts a review of strategic options. The company is in “active dialogue” with several parties, Eden Prairie, Minnesota-based Supervalu said in a statement.

Lam Research Corp. (LRCX) rose 9.1 percent to $36.62 for the biggest gain in the S&P 500. The chip-equipment manufacturer reported first-quarter earnings that beat analyst estimates

Philip Morris

Philip Morris International dropped 2.8 percent to $89.29. The maker of Marlboro cigarettes posted third-quarter profit that trailed analysts’ estimates. European Union nations facing a debt crisis and high unemployment saw smokers cut back or switch to contraband cigarettes or roll-your-own varieties. Sales in the region slipped 15 percent in the third quarter.

Boston Scientific Corp. (BSX) fell 2.6 percent to $5.48. The heart-device maker lowered its forecast for full-year revenue to no more $7.24 billion from a previous range of $7.2 billion to $7.4 billion. Analysts on average estimated $7.26 billion in sales for the year.

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