U.S. stocks rise as Macy’s jumps amid speculation on stimulus

AS INVESTORS WEIGH better-than-expected data to gauge whether the economy may be strong enough to withstand a scaling back of the Federal Reserve's stimulus, the Dow Jones Industrial Average pushed upward into record territory on Wednesday. / BLOOMBERG FILE PHOTO/JIN LEE
AS INVESTORS WEIGH better-than-expected data to gauge whether the economy may be strong enough to withstand a scaling back of the Federal Reserve's stimulus, the Dow Jones Industrial Average pushed upward into record territory on Wednesday. / BLOOMBERG FILE PHOTO/JIN LEE

NEW YORK – U.S. stocks rose, sending the Standard & Poor’s 500 Index to a record, after Macy’s Inc. jumped on better-than-estimated earnings and investors weighed the strength of the economy to assess when the Federal Reserve may scale back stimulus.
Macy’s jumped 9.5 percent, leading a rally among retailers, as earnings beat estimates. Tesla Motors Inc. advanced 2.4 percent as co-founder Elon Musk said the company won’t recall its Model S after fires involving the electric sedan. Phone shares declined as Verizon Communications Inc. lost 0.9 percent.
The S&P 500 gained 0.5 percent to 1,775.72 at 1:56 p.m. in New York, reversing an earlier decline of as much as 0.4 percent. The Dow Jones Industrial Average rose 23.41 points, or 0.2 percent, to 15,774.08. Trading in S&P 500 shares was in line with the 30-day average at this time of day.
“Investors are in need of additional data to assess when the Fed may taper, as well as the strength of the economy,” Kate Warne, a St. Louis-based investment strategist at Edward Jones & Co., said by phone. “This is a situation where the underlying fundamentals are positive for stocks. There hasn’t been anything that would snuff out that general direction, but stocks are waiting for the next piece of data that will determine the short-term direction.”
The S&P 500 has climbed to record levels this year as the Fed maintained its $85 billion in monthly asset purchases. Central bank support has helped propel the index higher by more than 160 percent from its March 2009 low. The gauge has rallied 25 percent so far in 2013, poised for its best year in a decade, and is trading at 16 times projected earnings, more than the five-year average of 14 times profit, according to data compiled by Bloomberg.

Scaling back

Reducing bond purchases “ought to be on the table at upcoming meetings” by the Federal Open Market Committee, including Dec. 17-18, Fed Bank of Atlanta President Dennis Lockhart said Tuesday. Central bank policy makers will probably scale back the monthly pace of bond buying to $70 billion at their March 18-19 meeting, according to the median of 32 estimates in a Bloomberg survey of economists on Nov. 8.

Investors have been weighing better-than-projected data to gauge whether the economy may be strong enough to withstand less stimulus. This week will bring reports on U.S. jobless-benefit claims and manufacturing in the New York area. Investors may get some insight into Fed policy thinking when Vice Chairman Janet Yellen testifies before the Senate Banking Committee Thursday for her confirmation hearing to succeed Ben S. Bernanke as chairman.

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Yellen testimony

“We could see some reaction to whatever Janet Yellen says tomorrow,” Warne said. Her firm oversees $746 billion. “Everyone would like to have some indication of when the Fed will begin to taper its purchases, but she’ll probably be quite constrained in how she discusses her views on the economy and Federal Reserve policy.”
In the United Kingdom, Bank of England Governor Mark Carney signaled that officials may consider raising interest rates sooner than they previously forecast as the U.K. economy recovers “robustly” and inflation slows. The jobless rate as measured by International Labour Organisation standards declined to 7.6 percent in the third quarter, the lowest since 2009, the Office for National Statistics said Wednesday.

Corporate earnings

Macy’s, NetApp Inc. and Cisco Systems Inc. are reporting results Wednesday. Of the 453 S&P 500 companies that have announced so far, 75 percent have beaten analysts’ income forecasts, data compiled by Bloomberg showed. Profits for the gauge will rise 4.7 percent in the third quarter and 6.2 percent in the final three months of the year, estimates compiled by Bloomberg show.
The Chicago Board Options Exchange Volatility Index, which measures future volatility signaled by S&P 500 options, dropped 1.3 percent to 12.66, reversing an earlier gain of 4.1 percent. The gauge has tumbled 30 percent this year.
Eight of 10 main S&P 500 groups advanced. Consumer discretionary stocks gained 1.2 percent for the best performance among the industries.

Macy’s jumped 9.5 percent, the most since May 2011, to $50.72. The second-largest U.S. department-store company reported third-quarter earnings that beat analysts’ estimates as better local selections boosted sales, signaling stronger demand headed into the holidays.
Gap Inc. increased 1.3 percent while L Brands Inc. added 2 percent. Ralph Lauren Corp. and Abercrombie & Fitch Co. each gained at least 2.3 percent.

Holiday optimism

“People are starting to think about the implications of a positive holiday season,” Walter Todd, chief investment officer at Greenwood Capital Associates LLC, said in phone interview. “Retail for a while had been underperforming, but just the past couple weeks we’ve gotten some positive data points from Gap, Limited Brands and now from Macy’s.”
Tesla added 2.4 percent to $141.09. The stock tumbled 29 percent from Sept. 30 through Tuesday amid several reports of battery-related fires in Model S cars, and as the Palo Alto, Calif.-based company posted third-quarter results that disappointed some investors.
“We’re about five times less likely to have a fire than an average gasoline car,” Elon Musk, CEO of the company and its biggest shareholder, said yesterday at a conference in New York. Reaction to the fires reported by some media was “extremely inaccurate and unreasonable,” Musk said.
General Motors Co. jumped 4.7 percent to $38.39 after the Detroit-based carmaker that counts China as its biggest market said it will open a new headquarters in Singapore to oversee markets including Southeast Asia and India.

Colored clogs

Crocs Inc. surged 9.4 percent to $13.84, its biggest gain in a year. The shoemaker known for its brightly colored clogs is considering its strategic options after talks to take the company private stalled, people with knowledge of the matter said.
The company held talks with private-equity firms including Blackstone Group LP and KKR & Co., two people said, asking not to be identified because the information is private. The chance of a deal is slim because of a gap in price expectations, said one of the people.
Office Depot Inc., which completed a merger with OfficeMax Inc. last week, rose 3.7 percent to $5.40. The company named Roland Smith as CEO and chairman of the newly formed office-supply chain retailer.
Verizon sank 0.9 percent to $49.73, leading phone shares lower, as it acquired technology company upLynk to expand video streaming capabilities. Utilities providers sank for a second day.
Nucor Corp. fell 3 percent to $52.15 after Morgan Stanley analyst Evan Kurtz downgraded the steel producer’s stock. Kurtz upgraded his rating and raised the price target for U.S. Steel Corp., saying new management is taking a “serious and transformational approach.” U.S. Steel rose 1.2 percent to $27.34.

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