Economic Activity

U.S. stocks advance amid better-than-forecast economic reports

BLOOMBERG FILE PHOTO/TIM BOYLE
STOCKS ADVANCED in the U.S. after better-than-estimated reports on consumer confidence and housing.
Posted 9/25/12

NEW YORK - U.S. stocks advanced, snapping a three-day decline for the Standard & Poor’s 500 Index, after better-than-estimated consumer confidence and housing data.

Merck & Co. and Pfizer Inc. each added 1 percent to pace gains in health-care companies in the S&P 500. Caterpillar Inc., the world’s biggest construction and mining equipment maker, fell 2 percent after cutting its forecast for 2015 earnings. Red Hat Inc., the largest seller of the open-source Linux operating system, dropped 2 percent as profit missed estimates and the company pared sales forecasts.

The S&P 500 rose 0.4 percent to 1,462.28 at 10:11 a.m. New York time. The Dow Jones Industrial Average added 52.65 points, or 0.4 percent, to 13,611.57. Trading in S&P 500 companies was almost in line with the 30-day average at this time of day.

“The economic numbers are decent,” Burt White, who oversees about $350 billion as chief investment officer at LPL Financial Corp. in Boston, said in a telephone interview. “The housing healing is here. The fact that you’re starting to see stabilization in housing is a real boost to confidence.”

Stocks gained as data showed confidence among American consumers rose in September to a seven-month high, which may help support the largest part of the economy. Home prices in the U.S. climbed more than forecast in July from a year earlier, adding to signs that housing will spur economic growth.

Seven weeks

The S&P 500 yesterday had the longest decline in seven weeks as European leaders clashed on ways to stem the debt crisis and data from China and Germany signaled the slowdown is deepening. The index was still up 16 percent this year amid better-than-estimated earnings, rising consumer confidence and home sales, and Federal Reserve stimulus.

All 10 groups in the S&P 500 advanced as phone, health-care and financial companies had the biggest gains. Merck added 1 percent to $45.61. Pfizer rose 1 percent to $25.

Caterpillar lost 2 percent to $89.10. The company said profit will be $12 to $18 a share, compared with a previous projection of $15 to $20. While a global recession remains possible, Caterpillar is forecasting moderate and “anemic” growth through 2015, Chairman and Chief Executive Officer Doug Oberhelman said yesterday in a presentation to analysts at the MINExpo industry conference in Las Vegas.

Red Hat retreated 2 percent to $56.37. The company cited a slowdown in the services side of its business for the lower forecast. Demand for subscriptions to its software remains strong, Chief Executive Officer Jim Whitehurst said on a conference call.

Gold miners

David Einhorn’s Greenlight Capital Inc. suffered in the past year by favoring gold-mining stocks over the precious metal, a strategy that Scotia Capital Inc. recommended last week. Two exchange-traded funds that Greenlight was buying in the third quarter of last year have declined since Sept. 30, 2011. Gold has risen about 9 percent during the same period in New York. Einhorn declined to comment on the performance.

Greenlight has stayed with one of the funds, the Market Vectors Gold Miners ETF, which invests in the metal’s biggest producers. The New York-based hedge fund is the third-largest shareholder even after cutting its stake by 17 percent in the second quarter, according to data compiled by Bloomberg.

The other ETF is also one of Van Eck Associates Corp.’s Market Vectors funds and tracks smaller mining companies, known as juniors. Greenlight finished last year’s third quarter with 1.9 million shares and sold all of them in the first half of this year, according to filings.

“There is a case to be made that the equities should start to outperform bullion,” Tanya Jakusconek, an analyst at Scotia Capital, wrote in a Sept. 20 report. Capital-spending cutbacks may lead to greater cash flow for many producers, the Toronto- based analyst wrote.

Five gold-mining stocks have the equivalent of buy ratings from Jakusconek, according to data compiled by Bloomberg. They are Agnico-Eagle Mines Ltd., Barrick Gold Corp., Eldorado Gold Corp., Goldcorp Inc. and Iamgold Corp.

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