Tuesday, 17 July 2012

U.S. Stocks Gain As Bernanke Says Fed Prepared To Act

By Inyoung Hwang and Julia Leite - Jul 17, 2012 9:08 PM GMT+0400
U.S. stocks rose, erasing earlier losses, as Federal Reserve Chairman Ben S. Bernanke told senators that the central bank is prepared to act to boost growth if the labor market doesn’t improve.
Walt Disney Co. (DIS) rallied 3.8 percent to a record after Bank of America Corp. analysts raised the world’s largest entertainment company to a buy. Coca-Cola Co. (KO) advanced 1.8 percent after posting earnings that topped projections. Mattel Inc. (MAT) jumped 11 percent after reporting second-quarter profit that exceeded the average analyst estimate.
Ben S. Bernanke, chairman of the U.S. Federal Reserve, delivers his semiannual monetary policy report to the Senate Banking Committee in Washington, D.C. Photographer: Joshua Roberts/Bloomberg
Bernanke Testifies on U.S. Economy, Monetary Policy
July 17 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke testifies about the U.S. economy and Fed policy before the Senate Banking Committee in Washington. Bernanke said progress in reducing unemployment is likely to be “frustratingly slow” and repeated the Fed is ready to take further action to boost the recovery, while refraining from discussing specific steps. (This is Bernanke's prepared statement. Source: Bloomberg)
The Standard & Poor’s 500 Index added 0.4 percent to 1,358.42 at 1:02 p.m. in New York after losing as much as 0.6 percent. The Dow Jones Industrial Average increased 48.55 points, 0.4 percent, to 12,775.76.
“The stock market has faith in the Fed,” said Jack Ablin, chief investment officer at BMO Harris Private Bank in Chicago, which oversees about $60 billion of assets. “With all of the headlines, and all of the slowing, investors still believe the Fed will do anything in its power to keep the ship afloat.”
Stocks headed lower in the first hour of trading as Bernanke’s prepared testimony to Congress cited no specific details on the central bank’s plans, disappointing investors anticipating a more aggressive approach to helping the economy. Equities recovered as Bernanke’s responses to senators boosted confidence that he’s prepared to take action.

Economy Watch

The S&P 500 (SPX) has slipped in seven of the previous eight sessions and is down more than 4 percent from a four-year high in April as economic data trailed estimates and investors braced for the first decline in quarterly profits since 2009.
Bernanke’s testimony follows data yesterday showing a contraction in June retail sales and a report today that the cost of living in the U.S. was little changed in June, a sign inflation may stay subdued.
The Citigroup Economic Surprise Index for the U.S., which measures how much data from the past three months is beating or missing the median estimates in Bloomberg surveys, is at minus 62.30, near the almost 11-month low of minus 64.9 reached last week. The gauge peaked at 91.9 in January.
Investors are also watching earnings reports this week. Profits beat estimates at 32 of the 45 companies in the S&P 500 that have reported quarterly results so far, data compiled by Bloomberg showed. Earnings are down 3 percent for the group and profits are projected to decrease 2.1 percent for the entire S&P 500.

Disney, Coca-Cola

All 10 groups in the S&P 500 rose, as health-care and telephone stocks led gains by rising 0.9 percent.
Walt Disney rallied 3.8 percent to $49.69, its highest price ever, while so-called consumer discretionary stocks in the S&P 500 added 0.8 percent as a group. The company was raised to buy from neutral by Bank of America, which cited a boost to 2012 earnings from the film “Marvel’s The Avengers” and a contribution to profit next year from the opening of Cars Land.
Coca-Cola advanced 1.8 percent to $77.89 for the third- biggest gain in the Dow. The world’s largest soft-drink maker reported second-quarter profit that topped analysts’ estimates, helped by pricing increases in North America late last year.
Mattel jumped 11 percent to $34.40 for the biggest gain in the S&P 500. The world’s largest toymaker surged the most in more than three years as price increases helped second-quarter profit and revenue top analyst estimates.
Sprint Nextel Corp. (S), the third-largest U.S. wireless carrier, rose to the highest level since September after Credit Suisse AG boosted its price target for the stock, citing its network upgrade and cost management. Sprint advanced 4.9 percent to $3.63.
To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net
Julia Leite in New York at jleite3@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson atlthomasson@bloomberg.net