Tuesday, 11 September 2012

U.S. Stocks Advance Amid Speculation Over Fed Decision

By Inyoung Hwang - Sep 11, 2012 6:24 PM GMT+0400

U.S. stocks rose, after yesterday’s drop in the Standard & Poor’s 500 Index, amid speculation the Federal Reserve will act to stimulate the economy and Germany’s highest court said it won’t delay its ruling on the euro area’s permanent bailout fund.
Alcoa Inc. (AA) and Caterpillar Inc. (CAT) climbed at least 1.8 percent, leading gains among the biggest companies. Nine out of 10 groups in the S&P 500 rose. Green Mountain Coffee Roasters Inc. jumped 2.3 percent after Luigi Lavazza SpA increased its stake in the company.Ralph Lauren Corp. (RL) paced declines among luxury goods companies as Burberry Group Plc said profit will be at the lower end of estimates.
Alcoa Inc. and Cliffs Natural Resources Inc. climbed at least 0.8 percent as investors bought shares of companies most tied to economic growth. Photographer: Stephen Morton/Bloomberg
Sept. 11 (Bloomberg) -- Brian Belski, chief investment officer at BMO Capital, talks about the outlook for the stock market and investment strategy. Belski speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates, also speaks. (Source: Bloomberg)
Aug. 23 (Bloomberg) -- Mitchell Pinheiro, an analyst at Janney Montgomery Scott, talks about Green Mountain Coffee Roasters Inc.'s growth outlook and the specialty-foods industry. He speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." (Source: Bloomberg)
The S&P 500 added 0.3 percent to 1,433.54 at 10:20 a.m. in New York. The Dow (INDU) Jones Industrial Average gained 69.85 points, or 0.5 percent, to 13,324.14. Trading in S&P 500 companies was up 24 percent from the 30-day average at this time of day.
“Everybody is waiting to see what the Fed and German court will do,” Greg Peterson, director of investment research at Ballentine Partners LLC in Waltham, Massachusetts, which has about $4 billion in assets, said by telephone. “The market is expecting a third round of quantitative easing and the Fed has been reassuring.” He said, “The Fed has come out and said that things are weakening and that they’re willing to act.”
The S&P 500 is less than 10 percent from its record closinghigh after rising 14 percent this year. The equities index is 20 percent above its level on Sept. 15, 2008, the first trading day after Lehman Brothers Holdings Inc. filed the world’s biggest bankruptcy and prompted a 46 percent drop through March 9, 2009. The benchmark gauge fell 0.6 percent yesterday as concern Greece’s debt crisis will worsen overshadowed speculation that central banks will take steps to support the global economy.

Fed Meeting

The Federal Open Market Committee will discuss additional measures to stimulate the U.S. economy at a two-day meeting starting tomorrow. Federal Reserve Chairman Ben S. Bernanke said on Aug. 31 he wouldn’t rule out steps to lower an unemployment rate he described as a “grave concern.”
The U.S. may lose its top credit rating from Moody’s Investors Service unless lawmakers are able to reduce the percentage of debt to gross domestic product during budget negotiations next year. Moody’s, which placed a negative outlook on the U.S.’s Aaa grade in August, said in a statement today that the rating would likely be cut to Aa1 if negotiations fail to produce such policies.
A report from the Commerce Department showed that the country’s trade deficit widened in July for the first time in four months as the global economic slowdown reduced demand for American-made goods.

German Court

U.S. equities advanced today as Germany’s Federal Constitutional Court said it will issue a ruling tomorrow on whether to allow the country to ratify the 500 billion-euro ($640 billion) European Stability Mechanism. The court rejected an argument by lawmaker Peter Gauweiler that it delay the decision after the European Central Bank pledged unlimited funds last week to buy government bonds.
The S&P 500 climbed to its highest level since 2008 on Sept. 6 as the ECB approved a bond-buying program to lower borrowing costs for the most-indebted euro-area states.
“The very aggressive approach of Mario Draghi and the ECB to the European crisis has reduced the tail risk of a global financial crisis emanating from it,” David Kelly, chief market strategist at JPMorgan Funds in New York, said by phone. His firm oversees about $348 billion. “The general view in Europe is that is that the German Constitutional court will not throw the whole thing out.”

Alcoa, Caterpillar

Alcoa, the largest U.S. producer of aluminum, jumped 2.2 percent to $9.25, leading gains in the Dow. Caterpillar, the world’s biggest maker of construction and mining equipment, rallied 1.8 percent to $88.64. Cliffs Natural Resources Inc. (CLF), the largest iron-ore producer in the U.S., added 6.2 percent to $41.59 for the biggest gain in the S&P 500.
Green Mountain (GMCR), the maker of Keurig brewers and single- serve pods, advanced 2.3 percent to $31.07 after Lavazza said in a filing after the market closed yesterday that it increased its stake to 6.8 percent. Lavazza owned 5 percent of Green Mountain as of Feb. 24, data compiled by Bloomberg show.
Morgan Stanley (MS) will purchase 14 percent of its brokerage joint venture from Citigroup Inc. (C) at a price that values the total unit at $13.5 billion. Citigroup has said it may need to take a charge if the price lowers the valuation on its balance sheet for its current 49 percent holding. Morgan Stanley climbed 1.6 percent to $16.87, while Citigroup advanced 2.1 percent to $32.49.

Legg Mason

Legg Mason Inc. (LM), the money manager reeling from 19 straight quarters of client redemptions, jumped 4.2 percent to $26.55. The Baltimore-based company said today in a statement that Mark R. Fetting will step down as chairman and chief executive officer on Oct. 1, two months before a standstill agreement with activist investor Nelson Peltz expires.
American International Group Inc. (AIG) sank 1.4 percent to $32.84. Shares of the bailed-out insurer valued at $18 billion were sold by the U.S. government, converting a four-year bailout into a profit for taxpayers. The U.S. sold about 553.8 million shares at $32.50 apiece, the Treasury Department said yesterday in a statement.
Ralph Lauren lost 3.3 percent to $155.02, while Tiffany & Co. (TIF) erased 1.4 percent to $62.14. London-based Burberry said full-year profit will be at the lower end of analyst estimates after sales growth slowed. Coach Inc. (COH) fell 1 percent to $61.95 after Brean Murray Carret & Co. lowered its rating on the company to hold from buy.
To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson atlthomasson@bloomberg.net