Equities extended gains on a report that the Federal Reserve is discussing a new type of bond-buying program. Financial and industrial shares rose the most among 10 groups in the S&P 500. Bank of America Corp. (BAC) and Caterpillar Inc. (CAT) advanced at least 2.2 percent. Apple (AAPL) Inc. added 0.1 percent after introducing a new version of the iPad with a sharper screen.
The S&P 500 rose 0.7 percent to 1,352.63 at 4 p.m. New York time, after slumping 1.5 percent yesterday. The Dow Jones Industrial Average added 78.18 points, or 0.6 percent, to 12,837.33. The Russell 2000 Index of small companies gained 1.1 percent to 795.95. About 6.1 billion shares changed hands on U.S. exchanges, or 9.1 percent below the three-month average.
“The market just wants to go up,” said Jack Ablin, who helps oversee $55 billion as chief investment officer at Harris Private Bank. “The ADP report was positive. The bigger participation in the Greek debt swap is encouraging. Plus, there’s a report that says that the Fed would continue to buy bonds, but they are not going to expand their balance sheet.”
Stocks rose as companies added 216,000 workers to payrolls in February, according to ADP Employer Services. The report came two days before the Labor Department’s monthly jobs data. Consumer borrowing rose more than forecast in January. Optimism about Greece’s debt swap also helped lift stocks. Investors with 58 percent of the Greek bonds eligible for the nation’s debt swap have so far indicated they’ll participate.
Money Printing
Equities extended gains as the Wall Street Journal said the Fed would print new money to buy long-term mortgage or Treasury bonds, then effectively tie up that money by borrowing it back for short periods at low rates.
“The Fed ought to be saving future bullets for a situation that requires a strategic intervention,” said Philip Orlando, the New York-based chief equity strategist at Federated Investors Inc., which oversees about $370 billion. “If the Fed does something now, what happens if six months from now, Greece does default and it does throw the world into a recession? What’s the Fed going to do then?”
Before today, the S&P 500 (SPX) had fallen for three straight days on concern that a rally that restored more than $3.2 trillion to U.S. equity value since October outpaced economic prospects. The benchmark gauge trades at 13.9 times reported earnings, below the average since 1954 of 16.4 times.
Banks Rally
Financial shares, which yesterday had the biggest loss among 10 groups in the S&P 500, led the gains today. Bank of America rose 4 percent, the most in the Dow, to $8.02. JPMorgan Chase & Co. (JPM) advanced 1.6 percent to $39.95.
Industrial shares had the second-biggest gain in the S&P 500. Caterpillar advanced 2.2 percent to $108.28. United Technologies Corp. climbed 1.5 percent to $82.57.
General Electric Co. (GE) increased 1.9 percent to $18.77. The world’s biggest maker of jet engines, power generation equipment, health-care imaging equipment and locomotives reiterated its forecast of earnings growth of at least 10 percent from industrial and capital units this year.
Apple rose 0.1 percent to $530.69, trimming a gain of as much as 1.4 percent. The new iPad will cost $499 to $829 and include an A5X chip that enables better graphics. It will also boast a 9.7-inch screen that has more pixels than traditional high-definition televisions and run on so-called long-term evolution, or LTE, wireless networks. The device will be available March 16, and Apple is taking orders starting today.
Significant Upgrade
Chief Executive Officer Tim Cook is making the most significant upgrade yet to Apple’s tablet months before Microsoft Corp. (MSFT) introduces software that will run on competing devices. The new version is also aimed at helping the company fend off competition from Google Inc. (GOOG)’s Android operating system, as well as Amazon.com Inc. (AMZN), whose $199 Kindle Fire is gaining traction among budget-conscious buyers.
Microsoft gained 0.9 percent to $31.84. Google added 0.3 percent to $606.80. Amazon.com rose 1.5 percent to $183.77.
Ciena Corp. (CIEN) surged 4.2 percent to $14.01. The maker of network equipment for phone companies forecast fiscal second- quarter revenue that topped some analysts’ estimates. Ciena, which last month said first-quarter results would suffer from delays in recording international sales, today predicted stronger operating results in the second half of the year.
Rival JDS Uniphase Corp. (JDSU), the largest maker of fiber-optic testing equipment, added 2.5 percent to $12.80.
Homebuilders Surge
A measure of homebuilders in S&P indexes jumped 4 percent. Lennar Corp. (LEN) increased 5.6 percent to $23.62. D.R. Horton Inc. climbed 3.9 percent to $13.99.
Hovnanian Enterprises Inc. (HOV) increased 2.5 percent to $2.46. The largest homebuilder in New Jersey reported a narrower first- quarter loss as it reduced writedowns and increased sales.
Wynn Resorts Ltd. (WYNN) added 2.4 percent to $122.27. The hotel and casino operator asked investors to approve the removal of Japanese billionaire Kazuo Okada as a director, after accusing him of making improper payments to Philippines gambling officials.
Kraft Foods Inc. (KFT) fell 1.2 percent to $37.83 for the biggest decline in the Dow. The company was cut to “hold” from “buy” by Jefferies Group Inc., which said the stock has little incentive to outperform this year.
Pandora Media Inc. (P) plunged 24 percent, the most in the Russell 1000 Index, to $10.86. The Internet radio pioneer forecast first-quarter results that missed analysts’ projections because of a seasonal lull in advertising sales.
Solar stocks declined as Canadian Solar Inc. (CSIQ)’s loss exceeded estimates. Canadian Solar fell 13 percent to $2.85. First Solar Inc. (FSLR) dropped 6.6 percent to $25.80 for the biggest decline in the S&P 500.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
www.bloomberg.com/news/2012-03-07/u-s-stock-index-futures-rise-before-payroll-report-apple-mako-advance.html
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