U.S. Stocks Fluctuate as Commodity, Technology Shares Advance
A pedestrian walks outside EBay Inc. headquarters. Photographer: Tony Avelar/Bloomberg
Aug. 16 (Bloomberg) -- John Michaelson, co-founder of Imperium Partners Group LLC, talks about the impact of low interest rates on investments, bank lending and consumer confidence. Michaelson speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
U.S. stocks fluctuated as gains in technology and commodity companies helped the market overcome an early slide triggered by concern the economic recovery is slowing.
EBay Inc. gained 3.7 percent on speculation its PayPal service will be used by Google Inc.’s Android smartphone. Titanium Metals Corp. and Cliffs Natural Resources Inc. rallied at least 2.4 percent as metal prices increased and Goldman Sachs Group Inc. reiterated its “overweight” recommendation on commodities. Corinthian Colleges Inc. and Washington Post Co. sank on concern their for-profit colleges will lose access to government student loans.
The S&P 500 climbed less than 0.1 percent to 1,080.25 at 10:59 a.m. in New York, recovering from an early 0.9 percent slump. The Dow Jones Industrial Average increased 7.64 points, or 0.1 percent, to 10,310.79, reversing a 94-point tumble.
“It’s a wait-and-see approach,” said Peter Jankovskis, who helps manage about $2.2 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “People are wary because of weak global economic numbers. Corporate earnings have been strong. However, we’ll have a fair amount of economic data this week and investors will be waiting to see what those numbers will show.”
Stocks tumbled in early trading after weaker-than-forecast reports on New York manufacturing and Japan’s economy added to concern the global recovery is slowing. About $1.9 trillion has been wiped from the value of global equities since the Federal Reserve said Aug. 10 that the pace of economic recovery will probably be “more modest” than forecast.
The 4.3 percent retreat in the S&P 500 from Aug. 9 through Aug. 13 threatened the index’s rebound from a 10-month low on July 2.
Economic Reports
The Fed Bank of New York’s general economic index rose to 7.1 this month from 5.1 in July. Economists forecast the measure would rise to 8, according to the median estimate in a Bloomberg News survey. Readings greater than zero signal expansion in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.
Gross domestic product in Japan rose an annualized 0.4 percent in the second quarter, the country’s Cabinet Office said today, pushing the economy into third place behind the U.S. and China. The median estimate of 19 economists surveyed by Bloomberg News was for growth of 2.3 percent.
“The market is still nervous and optimism from the second- quarter earnings reports can quickly be diminished by other factors,” said Christian Falkner, an analyst at Alpha Wertpapierhandels AG in Frankfurt. “I don’t see one single event, but a combination of bad economic figures and the statements from the Federal Reserve and the Bank of England on economic growth last week.”
Corinthian Tumbles
Corinthian Colleges sank 24 percent, the most intraday in almost two years, to $5.05 after BMO Capital Markets downgraded the stock to “market perform” from “outperform.” Washington Post slumped 12 percent to $303.33.
Colleges owned by Corinthian Colleges, Career Education Corp. and Washington Post have campuses where fewer than 20 percent of federal student loans are being repaid, according to the U.S. Department of Education, which wants to use the data to determine whether programs can remain eligible for aid.
Nationally, for-profit colleges have a 36 percent student- loan repayment rate, compared with 54 percent at public universities and 56 percent at private nonprofits, according to an analysis of the Education Department data by the Institute for College Access & Success, an Oakland, California nonprofit research and advocacy group.
Chesapeake, 3Par
Chesapeake Energy Corp. gained 0.9 percent to $20.97 after being raised to “outperform” from “market perform” at BMO Capital Markets. The 12-month share-price estimate is $30.
3Par Inc. surged 86 percent to $17.92. Dell Inc. agreed to buy the maker of hardware and software for reducing information- storage requirements for about $1.15 billion. 3Par investors will get $18 a share in cash. That’s almost double the stock’s closing price of $9.65 on Aug. 13.
Investors are moving more money than ever before out of stocks and into bonds, widening a valuation gap and convincing the biggest money managers that now is the time to buy equities.
About $33 billion flowed out of funds owning U.S. shares this year even as the economic recovery sent free cash flow for American companies excluding banks to 6.8 percent of their market value. That’s the highest level compared with corporate debt yields since 1960, Credit Suisse Group AG data show. About $185 billion was sent to bond funds through July 31, the most on record, according to the Investment Company Institute.
“People would rather overpay for bonds than underpay for stocks,” said David Kelly, who helps oversee $445 billion as chief market strategist for JPMorgan Funds in New York. “It’s a reflection of an extraordinary prejudice. If people are at an emotional extreme, it means that at some point there’s got to be reallocation of cash away from the bond market toward the stock market. Ultimately, it’s bullish.”
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