BLBG: U.S. Stocks Advance on Fed Speculation, Budget Talks
U.S. stocks rose for a sixth day, driving the Dow Jones Industrial Average toward its longest rally since March, amid speculation the Federal Reserve will expand stimulus measures and as talks continued on the budget.
DuPont Co. (DD) advanced 1.9 percent as the chemical maker announced a share buyback and said 2012 earnings will be at the high end of forecasts. Berkshire Hathaway Inc. (BRK/A) climbed 2.4 percent after lifting the threshold it will pay for stock, signaling that Chief Executive Officer Warren Buffett views the shares as undervalued. Eli Lilly & Co. sank 3.1 percent after saying it’s conducting an added study for an experimental Alzheimer’s drug.
The Standard & Poor’s 500 Index rose 0.3 percent to 1,431.67 at 10:29 a.m. in New York, erased its post-election losses. The Dow gained 27.82 points, or 0.2 percent, to 13,276.26, rallying 2.5 percent over six days. Trading in S&P 500 companies was in line with the 30-day average at this time of day, according to data compiled by Bloomberg.
“I’d be really surprised if any significant news comes out of the Fed today,” Michael Vogelzang, who oversees $2.3 billion as president and chief investment officer at Boston Advisors LLC, said in a phone interview. “As a result, people are more worried about the fiscal situation. We could see a much higher equity market with any kind of decent solution.”
President Barack Obama lowered his demand for tax increases in the budget to $1.4 trillion from $1.6 trillion yesterday. House Speaker John Boehner said today the president’s revenue demand can’t pass the House or the Senate. Democrats and Republicans remain divided on taxes and spending, as well as on whether an agreement should include an increase in the debt limit and further programs to boost the economy.
Bloomberg Poll
Almost half of Republicans say Obama has an election mandate to raise rates on the rich. Majorities of about 2-to-1 also read the result of the Nov. 6 election as an endorsement of the president’s pledge to protect Social Security and Medicare benefits, according to a Bloomberg National Poll of 1,000 adults conducted Dec. 7-10.
The Fed concludes a two-day meeting today. The U.S. central bank will announce its interest-rate decision at 12:30 p.m. in Washington, followed by forecasts on economic growth, unemployment and inflation. It will expand economic stimulus by unveiling $45 billion in monthly Treasury purchases in addition to the program to buy $40 billion in mortgage bonds each month, according to a Bloomberg survey of economists.
“The number that people are talking about is the $45 billion worth of medium- and long-dated Treasuries,” Mike Lenhoff, chief strategist at Brewin Dolphin Securities in London, said in a phone interview today. “It will just reinforce the support that it already has for the economy. What really matters is this deal on budget policy.”
Japan Economy
In Asia, Japan’s machinery orders rose for the first time in three months. Orders gained 2.6 percent in October from the previous month, the Cabinet Office said in Tokyo. The median estimate of 25 economists surveyed by Bloomberg News called for a 3 percent increase.
The S&P 500 will surpass its record to reach 1,580 at the end of next year, according to Thomas Lee, chief U.S. equity strategist at JPMorgan Chase & Co. His forecast is 0.9 percent higher than the benchmark equity measure’s all-time high of 1,565.15 and 11 percent above its closing level yesterday. Stocks will rally as investors get clarity on political concerns in the U.S. and Europe, an acceleration in durable goods spending lifts price-earnings multiples and earnings growth picks up, according to New York-based Lee in a note dated today.
DuPont Gains
DuPont climbed 1.9 percent to $44.52. The biggest U.S. chemical maker by market value said 2012 earnings will reach the upper end of the company’s forecast and it will spend as much as $1 billion to repurchase shares.
Earnings excluding one-time items will approach $3.30 a share this year and increase by the “low- to mid-single digits” for 2013, Wilmington, Delaware-based DuPont said.
Berkshire climbed 2.4 percent to $89.32. The company said it will pay as much as 120 percent of book value, a measure of assets minus liabilities for stock buybacks. The limit was 110 percent. Buffett, 82, and Vice Chairman Charles Munger have been weighing buybacks as the company seeks to deploy part of its $47.8 billion cash hoard. Berkshire last year began a buyback program after shunning repurchases for four decades.
Dish Network Corp. (DISH) climbed 3 percent to $37.09. The Federal Communications Commission said it approved a wireless service from the second-largest U.S. satellite-TV provider that could compete with Verizon Wireless and AT&T Inc.
Dolby Laboratories Inc. climbed 5.9 percent to $36.22. The audio-technology company whose products are used in cinemas, announced a special one-time dividend of $4 a share.
Eli Lilly & Co. sank 3.1 percent to $49.05. The company said it will conduct an additional late-stage study of its experimental Alzheimer’s treatment solanezumab, a move that could push the drug’s introduction back three years to 2016. Lilly doesn’t believe it has enough data to gain U.S. marketing clearance for the medicine, based on conversations with the Food and Drug Administration, the Indianapolis-based company said in a statement today.
To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net
