BLBG: U.S. Stocks Rise as Retail Sales Slip Before Fed Meeting
U.S. stocks rose, with the Standard & Poor’s 500 Index extending a record, as Federal Reserve policy makers began a two-day meeting while investors assessed data showing lower retail sales and producer prices.
The S&P 500 rose 0.2 percent to 1,765.65 at 9:30 a.m. in New York.
“It still seems that the Fed has created this good news is bad news, bad news is good news scenario,” Randy Bateman, who oversees $15 billion as chief investment officer of Huntington Asset Advisors in Columbus, Ohio, said by telephone. “The anticipation is that the Fed will retain its purchasing of $85 billion in monthly Treasury and mortgage securities, which is going to continue to help the housing market. That will be taken fairly well by the market.”
The S&P 500 climbed in 12 of the past 14 sessions through yesterday, as companies beat estimates in the current earnings reporting season and signs of slower economic growth fueled bets the Fed will maintain stimulus measures. The rally has pushed the index up 24 percent this year, leaving it poised for the best annual gain in a decade.
The 16-day government shutdown earlier this month took at least $24 billion out of the economy and will spur the Fed to wait until March to taper, a Bloomberg survey showed this month. The central bank’s policy makers convene today and tomorrow.
Economic Data
Data today showed retail sales dropped 0.1 percent last month, restrained by the biggest decrease at auto dealers since October 2012. Wholesale prices unexpectedly fell in September as food costs retreated. Inflation has been running below the Fed’s 2 percent objective in the near-term, giving policy makers room to maintain monetary stimulus.
The Conference Board is due to release it consumer confidence index at 10 a.m. New York time. The gauge declined to 75 this month from 79.7 in September, according to forecasts compiled by Bloomberg.
Weaker-than-forecast data yesterday on factory output and sales of previously owned homes added to concern that growth slowed in the weeks before the shutdown. Home prices in 20 U.S. cities rose in August from a year ago by the most since February 2006, the S&P/Case-Shiller index indicated today.
The Fed’s stimulus has helped propel the S&P 500 up more than 160 percent from a 12-year low in 2009. While the rally lifted equity valuations to a four-year high, with the index trading at 15.9 times estimated operating earnings, that’s still below the multiples at the market’s two previous peaks, when the ratio reached 16.5 in October 2007 and 25.7 in March 2000, data compiled by Bloomberg show.
‘Fairly Elevated’
“The market has traveled away, sentiment has got to fairly elevated levels, therefore to push these markets on requires some pretty positive earnings news to come through,” Mark Harris, a London-based fund manager at City Financial, which oversees about $1.2 billion, said in an interview today.
Some 39 members of the S&P 500 release results today, including Pfizer Inc. and Goodyear Tire & Rubber Co. Earnings for the broad equity gauge probably increased 3.7 percent in the third quarter as sales climbed 2.4 percent, according to analysts’ estimates compiled by Bloomberg. Profits have grown by an average of 5.7 percent among the 281 companies that have reported so far, while sales have gained 3.5 percent.
To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
