U.S. stocks erase losses as Fed minutes focus on more job growth

July 10, 2013 09:57 AM

U.S. stocks erased losses as minutes from the Federal Reserve’s last meeting showed many officials want to see further progress in the employment market before the central bank slows the pace of bond purchases.

Family Dollar Stores Inc. added 8% as the retailer’s earnings topped analyst estimates. Hewlett-Packard Co. rose 2.6% after Citigroup Inc. advised investors to buy the stock. Financial companies fell the most out of 10 S&P 500 groups as Bank of America Corp. and Wells Fargo & Co. slumped more than 1%. Nabors Industries Ltd. fell 6.1% after forecasting operating income below analysts’ estimates.

The Standard & Poor’s 500 Index rose 0.1% to 1,653.59 at 2:32 p.m. in New York, after falling as much as 0.3% earlier. The index rallied 2.4% in the previous four days as better-than-estimated employment data eased concern over a scaling back of Fed stimulus. The Dow Jones Industrial Average added 15.60 points, or 0.2%, to 15,315.94 today. Trading in S&P 500 stocks was 8.9% below the 30-day average at this time of day.

“Clearly the majority is still in the camp that says, ‘We may need to continue at this pace for a little bit longer,’” Scott Wren, the St. Louis, Missouri-based senior equity strategist at Wells Fargo Advisors LLC, which oversees about $1.3 trillion, said by telephone. “The market’s pretty convinced that the Fed’s not going to do anything to dramatically change the liquidity that they’re pumping into the system, and the minutes support that.”

Minutes from the central bank’s June 18-19 meeting, released today in Washington, showed that while several members judged that a reduction in asset purchases “would likely soon be warranted,” many officials want to see more signs employment is picking up before they’ll begin slowing the pace of $85 billion in monthly bond purchases.

Jobs Data

Fed officials met before the Labor Department’s jobs report for the month of June exceeded expectations, with the economy adding 195,000 jobs and the unemployment rate unchanged at 7.6%.

The U.S. benchmark has recovered following a 4.8% drop between June 19 and 24, triggered when Fed Chairman Ben S. Bernanke said the central bank may reduce its bond-buying this year and end the program in 2014 as economic risks subside. The index is up 16% for the year.

Record High

The S&P 500 closed within 1% of a record high yesterday after Alcoa Inc. started the U.S. earnings season with results that beat analysts’ estimates. Yum! Brands Inc. reports earnings today, while JPMorgan Chase & Co. and Wells Fargo are among companies releasing results this week.

Data today showed inventories at U.S. wholesalers unexpectedly declined in May by the most since September 2011 as sales surged, pointing to a pickup in orders and production.

In China, a report from the General Administration of Customs in Beijing showed that exports fell 3.1% in June from a year earlier. The median estimate in a Bloomberg survey had called for a 3.7% gain. Imports dropped 0.7% last month, compared with the median projection of a 6% increase. China’s trade surplus with the U.S. slipped to $17.49 billion in June from $19.35 billion in May.

Volatility Gauge

The Chicago Board Options Exchange Volatility Index, or VIX, fell 0.7% to 14.25, after gaining as much as 1.9% earlier in the day. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80% of the time, reached a six-month high on June 20 and has fallen 30% since.

Health-care, utility and technology shares rose the most among 10 S&P 500 groups, climbing at least 0.3%.

Hewlett-Packard increased 2.6% to $26.12. Citigroup upgraded its recommendation for the computer maker to buy from sell and doubled its price estimate for the shares to $32. A survey among chief information officers signaled a “positive inflection” for HP’s services, Citigroup analysts said.

Family Dollar Stores jumped 8% to $69.07. The second-biggest U.S. dollar-store retailer reported fiscal third- quarter earnings of $1.05 a share, beating analyst estimates of $1.03 a share. Same-store sales climbed 2.9% as average transaction value and customer traffic increased for the quarter ended June 1.

Dollar General Corp. increased 5.2% to $54.51. Dollar Tree Inc. added 2.6% to $54.21.

Banks Slip

Financial companies lost 0.7%. U.S. regulators proposed a plan yesterday that said the eight largest firms would need to retain capital equal to at least 5% of assets, while their banking units would have to hold a minimum of 6%. Bank of America dropped 1% to $13.40. Wells Fargo sank 1.6% to $42.

Nabors Industries fell 6.1% to $15.03 after the company said it expects second-quarter operating income of $88 million to $91 million, below estimates of $110.1 million. The owner and operator of land drilling rigs cited adverse weather and intense competition, particularly for pressure pumping in the U.S. and Canada.

Best Buy Co. plunged 4.6% to $28.35. Cleveland Research Co. wrote in a report that a seasonal slowdown during the May to June period appears more pronounced this year for the world’s largest consumer-electronics retailer.

Fastenal Co. slid 3% to $45.70 after the seller of industrial and construction supplies reported second-quarter sales of $847.6 million, lower than analyst estimates for $857.4 million.

www.bloomberg.com

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