Economic data “are reasonably robust,” Tim Holland, partner and portfolio manager at Tamro Capital Partners at Alexandria, Virginia, said in a phone interview. His firm oversees $2.2 billion. “The $64,000 question the past three months is ‘can the world sustain higher rates?’ In my mind, higher rates that go hand in hand with better economic growth are not anything to be scared of.”
Central bank policy makers have been weighing data to determine whether the economy is strong enough for it to scale back the pace of bond buying. The Fed will probably decide to cut its $85 billion in monthly bond purchases this month, according to 65% of economists surveyed by Bloomberg on Aug. 9-13. The Federal Open Market Committee holds a two-day gathering on Sept. 17-18.
Monetary stimulus from central banks including the Fed has helped drive a global equity rally, with the S&P 500 and the MSCI All-Country World Index more than doubling from their lows in 2009. European Central Bank President Mario Draghi said today that the monetary stance for the euro area will remain accommodative for as long as necessary. In the U.K., Bank of England officials also left rates unchanged at 0.5%.
The S&P 500 has slipped 3.1% from a record 1,709.67 on Aug. 2 amid concern over Fed tapering and as the U.S. moved closer to a military strike against Syria. The Senate Foreign Relations Committee voted yesterday to authorize President Barack Obama to conduct a limited military operation against the regime of Bashar al-Assad. The full Senate will begin to discuss the president’s plans when it reconvenes on Sept. 9.
Obama is meeting world leaders at the Group of 20 summit in St. Petersburg today. The office of Russian President Vladimir Putin said there’ll no separate session on Syria at the summit.
The Chicago Board Options Exchange Volatility Index, or VIX, fell 1.5% to 15.64 today. The equity volatility gauge is down 13% this year.
Eight out of 10 S&P 500 industry groups gained as energy, financial and industrial shares climbed more than 0.4%.
Louisiana-Pacific surged 11% to $16.98 after agreeing to buy Ainsworth Lumber for about C$906 million ($863 million) in cash and stock. The Canadian company makes a substitute for plywood called oriented strand board.
Costco gained 2.6% to $114.39. The largest U.S. warehouse-club chain said August sales at U.S. stores open at least one year rose 5%, excluding fuel. Analysts estimated a 4.2% increase.
Groupon rallied 3.9% to $10.70. The daily deals site has turnaround potential in other markets after introducing deal banks in North America and showing strength in the mobile market, Morgan Stanley analysts including Scott Devitt wrote in a note. They raised the stock to overweight, an equivalent of buy, from equalweight.
Fastenal Co. jumped 6.5% to $48.82. The construction supplies retailer said August daily sales rose 7.2% after a 2.9% gain in July on increased business from manufacturing customers.
Telephone and utility companies retreated at least 0.4% for the worst performance in the S&P 500 as rising bond yields reduced demand for equity income. The two groups offer a dividend yield of more than 4.2%, the most among 10 industries. That compared with the yield of 2.98% in 10- year Treasury bonds.
AT&T Inc., the largest U.S. phone company, declined 1.2% to $33.32 for the biggest loss in the Dow.