S&P; 500 Index Erases Last Week’s Loss Amid Global Takeovers; Franc Weakens
U.S. Stocks Advance Amid Takeovers, Valuation
Richard Drew/AP
Trader Robert Charmak, center, works on the floor of the New York Stock Exchange on Aug. 15, 2011.
Trader Robert Charmak, center, works on the floor of the New York Stock Exchange on Aug. 15, 2011. Photographer: Richard Drew/AP
Aug. 15 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks rose, erasing last week’s drop, as $21.5 billion in takeovers and valuations near the cheapest level in two years helped the Standard & Poor’s 500 Index extend its best three-day rally since 2009. Bloomberg's Julie Hyman also speaks. (Source: Bloomberg)
Aug. 15 (Bloomberg) -- Tobias Levkovich, chief U.S. equity strategist at Citigroup Inc. talks about the U.S. stock market, investment strategy and the economy. Levkovich speaks with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Aug. 15 (Bloomberg) -- Charles Lieberman, chief investment officer at Advisor's Capital Management LLC, talks about investment strategy and his outlook for the U.S. economy and stocks. Lieberman speaks with Julie Hyman on Bloomberg Television's "Taking Stock." (Source: Bloomberg)
Aug. 15 (Bloomberg) -- Catherine Yeung, investment director at Fidelity International, speaks about the outlook for Asian stocks. Yeung speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Aug. 15 (Bloomberg) -- Google Inc., maker of the Android mobile-phone software, agreed to buy Motorola Mobility Holdings Inc. for about $12.5 billion, gaining wireless patents. Motorola shareholders will get $40 a share in cash, the companies said in a statement today. That’s 63 percent more than Motorola Mobility’s closing price on the New York Stock Exchange on Aug. 12. Both boards have approved the deal. Cristina Alesci reports on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Aug. 15 (Bloomberg) -- Richard Lacaille, chief investment officer at State Street Global Advisors, talks about the risk of a U.S. double-dip recession and his investment strategy. He speaks with Owen Thomas on Bloomberg Television's "On the Move." (Source: Bloomberg)
Aug. 15 (Bloomberg) -- John Horner, a currency strategist at Deutsche Bank AG in Sydney, talks about global currencies, economies and central banks' monetary policies. Horner speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Aug. 12 (Bloomberg) -- Michael Woolfolk, senior currency strategist at Bank of New York Mellon Corp., talks about investment trends in currency markets. Woolfolk also discusses the Swiss franc, U.S. economy and Europe's sovereign debt crisis. He speaks with Matt Miller and Carol Massar on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Aug. 15 (Bloomberg) -- Joseph Tanious, market strategist at J.P. Morgan Asset Management, discusses the outlook for financial markets and the U.S. economy. Tanious speaks with Maryam Nemazee on Bloomberg Television's "InsideTrack. (Source: Bloomberg)
U.S. and European stocks rose, erasing all of last week’s losses for the Standard & Poor’s 500 Index, as companies announced $27 billion in global deals after equities traded near their cheapest relative to earnings since 2009. Credit risk fell. The Swiss franc and yen weakened.
The S&P 500 advanced 2.2 percent to 1,204.49 at 4 p.m. in New York after losing 1.7 percent last week. The Stoxx Europe 600 Index added 0.2 percent. The franc depreciated against all 16 of its most-traded peers. The Markit iTraxx SovX Western Europe Index of credit-default swaps insuring the debt of 15 governments fell to the lowest level this month. The 10-year Treasury note yield rose five basis points to 2.30 percent. Oil rallied 2.9 percent.
Global markets are stabilizing following a week of record swings in U.S. stocks after S&P cut the nation’s credit rating. Motorola Mobility Holdings Inc. surged 56 percent to lead gains in the S&P 500 today after Google Inc. offered to buy the company. The Swiss government and central bank are in talks about a possible target for the franc to halt its gains, SonntagsZeitung reported, citing unidentified people.
“M&A activity in general, and this is M&A with a capital M and a capital A, is generally synonymous with a relatively healthy economy and good things to come and a bull market,” Richard Weiss, a Mountain View, California-based senior money manager at American Century Investments, said in a Bloomberg Television interview. His firm oversees about $108 billion. “Although it remains to be seen whether that’s true, it’s generally a positive.”
Three-Day Gain
The S&P 500 is up 7.5 percent since Aug. 10, its biggest three-day rally since March 2009, as valuations and the pickup in takeovers overshadowed more signs the economic recovery is slowing. The Federal Reserve Bank of New York’s general economic index fell to minus 7.7 from minus 3.8 in July. The median forecast in a Bloomberg survey called for a reading of zero, the dividing line between expansion and contraction.
Federal Reserve Bank of Atlanta President Dennis Lockhart said the central bank could purchase more Treasuries or alter its balance sheet if the U.S. economy were to slow further. “If additional actions are required, I can assure you the Federal Reserve is not out of bullets,” Lockhart said today in a speech in Florence, Alabama.
Motorola Mobility, maker of the Droid smartphone, jumped the most since it was spun off from Motorola Inc. last year after Google Inc. said it agreed to buy the company for about $12.5 billion. Bank of America Corp. (BAC) climbed 7.9 percent as the biggest U.S. bank by assets said it will exit the international credit-card business, including the $8.6 billion sale of its Canadian card unit to Toronto-Dominion Bank.
More Deals
Time Warner Cable Inc., the second-largest U.S. cable- television operator, agreed to buy Carlyle Group’s Insight Communications Co. for $3 billion in cash. Provimi SA said Cargill Inc. offered to buy the company for an enterprise value of 1.5 billion euros.
U.S. equity swings last week were unprecedented, according to data compiled by Birinyi Associates Inc., Bloomberg and Howard Silverblatt, a senior index analyst at S&P. The index fell or rose more than 4.4 percent on each of the first four days of last week, reversing direction in a back-and-forth pattern not seen at that magnitude in the history of the benchmark gauge for U.S. stocks. The S&P 500 finished the week with a two-day rally of 5.2 percent.
“We’re bouncing off the bottoms and people don’t feel terrible about valuations,” Sarah Hunt, portfolio manager at Alpine Mutual Funds in Purchase, New York, said in a telephone interview. Alpine oversees about $6 billion. “The M&A deals make investors feel more comfortable because it shows that this meltdown isn’t going to wipe out valuations forever,” she said. “There are good stocks, which are worth buying with the caveat that you have to be able to handle the volatility.”
Global Advance
The MSCI All-Country World Index climbed 2.1 percent, trading at 12.5 times earnings after reaching 11.8 on Aug. 10, the lowest since March 2009. Japan’s Nikkei 225 Stock Average rallied 1.4 percent as the country’s economy contracted less than economists estimated in the second quarter.
Four stocks advanced for each that declined in Europe’s Stoxx 600. Aker Drilling ASA surged 96 percent after Transocean Ltd., the world’s largest offshore driller, offered to buy the Norwegian company for 7.9 billion kroner ($1.4 billion).
The MSCI Emerging Markets Index increased 2.4 percent, the biggest advance since April 20 as Morgan Stanley raised its equity allocation for developing-nation stocks to the highest level since April 2009. The Hang Seng China Enterprises Index rallied 4.7 percent, the most since June 2009, while gauges in Taiwan, Russia, Hungary and the Czech Republic rallied more than 2.3 percent.
Stronger Forint
The Hungarian forint strengthened 4 percent against the franc, climbing a record 13 percent in three days. Markets in India, South Korea and Poland were shut for holidays.
The franc depreciated as much as 2.7 percent versus the dollar and tumbled as much as 10 percent over the three days against the euro, the most since the start of the common currency in 1999. The plans to target the exchange rate of the franc are ready and the Swiss National Bank may set a target in “coming days,” the SonntagsZeitung newspaper reported yesterday. Walter Meier, a spokesman for the SNB, declined to comment.
The yen dropped against 15 of 16 major counterparts, weakening the most versus the South African rand, the Swedish krona and the Norwegian krone after Japanese Finance Minister Yoshihiko Noda indicated he’s ready to intervene in markets again.
Credit-Default Swaps
The euro advanced 1.4 percent to $1.444, rising for the third consecutive day, while the Dollar Index, which tracks the U.S. currency against those of six trading partners, declined 1 percent.
Credit-default swaps on the Markit iTraxx SovX gauge fell 7.1 basis points to 276. Contracts on Italy dropped 12 basis points to 342 at the close of trading in London, after surging to a record 391 on Aug. 10, according to CMA. Swaps protecting Spanish debt declined seven basis points to 346, compared with an all-time high of 430 on Aug. 4.
The yield on the 30-year Treasury bond climbed four basis points to 3.77 percent. U.S. debt gained $91.5 billion in value in the week after S&P lowered America’s credit rating on Aug. 5. Yields tumbled after the Federal Reserve said on Aug. 9 that it would keep its target lending rate at almost zero at least through mid-2013.
U.S. Assets
Global demand for U.S. stocks, bonds and other financial assets weakened in June from a month earlier as the White House and Congress wrangled over raising the debt limit, government figures show.
Net buying of long-term equities, notes and bonds totaled $3.7 billion during the month compared with net buying of $24.2 billion in May, according to statistics issued by the U.S. Treasury Department. Including short-term securities such as stock swaps, foreigners sold a net $29.5 billion compared with net selling of $48.8 billion the previous month.
Crude oil futures gained 2.9 percent, bolstered by corporate deal announcements and a report that Japan’s gross domestic product shrank at an annualized 1.3 percent rate in the three months ended June 30. The median forecast of economists was for a 2.5 percent drop.
The Thomson Reuters/Jefferies CRB Commodity Index climbed 1.2 percent. Corn rose to a two-month high and soybeans gained for a fourth straight session on speculation that dry weather will damage maturing crops in the U.S, the world’s biggest producer and exporter.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net
To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net
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