U.S. stocks rose for the week, rebounding from the biggest monthly loss since May 2012, as data showed signs of economic growth and investors weighed prospects for central bank stimulus cuts amid tensions over Syria.
Ford Co. (F) and General Motors Co. (GM) climbed more than 5 percent as automakers’ August vehicle sales reached the highest level since May 2007. J.C. Penney (JCP) Co. surged 14 percent as two hedge funds raised their stakes in the struggling retailer. Microsoft Corp. fell 6.7 percent after agreeing to buy Nokia Oyj’s handset business for $7.2 billion.
The Standard & Poor’s 500 Index rose 1.4 percent to 1,655.17 for the holiday-shortened week. The benchmark index slumped during three of the previous four weeks, losing 3.1 percent in August. The Dow advanced for the first time in five weeks, gaining 112.19 points, or 0.8 percent, to 14,922.50.
“Clearly cumulative evidence of economic improvement is occurring,” Terry Sandven, chief investment strategist at U.S. Bank Wealth Management, said in a phone interview. His firm manages $112 billion. “Manufacturing seems to be gaining steam and housing still is favorable as well. Many of us had expected the Fed to start tapering in September, and that still is a likely outcome, although I think now the jury is still out.”
Equities rose as economic data during the week showed manufacturing is expanding as the Institute for Supply Management’s index unexpectedly climbed in August to the highest level in more than two years. Service industries in the U.S. last month grew at the fastest pace in almost eight years.
A report on the final day of the week showed payrolls in the U.S. climbed less than projected in August and gains in the prior two months were revised downward, fueling speculation that any Federal Reserve move to taper its stimulus program will be limited. The unemployment rate unexpectedly fell to 7.3 percent as more people left the labor force.
“It’s the right direction, just the wrong velocity,” Ron Florance, deputy chief investment officer for Wells Fargo Private Bank, which oversees $170 billion, said by phone from Scottsdale, Arizona. “We’re still on the path of tapering. I think it may give them an excuse for a smaller taper.”
Economists forecast the central bank will reduce its monthly $85 billion in asset buying by $10 billion at its meeting on Sept. 17-18, according to the median of 34 responses in a Bloomberg News survey of economists. Fed stimulus helped drive the S&P 500 up more than 150 percent from its bear-market low in 2009.
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. Americans spending more on cars and housing helped the economy maintain a “modest to moderate” pace of expansion from early July through late August, even as borrowing costs increased, the Fed said Sept. 4 in its Beige Book business survey.
The yield on 10-year Treasuries breached 3 percent for the first time in two years, ending the week at 2.93 percent.
Equity gains following the jobs report on the last day of the week were erased as tensions grew between the U.S. and Russia over Syria. President Vladimir Putin said his country will continue to assist Syria if it’s attacked. President Barack Obama is advocating to punish the regime of Bashar al-Assad for allegedly using chemical weapons. A U.S. Senate committee approved a limited military strike on Syria during the week, clearing the way for a vote by the full chamber.
The Chicago Board Options Exchange Volatility Index (VIX), or VIX, fell 6.8 percent to 15.85 for the week. The equity volatility gauge is down 12 percent for the year.
Health-care and financial stocks advanced at least 1.8 percent to lead the S&P 500’s 10 main industry groups.
Ford climbed 5 percent to $17 as August deliveries gained 12 percent, beating analyst estimates. General Motors gained 6.1 percent to $36.15 after reporting its best sales month since 2008.
The pace of the comeback in U.S. auto sales exceeded already rosy estimates in August, with a total surpassing any month in more than six years and a sales rate that was the fastest since 2007.
J.C. Penney jumped 14 percent to $14.27. Glenview Capital Management LLC joined J. Kyle Bass in raising its stake in the retailer, becoming its biggest shareholder in a bet the company will recover after Bill Ackman ended a revamp effort last month.
Hayman Capital Management LP, Bass’s hedge fund, held 11.4 million shares of the Plano, Texas-based department-store chain, according to a filing. In a separate filing, Glenview said it owned 20.1 million shares, or 9.1 percent.
CBS Corp. (CBS) rose 4.9 percent to $53.62. The broadcaster’s programs returned to Time Warner Cable in New York, Los Angeles and Dallas after the companies ended a one-month dispute, in time for the start of National Football League regular-season games.
E*Trade Financial Corp. jumped 16 percent to $16.26, the highest in two years. The online brokerage said its banking subsidiary will pay a $100 million dividend to the parent company and plans to make similar payments every quarter. Goldman Sachs Group Inc. raised its recommendation on the stock to buy from neutral.
Apple Inc. (AAPL) advanced 2.3 percent to $498.22. The company is close to a deal with China Mobile Ltd. to sell its iPhones through the world’s largest carrier, said a person with knowledge of the matter. Apple is also near an agreement with NTT DoCoMo Co., Japan’s largest carrier, which also hasn’t offered the iPhone on its network.
The company also sent out invitations during the week to a Sept. 10 event, where the world’s largest technology company will unveil new models of the iPhone.
Phone and utility companies retreated at least 1 percent for the worst performance among 10 groups in the S&P 500 as rising bond yields reduced demand for equity income. The two groups offer a dividend yield of more than 4.1 percent, the most among 10 industries.
Verizon Communications Inc. lost 2.2 percent to $46.34 after agreeing to buy Vodafone Group Plc’s 45 percent stake in Verizon Wireless for $130 billion, getting full control of the most profitable U.S. mobile-phone carrier in the biggest acquisition in more than a decade.
Microsoft fell 6.7 percent to $31.15. The company purchased Nokia’s handset unit in an effort to gain ground on Apple Inc. and Google Inc. in the smartphone market. Microsoft is deepening a push into hardware as dwindling computer sales sap demand for the programs that made it the world’s largest software maker.