U.S. Stocks Rise as Policy Makers Weigh Cyprus Options

U.S. Stocks Rise as Policy Makers Weigh Cyprus Options
By Lu Wang & Sarah Pringle - Mar 21, 2013 12:19 AM GMT+0800

U.S. stocks rose, snapping a three- day decline in the Standard & Poor’s 500 Index, as euro-area leaders weighed options for Cyprus and investors awaited the Federal Reserve’s monetary policy decision.
Adobe (ADBE) Systems Inc. climbed 3.8 percent as the software maker reported sales and profit that exceeded analysts’ estimates. BlackBerry added 5.9 percent after Morgan Stanley raised its rating on the Canadian smartphone maker. Lennar Corp. (LEN) gained 4.6 percent after posting first-quarter earnings that beat projections. FedEx (FDX) Corp. slumped 5.6 percent as it lowered its 2013 earnings forecast amid a widening customer shift to cheaper overseas shipments.

The S&P 500 (SPX) advanced 0.5 percent to 1,556.20 at 12:17 p.m. in New York, trading within nine points of its all-time high reached in 2007. The Dow Jones Industrial Average rose 54.15 points, or 0.4 percent, to 14,509.97. Trading in S&P 500 stocks was 16 percent below the 30-day average during this time of day.
“Everyone is bringing their punch bowl and the market is applauding, who wouldn’t?” Doug Cote, chief market strategist with ING U.S. Investment Management in New York, said in a phone interview. His firm oversees about $180 billion. “Cyprus is just thumbing their nose at the ECB, saying you don’t have a choice but to bail us out in perpetuity.”
The S&P 500 had this year’s longest slump through yesterday after European policy makers announced plans to force depositors in Cyprus to shoulder part of the country’s bailout with their savings. Stocks and the euro gained today as investors speculated that the European Central Bank will continue to support the country’s banks until next week after lawmakers in the Mediterranean nation rejected an unprecedented levy on bank deposits.

Fed Meeting
In the U.S., the Fed will probably start reducing its $85 billion of monthly bond buying no earlier than the fourth quarter of 2013, according to median estimates by economists surveyed March 13-18 before a two-day meeting of policy makers ending today. The Fed will likely halt quantitative easing entirely in the first half of next year after expanding central bank assets to a record of about $4 trillion, they forecast.
Fed Chairman Ben S. Bernanke, starting today, will cut the time between the release of post-meeting statements by the Federal Open Market Committee and his news briefings, giving investors less opportunity to misperceive the Fed’s intent. The FOMC plans to release a statement at 2 p.m. in Washington, and Bernanke plans to hold a press conference at 2:30 p.m.
“In a lot of ways what’s happening in Cyprus only serves to reinforce the Fed’s current policy,” Richard Helm, a portfolio manager at New York-based Cohen & Steers, which oversees more than $40 billion, said in a phone interview. “It puts to bed that the Fed might raise rates sooner than later if you do have issues re-emerging in Europe.”

Record Highs
The S&P 500 has surged 130 percent from a 12-year low in 2009 as companies reported better-than-estimated earnings and the Fed embarked on three rounds of bond purchases to stimulate the economy. The benchmark index rose to within two points of its 2007 record last week while the Dow hit an all-time high.
All 10 S&P 500 groups gained as consumer staples and consumer-discretionary companies climbed the most, rising at least 0.8 percent. The Chicago Board Options Exchange Volatility Index (VIX), which measures the cost of using options as insurance against declines in the S&P 500, slid 12 percent to 12.64, after a 27 percent jump over two days. The gauge, known as the VIX, is down 30 percent this year.
Adobe gained 3.8 percent to $42.29 as the maker of Photoshop software reported sales for the quarter ended March 1 of $1.01 billion, beating the average analyst estimate of $985.8 million. Profit excluding some items was 35 cents a share, exceeding the average analyst projection of 31 cents.

BlackBerry Rating
BlackBerry, formerly Research In Motion Ltd., surged 5.9 percent to $15.91. Morgan Stanley raised its rating on the Canadian-based phone company to overweight from underweight. The BlackBerry 10 device may boost gross margins and average selling prices, Morgan Stanley analyst Ehud Gelblum said in a note.
An S&P index of homebuilders climbed 2.6 percent to the highest level since July 2007. Lennar jumped 4.6 percent to $43.34. The third-biggest U.S. homebuilder by revenue said earnings rose in the fiscal first quarter as prices and sales increased amid a broadening national housing recovery. First- quarter earnings climbed to 26 cents a share, exceeding the average analyst projection of 15 cents.
Toll Brothers Inc., the largest U.S. luxury-home builder, added 2.6 percent to $35.41. Orders are up 49 percent for the spring, Chief Executive Officer Douglas Yearley said today on Bloomberg Television.

FedEx Tumbles
FedEx fell 5.6 percent to $100.50. The operator of the world’s largest cargo airline said profit in the fiscal year through May will be $6 to $6.20 a share, down from an earlier forecast of as much as $6.60. Both the projection and fiscal third-quarter profit trailed analysts estimates.
The company, an economic bellwether because it moves goods as varied as medical supplies and auto parts, is in the midst of a $1.7 billion restructuring to compensate for customers moving away from the fastest, most lucrative deliveries. Starting in April, it will decrease capacity to and from Asia and put low- yielding shipments in less expensive networks, Chief Executive Officer Fred Smith said.
Cintas Corp. dropped 7.4 percent to $42.54 after the provider of restroom supplies and entrance mats said it expects full-year earnings per share of $2.50 to $2.54. That compares with a previous forecast of $2.50 to $2.58.
To contact the reporters on this story: Lu Wang in New York at [You must be registered and logged in to see this link.]; Sarah Pringle in New York at [You must be registered and logged in to see this link.]
To contact the editors responsible for this story: Lynn Thomasson at [You must be registered and logged in to see this link.]