S&P 500 Rises for Third Day; Charter One Financial, Exxon Gain
May 5 (Bloomberg) -- The Standard & Poor's 500 Index rose for a third day on optimism that the Federal Reserve's pledge to boost interest rates at a ``measured'' pace won't derail a 14- month rally.
``That should take concerns out of the market, and should let the fundamentals such as corporate earnings growth shine through a bit more,'' said David Chalupnik, head of equities at U.S. Bancorp Asset Management, which oversees $122 billion in Minneapolis.
Charter One Financial Inc. advanced after the company agreed to a $10.5 billion buyout offer from Royal Bank of Scotland Group Plc. Energy shares gained, led by Exxon Mobil Corp., as crude oil futures closed at a 13-year high.
The S&P 500 added 2.03, or 0.2 percent, to 1121.58. The benchmark is up 40 percent since its 2003 low in March of that year. The Nasdaq Composite Index rose 6.78, or 0.4 percent, to 1957.26, its third consecutive day of gains. The Dow Jones Industrial Average lost 6.25, or 0.1 percent, to 10,310.95.
About the same number of stocks rose and fell on the New York Stock Exchange. Some 1.5 billion shares changed hands on the Big Board, in line with the three-month daily average.
Federal Reserve
The Fed kept its benchmark lending rate at a 45-year low of 1 percent yesterday. Policy makers dropped their pledge to be patient about boosting rates. Concerns about higher borrowing costs sent the S&P 500 to a one-month low last week.
``At this juncture, with inflation low and resource use slack, the committee believes that policy accommodation can be removed at a pace that is likely to be measured,'' members of the rate-setting Open Market Committee said in a statement yesterday.
An index of U.S. service industries, which make up the largest share of the economy, unexpectedly climbed to a record 68.4 in April and more companies were hiring than at anytime since November 2000, a private survey showed. Readings greater than 50 indicate expansion.
The S&P 500 and Dow average bounced between gains and losses in the first four hours of trading, with the S&P 500 gaining as much as 0.5 percent and losing as much as 0.2 percent. Higher rates may damp earnings growth as consumer spending would slow, some investors said.
`Dark Cloud'
``Rates are going higher from here and that's going to be a dark cloud overhanging the equity market,'' said Michael Mullaney, who helps manage $10 billion at Fiduciary Trust Co. in Boston. ``Profit growth is still strong, but slowing.''
First-quarter earnings for S&P 500 companies increased 27 percent, based on results for the 429 members that have reported and estimates for the rest, according to Thomson Financial. That's double the 13.4 percent forecast on Jan. 1. Analysts expect profit growth to slow to 17.2 percent in the second quarter and 12.4 percent in the third, said Thomson.
Charter One surged $7.91, or 22 percent, to $43.86, for the biggest gain in the S&P 500. Royal Bank of Scotland, the U.K.'s second-largest lender, will pay $44.50 a share in cash for Charter One. Royal Bank of Scotland shares dropped 5.6 percent in London.
Exxon, the world's biggest publicly traded oil company, gained 47 cents to $43.99. ChevronTexaco Corp., the second- largest U.S. oil company, rose $1.31 to $94.39.
The Amex Oil Index, which tracks 13 companies in the industry, jumped 1.2 percent. Crude oil for June delivery closed at its highest since October 1990, rising 1.5 percent to $39.57 a barrel on the New York Mercantile Exchange.
Dell Upgrade
Dell Inc., the world's largest maker of personal computers, rose 40 cents to $35.71. Banc of America Securities analyst Keith Bachman said the company's earnings and profit margins may exceed estimates for the next several years as sales of computers exceed his previous forecast. He upgraded the shares to ``buy'' from ``neutral.''
Western Wireless Corp., which sells mobile-phone service in 19 western U.S. states, jumped $3.59 to $25.18. The company said first-quarter revenue was $448.9 million. Analysts expected $427.4 million, according to the average of 4 estimates compiled by Thomson.
Cypress Semiconductor Corp. added 82 cents to $14.87. The maker of chips used in video-game consoles and mobile phones expects second-quarter profit, excluding some items, of 23 cents a share. Analysts had forecast earnings of 21 cents, according to Thomson. The company said it initially made the forecast at the JP Morgan Technology & Telecom conference yesterday.
Hartford Financial Services Group Inc., the biggest U.S. seller of variable annuities, rose $2.74 to $64.35. First-quarter profit, excluding investment gains and losses and the cost of an accounting rule change, was $1.70 a share, beating the $1.47 average estimate of analysts polled by Thomson Financial.
Ligand Pharmaceuticals Inc., the maker of cancer and pain drugs that lost money for 12 straight years, shed $3.36 to $18.30. The company had a loss of 18 cents a share in the first quarter, wider than the 6-cent loss that analysts expected in a Thomson poll.
QQQs, Futures
Nasdaq-100 tracking shares, known by their QQQ symbol, gained 28 cents to $35.53. The S&P 500 shares, called Spiders, added 72 cents to $112.78.
S&P 500 futures expiring in June rose 6.50 to 1122 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures advanced 13.50 to 1432.50.
The Russell 2000 Index, which tracks companies with a median market value of about $500 million, added 0.42, or 0.1 percent, to 570.06. The Dow Jones Wilshire 5000 Composite Index, the broadest measure of U.S. shares, rose 24.49, or 0.2 percent, to 10,941.60. Based on changes in the index, the total value of U.S stocks increased by $29.4 billion.
Charter One Financial Inc. (CF US)
Cypress Semiconductor Corp. (CY US)
Dell Inc. (DELL US)
Exxon Mobil Corp. (XOM US)
Hartford Financial Services Group Inc. (HIG US)
Ligand Pharmaceuticals Inc. (LGND US)
Western Wireless Corp. (WWCA US)
To contact the reporter on this story:
Chris Graja in New York
cgraja@bloomberg.net.
To contact the editor of this story:
Phil Serafino at
pserafino@bloomberg.net.
Last Updated: May 5, 2004 16:20 EDT