U.S. equities rose a third day as Microsoft Corp.
(MSFT)’s plan to buy back $40 billion in stock fueled optimism that more
companies will return cash to shareholders,
while Treasuries climbed before a Federal Reserve decision tomorrow. European
and Asian shares retreated and oil fell.
The Standard & Poor’s 500 Index added 0.4 percent to
1,704.76 at 4 p.m. in New York, within five points of its Aug. 2 record. The
Shanghai Composite Index slid 2.1 percent, the most in two months, as foreign direct
investment in China trailed estimates. Ten-year Treasuries rose for a fifth
straight day, the longest rally in almost a year. The euro strengthened after
German investor confidence increased. The S&P GSCI gauge of 24 commodities
declined 1.2 percent as oil lost more than 1 percent and coffee
sank to a four-year low.
Microsoft paced a rally that sent technology shares to
the biggest gain among 10 industries in the S&P 500 after also announcing
plans to boost its dividend by 22 percent. TheFederal Open Market Committee
meets today and tomorrow, when members are forecast to cut monthly bond buying
by $10 billion to $75 billion, according to a Bloomberg survey of economists.
The U.S. cost of living rose less than forecast in August, a sign it will take
time for inflation to reach the Fed’s goal.
Large buybacks show “continued confidence by managers,”
Jerry Braakman, the chief investment officer of First American Trust in Santa
Ana, California, said in a phone interview. His firm oversees $1 billion. “With
inflation being benign it doesn’t require a more aggressive tightening than the
market would expect. This simulative environment will continue. If they have to
dial it back, they’ll do it moderately to continue supporting the economy going
forward.”
The S&P 500 Equal Weighted Index, which strips out
biases related to market value, jumped 0.5 percent to a record today. The
Russell 2000 Index, whose companies have a median market value of about $648
million, also climbed to an all-time high.
Market Movers
The S&P 500 climbed 0.6 percent yesterday, pushing
the gauge of U.S. shares to a six-week high. Alcoa Inc., American Express Co.,
Intel Corp. and General Electric Co. rallied at least 1.3 percent to lead gains
in the Dow Jones Industrial Average, with technology, consumer-discretionary
and industrial shares leading an advance among nine of the 10 main industries
in the S&P 500.
Safeway Inc. jumped 11 percent after the grocery chain
adopted a shareholder rights plan to thwart any unfriendly takeovers, saying an
investor accumulated a “significant amount” of common stock. Mosaic Co. (MOS)
slipped 1.2 percent today after North America’s second-largest fertilizer
producer cut its quarterly forecast for potash and phosphate sales and prices.
Buybacks
Microsoft increased 0.4 percent after earlier rising as
much as 2 percent. After struggling to keep up with rivals in the smartphone
and tablet markets, Microsoft is retooling its strategy and seeking a new chief
executive officer. Steve Ballmer, who has run the company since 2000, announced
plans last month to retire when a replacement is found. The company also agreed
to buy Nokia Oyj’s phone business for $7.2 billion, aiming to bolster its
position in mobile devices.
Authorized U.S. buybacks have reached a six-year high of
$556 billion this year, data from Birinyi Associates Inc. show.
The Stoxx Europe 600 Index fell 0.5 percent after
yesterday climbing to the highest level in more than five years. The U.K.
government sold a 3.2 billion-pound ($5.1 billion) stake in Lloyds Banking
Group Plc, while Schaeffler AG and its holding company raised about 950 million
euros ($1.3 billion) selling 4 percent in Continental AG. Lloyds lost 3.5
percent and Continental, Europe’s second-largest auto-parts maker, fell 3.1
percent.
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