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While you were sleeping: Stocks up ahead of Fed

Tuesday 18th June 2013

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Wall Street advanced, though gave up some of its earlier gains, following a Financial Times report that US Federal Reserve Chairman Ben Bernanke will signal the central bank is close to easing its US$85 billion-a-month bond-buying program.

In late afternoon trading in New York, the Dow Jones Industrial Average rose 0.41 percent, the Standard & Poor's 500 Index advanced 0.31 percent and the Nasdaq Composite climbed 0.45 percent. The S&P 500 was last at 1,631.82 after touching 1,646.50 earlier in the day.

The Federal Open Market Committee starts a two-day meeting on Tuesday. It will release its latest policy statement at the end of the meeting on Wednesday in the US, followed by a news conference hosted by Bernanke.

"Bernanke's first goal is to get people to understand that there will be no tightening in the rate of purchases," said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Global Investments, told Reuters.

"And since there are acceptable signs of growth in the economy, investors with a medium or longer-term horizon are happy to be buying in this environment."

The latest economic data were promising indeed.

The National Association of Home Builders/Wells Fargo index of builder sentiment rose 8 points to 52 in June, posting its biggest monthly increase since 2002 and reaching the highest level in seven years.

Separately, the Federal Reserve Bank of New York’s Empire State index jumped to 7.8 this month, from minus 1.4 in May.

In other news, shares of Netflix soared, last up 6.6 percent, after the company agreed to a multiyear deal for programming from DreamWorks Animation. Shares of DreamWorks were up 4 percent. 

"This is an unprecedented commitment to original content in the internet television space," DreamWorks Animation Chief Executive Officer Jeffrey Katzenberg said in a statement.

Also strengthening were shares of Advanced Micro Devices, last up 2.8 percent, on a report by Barron's that the company's outlook had improved. 

"SeaMicro offers AMD a chance to take share in the mainstream server-computer market, in which Intel sells about 96 percent of the chips, according to IDC," Barron's reported. "If the effort succeeds, it could lift AMD's stock substantially."

In Europe, the benchmark Stoxx 600 Index added 0.7 percent. The UK's FTSE 100 rose 0.4 percent, Germany’s DAX gained 1.1 percent, and France’s CAC 40 strengthened 1.5 percent.

In another sign of expectations of a Fed pullback, however tempered, the yield on the US 10-year government bond rose to 2.17 percent. The Fed currently is buying bonds at a rate of US$85 billion a month but with signs of a broader US recovery increasing Bernanke has begun to prepare investors for the inevitable easing of its stimulus efforts.


BusinessDesk.co.nz

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


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