US stocks rose for a second day as investors awaited the outcome of a Federal Reserve policy meeting for clues to the central bank's plan for stimulus.
AT&T Inc and American Express Co rallied at least 1.3 per cent, pacing gains among the largest companies. Flir Systems Inc climbed 5.8 per cent after Raymond James & Associates Inc lifted its rating to strong buy. Walter Energy Corp advanced 16 per cent as Morgan Stanley said the coal miner's shares may triple. Hormel Foods Corp dropped 4.7 per cent as the company cut its 2013 profit forecast.
The Standard & Poor's 500 Index increased 0.6 per cent to 1,649.17 at 1:33 pm in New York, extending its two-day rally to 1.4 per cent. The Dow Jones Industrial Average gained 116.17 points, or 0.8 per cent, to 15,296.17 today. Trading in S&P 500 stocks today was about 13 per cent below the 30-day average at this time of day.
"It's like the market's chewing on a piece of grass, trying to buy time," John Manley, chief equity strategist for Wells Fargo Funds Management, which advises $222.7 billion in assets in the Wells Fargo Advantage Funds, said by telephone. "Of course the Fed will taper. If they don't taper, heaven help us, but I don't think they'll taper one minute too soon. If they do anything, they'll probably err on the side of caution. They'll phase it back but only when they think they can do it safely. There are signs that it's working."
The Federal Open Market Committee begins a two-day policy meeting today, with Fed Chairman Ben S Bernanke holding a press conference tomorrow.
Stimulus from the central bank and corporate earnings that beat forecasts have propelled the bull market in US stocks into a fifth year and driven the benchmark index up 144 per cent from a 12-year low in 2009.
'Real, sustainable'
The S&P 500 has fallen 1 per cent from a record high on May 21, the day before Bernanke suggested the central bank could start to reduce bond purchases if the economy improves in a "real and sustainable way" The gauge fell as much as 3.6 per cent in the two weeks following the comments before paring the decline.
Housing starts climbed 6.8 per cent in May to a 914,000 annualised rate after a revised 856,000 pace in April, the US Commerce Department reported today. The median estimate of 82 economists surveyed by Bloomberg called for a 950,000 rate. Applications to build one-family homes increased 1.3 percent to a 622,000 pace, the fastest since May 2008.
"The strongest parts of the economy where we are really getting growth is autos and housing," Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, said by phone. The firm manages $3.9 billion. "The Fed is still worried about a number of things: low inflation, weak employment growth, weaker commodities and some weakness around the world in China and Europe."
The Dow Jones Transportation Average rose 1.1 per cent, led by Alaska Air Group. The index of 20 stocks including railroad, shipping companies and airlines has climbed 20 per cent this year, while an S&P index that tracks homebuilders is up 13 per cent.
Living costs
A separate report today showed the cost of living in the US rose less than forecast in May, restrained by the first drop in food prices in almost four years and signalling inflation remains under control. Fed policy makers have promised to keep their target for the benchmark interest rate near zero as long as the outlook for inflation doesn't exceed 2.5 per cent and unemployment remains above 6.5 per cent.
The Chicago Board Options Exchange Volatility Index, or VIX, rose 0.4 per cent to 16.87. The gauge has rallied 49 per cent since hitting a six-year low in March.
All 10 industries in the S&P 500 advanced, with telephone stocks rising 1.3 per cent to pace gains. AT&T, the second-largest US wireless carrier, jumped 1.3 per cent to $36.22. American Express, the biggest credit-card issuer by purchases, climbed 1.9 per cent to $75.28 for the biggest gain in the Dow.
Flir jumped 5.8 per cent to $26.40, the highest intraday level since March 15. The maker of night-vision cameras was lifted to strong buy from market perform by Raymond James analyst Brian Gesuale, who cited solid orders in the government division despite cuts in federal spending.
Walter Energy, a US miner of coal used in steelmaking, gained 16 per cent to $13.52. Morgan Stanley said the stock may climb to around $35 even if the company increases its share count by a third. The stock plunged 20 per cent in the previous two days as it canceled a plan to refinance $1.55 billion of loans.
Newfield Exploration Co jumped 3.2 per cent to $23.73. Stifel Nicolaus & Co. analyst Amir Arif boosted his recommendation on the oil producer to buy from hold.
BlackBerry gained 4.2 per cent to $14.90 after RBC Capital Markets raised its estimates for sales of BlackBerry 10 devices to 3.5 million units in the first quarter from 2.75 million. The brokerage boosted projections for second-quarter sales to 4 million units from 3 million.
Hormel sank 4.7 per cent to $38.73 for the biggest decline in the S&P 500. The maker of Spam lunch meat cut its profit forecast for 2013 to as little as $1.88 a share after earlier predicting at least $1.93. The company cited lower-than- anticipated results in pork operations, higher costs and softer sales of retail products in its refrigerated foods segment.
Investors cut bond holdings to a near two-year low this month and bought stocks as expectations the Fed may remove monetary stimulus bolstered growth forecasts, a Bank of America Corp survey showed.
A net 25 per cent of 190 global fund managers, who together oversee about $572 billion, said they are overweight US equities, meaning they hold more of the shares than are reflected in benchmarks, the highest level in 13 months.
"Investors' sentiment has been surprisingly resilient in recent weeks despite the jump in volatility in financial markets," New York-based Michael Hartnett, chief investment strategist at Bank of America's Merrill Lynch unit, wrote in a note to investors today. "While our fund-flows data shows bond capitulation, the survey shows that there has been no capitulation in equities in the US and Europe."
