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U.S. Stocks Rise on Housing Data, Putin Crimea Comments

By Callie Bost
March 18, 2014 4:39 PM EDT 94 Comments

U.S. stocks climbed, extending the best two-day gain for the Standard & Poor’s 500 Index in five weeks, as housing data bolstered confidence in the economy and Vladimir Putin said Russia isn’t seeking to split Ukraine.

Microsoft Corp. (MSFT) rallied to the highest since 2000 as the company plans to debut a version of Office for Apple Inc.’s iPad. Hewlett-Packard Co. (HPQ) added 3.7 percent after Barclays Plc lifted its rating on the computer maker. Nasdaq OMX Group Inc. fell 3.1 percent as New York’s attorney general started an investigation into whether stock exchanges provide high-frequency traders with improper advantages. GameStop Corp. dropped 3.4 percent after Wal-Mart Stores Inc. said it will start selling pre-owned video games later this year.

The S&P 500 gained 0.7 percent to 1,872.25 at 4 p.m. in New York to extend its two-day rally to 1.7 percent. The Dow Jones Industrial Average added 88.97 points, or 0.5 percent, to 16,336.19. Less than 5.9 billion shares changed hands on U.S. exchanges, 12 percent below the three-month average.

“We’ve got a more congenial Russian message this morning and we got better economic reports here in the States,” John Augustine, chief market strategist at Cincinnati-based Fifth Third Bancorp, said in a phone interview. His firm oversees $28.2 billion. “The building permits report was very bullish for the spring and summer housing season. Today, we move back to better economic reports and focusing on the Fed.”

The S&P 500 (SPX) rallied 1 percent yesterday for its biggest increase in almost two weeks as a measure of industrial production grew more than forecast. The gauge dropped 2 percent last week, the most since January, amid mounting tension in Ukraine and signs of an economic slowdown in China.

Housing Data

A Commerce Department report showed housing starts were little changed in February after declining less than previously estimated a month earlier, indicating the home-building industry is stabilizing after bad winter weather curbed construction. Permits filed for future projects increased 7.7 percent to a 1.02 million pace in February, the most since October.

Separate data indicated the cost of living was little changed in February, showing inflation remains well below the Federal Reserve’s goal. Low inflation makes it likely that Fed policy makers meeting today and tomorrow will maintain a pledge to keep interest rates low, even as unemployment declines.

The Federal Open Market Committee will announce a $10 billion cut to monthly bond purchases tomorrow, according to the median of responses in a Bloomberg survey. The central bank will continue to slow the program at that pace at every meeting before ending it at the Oct. 28-29 gathering, the survey showed.

Fed Plans

Fed Chair Janet Yellen said last month the U.S. economy was strong enough to withstand measured reductions to the central bank’s monthly bond purchases. Three rounds of Fed stimulus have helped push the S&P 500 up 177 percent from a 12-year low, as U.S. equities enter the sixth year of a bull market that started March 9, 2009.

Economic data “was sort of little-changed to us, but at least it wasn’t a lot worse,” Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors, said in a phone interview. His firm oversees about $82 billion. “People have been looking at a lot of negatively influenced numbers and thinking we may starting to get a little past that.”

Equity futures jumped this morning after Putin said Russia won’t attempt to further split up Ukraine. Crimea voted on March 16 to leave Ukraine and become a part of Russia. The regional parliament called the plebiscite after Ukrainian President Viktor Yanukovych fled the country following protests against his rule.

‘Don’t Believe’

“We don’t want to split up Ukraine, we don’t need that,” the Russian president said in a speech to parliament. “Don’t believe those who scare you with Russia, who yell that Crimea will be followed by other regions.”

U.S. and European leaders condemned Putin’s push to annex the region and promised further sanctions as early as this week. Ukraine’s government said the conflict has entered a military phase as clashes in Crimea intensified, killing at least one Ukrainian serviceman.

Investors have added $352.1 million to U.S. equity exchange-traded funds in the past five days and $463.4 million to bond ETFs, data compiled by Bloomberg show. Materials stocks absorbed the most money among industry ETFs, taking in $670 million during the past week.

Volatility Gauge

The Chicago Board Options Exchange Volatility Index (VIX), a gauge for U.S. stock volatility, plunged 7.2 percent to 14.52 today. The gauge has fallen 19 percent in the past two days, the biggest slide since Feb. 7.

Nine of the 10 main S&P 500 industries advanced today. Technology stocks rallied 1.4 percent as a group to lead the gains.

Microsoft jumped 3.9 percent to $39.55, the highest since July 2000. CEO Satya Nadella will begin unveiling his vision for the company when he debuts a version of Office for the iPad and offers some features of the application for free at an event next week, said people with knowledge of the announcement.

Hewlett-Packard added 3.7 percent to $30.56, closing at the highest level since August 2011. Barclays said HP’s servers may gain market share from International Business Machines Corp. and Lenovo Group Ltd.

Vehicle Safety

General Motors Co. climbed 1.6 percent to $35.17. Chief Executive Officer Mary Barra promoted 40-year engineering executive Jeff Boyer to a new global vehicle safety position, as scrutiny intensifies on a flaw linked to 12 deaths.

An S&P index of homebuilders rose 1.5 percent, with all 11 members advancing. D.R. Horton Inc. added 1.8 percent to $22.45 and Lennar Corp. gained 1.4 percent to $40.60.

GameStop plunged 3.4 percent to $38.39. Wal-Mart announced that customers can trade in video games for credit that can be used on any kind of merchandise. The world’s largest retailer will also sell pre-owned video games later this year.

Michael Kors Holdings Ltd. (KORS) slipped 1.8 percent to $96.77. Barclays initiated coverage of the luxury retailer with an underweight, or sell, rating and a price forecast of $85, 14 percent below yesterday’s closing price.

Nasdaq OMX fell 3.1 percent, the most since August, to $38.50. IntercontinentalExchange Group Inc., parent of the New York Stock Exchange, lost 1.5 percent to $205.94. New York Attorney General Eric Schneiderman is examining the sale of products and services that offer faster access to data and richer information on trades than what’s typically available to the public.

“We publicly file with the SEC for each and every one of these services, and we’re always engaged with government officials around the world,” Robert Madden, a spokesman for New York-based Nasdaq, said in a phone interview, referring to the U.S. Securities and Exchange Commission. He and Eric Ryan, a spokesman for NYSE, declined to comment on Schneiderman’s investigation.

To contact the reporter on this story: Callie Bost in New York at cbost2@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeremy Herron, Michael P. Regan

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