U.S. stocks rose, with equities rebounding from a weekly loss, after Warren Buffett’s Berkshire Hathaway Inc. agreed to buy Precision Castparts Corp. and commodities shares gained after Chinese stocks rallied.
Precision Castparts, a maker of equipment for the aerospace and energy industries, jumped 19 percent on the $37.2 billion deal. Berkshire’s Class B shares were little changed after also reporting profit that trailed estimates. Boeing Co. advanced 2.4 percent. Apple Inc. rose the most in three months, bouncing after its worst week since January.
The Standard & Poor’s 500 Index gained 1.2 percent to 2,102 at 1:01 p.m. in New York, above its average price during the past 50 days. The Dow Jones Industrial Average added 220.63 points, or 1.3 percent, to 17,594.01, on track for its biggest gain in two months. The Nasdaq Composite Index climbed 1.1 percent.
“China started it off with a 5 percent rally, there was another test of the S&P 200-day moving average, plus merger activity with Berkshire and PCP kind of gave the market an excuse to rally this morning,” said Mark Kepner, an equity trader at Themis Trading LLC in Chatham, New Jersey. “Since we have sold off a bit lately it just sets up for a morning rally.”
China’s stocks posted their biggest gain in a month amid speculation the government will accelerate mergers of state-owned enterprises to bolster economic growth. Investors also speculated China will act to prop up growth following a wider-than-expected drop in exports.
Fed’s Fischer
The S&P 500 dropped 1.3 percent last week while the Dow posted its longest losing streak in four years, amid a slump in media and biotechnology shares and as Apple Inc. fell into a correction. The S&P 500 has trailed most developed-market gauges this year, while speculators’ appetite for stock-market volatility has reacheda nine-year high. The gauge closed Friday 2.5 percent below its May record.
Investors will watch economic reports this week, including U.S. retail sales data on Thursday, after a report Friday showed a broad-based gain in hiring. The jobs data boosted the chance of a Federal Reserve rate hike in September by four percentage points to 54 percent, according to futures trading data compiled by Bloomberg.
Fed Vice Chairman Stanley Fischer said in a Bloomberg Television interview Monday that stubbornly low inflation in the U.S. won’t persist with the economy near full employment. The Fed is looking for signs that inflation will strengthen toward its 2 percent target before it starts to increase rates.
Earnings Watch
Kraft Heinz Co. is among companies reporting earnings on Monday, with those from Macy’s Inc. and News Corp. due later this week.
Most S&P 500 members have released results this season, of which 74 percent beat profit estimates and about half topped sales projections. Analysts now project a more modest drop in second-quarter earnings, calling for a 2.1 percent fall instead of a 6.4 percent decline a month earlier.
The Chicago Board Options Exchange Volatility Index fell 7.3 percent Monday to 12.41. The gauge, known as the VIX, rose 10 percent last week after posting its biggest monthly drop since February.
Nine of the S&P 500’s 10 main groups climbed today, with industrials and commodities-related shares rallying the most. Utilities lagged, following the sector’s best week in more than two months.
Energy Rebound
Consol Energy Inc., Diamond Offshore Drilling Inc. and Transocean Ltd. advanced at least 5 percent as oil rebounded from an almost five-month low to rise for the first time in four days.
Shares of industrial companies gained 1.8 percent, the biggest jump in almost two weeks. Joy Global Inc. added 9 percent, the most in more than three years, and Caterpillar Inc. climbed 3.6 percent as the group got a boost from Precision Castparts’ 19 percent climb and speculation on further stimulus in China.
Materials companies also advanced the most in nearly two weeks, adding 2.1 percent as copper rose from a six-year low after torrential rains in Chile halted work at some of the world’s biggest mines. Miner Freeport-McMoRan Inc. rallied 8.2 percent, while Alcoa Inc. rose 5.2 percent, its best rise in three months. The Bloomberg Commodity Index jumped 2.2 percent, the most in six months.
Texas Instruments Inc. added 4 percent to the highest in more than a month after the shares were raised to outperform from neutral at Macquarie Research.
Dean Foods Co. shares lost 7 percent, the most in six months, after the company declined to offer an explanation for the sudden resignation of its board chairman. Shares earlier fell nearly 18 percent before trimming their decline.
source:Bloomberg
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