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.
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.
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.