Wall Street kicked off the shortened week in positive territory today, after a US economic report confirmed that domestic inflationary pressures remain benign.
Fresh M&A news and analyst upgrades also added to the excitement. By 3:50pm (London time) the Dow Jones Industrial Average was trading at 10893.36, representing a 43-point (+0.40%) increase over Friday’s close. In addition, the broader, more representative, S&P 500 climbed 5.64 points (+0.48%) to 1172.23 while the Nasdaq 100 rose 10.85 points (+0.56%) to 1963.48.
Anyone looking for signs of an imminent rate hike may have been disappointed today after the Commerce Department showed a modest 0.30% increase in US consumer spending in February. This was in line with Bloomberg’s expectations and follows a downwardly revised gain of 0.4% the prior month. Consumer spending in January was previously reported to have increased 0.5%.
The report showed the core personal consumption expenditure index, an inflationary gauge tied to spending patterns, rising only 1.3% from a year ago. That compares with a 2.1% gain in the 12 months ended in January.
Although this is the fifth-straight month that spending increased, the pace in the gains is clearly decelerating, giving the Fed a strong reason to keep low interest rates. The report also showed personal income coming in flat in February, below the 0.1%-median forecast shown in a Bloomberg survey.
The data exerted pressure on the US dollar, enhancing commodities. By around 3:50pm (London time) May high-grade copper futures had rallied 2.9% higher at $3.5025 per pound while June gold futures rose 0.6% to $1112 per troy ounce. In addition, May light sweet crude oil (WTI) jumped nearly 3% to $82.35 a barrel.
Unsurprisingly, shares in miner Freeport-McMoRan rallied 3.9% to $82.25, Newmont mining rose 1.3% to $50.02 and Barrick Gold advanced 1% to $37.78 a share.
M&A news enlivened today’s trading session as well, with SunPower Corp, the second-biggest US supplier of solar modules, up 3.1% to $18.79 after announcing that it has completed its acquisition of SunRay Renewable Energy for $263 million in cash and $14 million in promissory notes.
Meanwhile, CKX Inc, the owner of the ‘American Idol’ brand, climbed 0.70% to $6 per share on speculation that it may be near a deal to be bought out by One Equity Partners, the private-equity arm of JPMorgan Chase, for around $6 a share.
Ford Motors was also eyed today after agreeing to sell its Volvo Cars unit to China’s Zhejiang Geely Holding for $1.8 billion. The news helped Geely’s shares climbed 1.7% in Hong Kong, however, Ford’s shares fell 1% to $13.72.
Separately, shares of natural gas and crude oil producer Southwestern Energy rallied 8.2% to $40.78 after Goldman Sachs raised its rating on the company from ‘neutral’ to ‘buy’. The owner of MTV Networks and Paramount Pictures Viacom also benefitted from an upgrade. Its shares climbed 1.4% to $35.94 after Morgan Stanley raised its rating from ‘underweight’ to ‘equal weight’. Meanwhile, financial news provider Barron’s yesterday said that Viacom’s shares may rise above $40 in the next 12 months.
In contrast, US banking stocks seemed to lose steam, with shares of Citigroup falling 2% to $4.22 this afternoon, after the US Treasury Department announced that it is planning to fully dispose of its 7.7 billion common shares in the bank over the course of this year.
‘Treasury intends to sell its Citigroup common shares into the market through various means in an orderly and measured fashion,’ the Treasury said in a statement in Washington today. ‘The manner, amount and timing of the sales under the plan is dependent upon a number of factors.’
Shares of Wells Fargo were unchanged at $31.22 while JPMorgan Chase fell 0.2% to $44.95. Bank of America edged 0.3% higher to $17.96.
Across the Atlantic, ratings agency Standard & Poors (S&P) today kept its AAA credit rating for the UK unchanged and reiterated a ‘negative outlook’ due to rising government debt concerns. S&P said it will review that rating again after the election, expected on May 6.
Separately, shares of Bank of Ireland fell 6.5% to €1.30 and Allied Irish Banks plunged 16.4% to €1.42 after the government is said to be planning to increase its stake in the two banks. Local media reports suggest the government could increase its stake in Allied Irish Banks from a current 25% to 70% and hike its stake in Bank of Ireland to 40%.
