U.S. stocks extend records on Fed bets amid factory reports

Bloomberg NewsNovember 16, 2013 

NEW YORK -- U.S. stocks rose to records Friday, with benchmark gauges capping a sixth week of gains, as investors assessed data on factory output amid growing speculation the Federal Reserve will maintain the pace of its monthly stimulus.

Exxon Mobil rallied 2.2 percent to a record after Warren Buffett's Berkshire Hathaway disclosed a stake. FedEx climbed 1.6 percent as billionaire investors George Soros and John Paulson took positions. Fannie Mae and Freddie Mac increased at least 6.2 percent as Bill Ackman's hedge fund bought shares in the government-backed mortgage insurers. Western Union dropped 4.3 percent after the company said its chief financial officer is leaving.

The Standard & Poor's 500 index rose 0.4 percent to 1,798.18. The gauge gained 1.6 percent in the past five days, capping its longest streak of weekly gains since February. The Dow Jones industrial average added 85.48 points, or 0.5 percent, to 15,961.70, a third straight record. About 6.1 billion shares changed hands on U.S. exchanges Friday, in line with the three-month average.

The S&P 500 and the Dow rallied as Janet Yellen, nominated to succeed Ben Bernanke as chairman of the Federal Reserve, said Thursday the central bank should take

care not to withdraw stimulus too early from an economy that is operating well below potential.

Data on Friday showed manufacturing in the New York region unexpectedly contracted in November. A separate report showed total industrial production in the U.S. fell 0.1 percent in October as output at mines and utilities declined. Factory output rose more than forecast. Wholesale inventories widened by 0.4 percent in September, the Census Bureau said.

Central bank policy makers will probably pare the $85 billion monthly pace of bond buying to $70 billion at their March 18-19 meeting, according to the median of 32 estimates in a Bloomberg survey of economists on Nov. 8. The group next meets Dec. 17-18. The Fed support has helped propel the S&P 500 higher by 166 percent from its March 2009 low.

Global equities rose Friday on expectations of continued Fed stimulus and as China's ruling party announced changes to economic policy. The government vowed to allow more private investment in the state sector, loosen its one-child policy and better protect farmers' rights to land, according to the Communist Party policy decision published Friday by the official Xinhua News Agency today.

The document, covering 60 measures, follows a communique issued Nov. 12 after a four-day party conclave in Beijing that omitted detailed policies for the world's second-largest economy.

The Chicago Board Options Exchange Volatility Index, which measures future volatility signaled by S&P 500 options, fell 1.5 percent to 12.19, the lowest since Aug. 5. The gauge lost 5.5 percent this week to extend its drop for the year to 32 percent.

All 10 main S&P 500 groups advanced at least 0.2 percent. Energy and materials producers rallied at least 0.6 percent to pace gains, as the U.S. factory data and Chinese policy changes boosted demand prospects for commodities.

Exxon, the world's biggest oil company by market value, advanced 2.2 percent to a record $95.27, for the Dow's biggest rise. Berkshire Hathaway reported a stake valued at about $3.7 billion on Sept. 30.

Financial stocks increased 0.5 percent as a group. American Express added 1.1 percent to $82.80 and Visa rose 0.9 percent to $202.

FedEx climbed 1.6 percent to $138.65. Soros Fund Management owned a $173 million stake and Paulson & Co. held $73.8 million in the shares of the operator of the world's largest cargo airline at the end of last quarter.

The funds join Daniel Loeb's Third Point in disclosing new stakes in the period. FedEx shares have rallied four straight days and trade at a record.

Fannie Mae added 7.8 percent to $3.30 and Freddie Mac gained 6.2 percent to $3.08, with both stocks closing at the highest level since May. Pershing Square Capital Management bought stakes of nearly 10 percent in each of the companies and said it may seek talks with management, shareholders and the government.

The government seized Fannie Mae and Freddie Mac after they were pushed to the brink of bankruptcy by investments in bad loans. The two took $187.5 billion in taxpayer aid before reporting record profit this year as the housing market rebounded.

General Electric rose 0.8 percent to $27.20. The company said it will sell as much 20 percent of its North American consumer lending business in an initial public offering in 2014, as CEO Jeffrey Immelt shrinks reliance on financial profits.

Zulily, which runs a shopping website targeted at moms, jumped 71 percent to $37.70 in its first day of trading after raising $253 million in its U.S. initial public offering. The e-commerce company and some stockholders sold 11.5 million shares for $22 apiece Thursday.

Kellogg, the maker of Rice Krispies cereal, declined 1.1 percent to $62.61.

The stock was cut to underweight, or sell, from equalweight, or hold, at Barclays.

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