U.S. Stock Prices Rally Following Release of Durable Goods Report

U.S. stock prices moved up today, with several companies making significant gains following the release of July’s durable goods order report.  The drop in durable order metrics fueled speculation that the Federal Reserve may hold off in the meantime on its plans to cut back on its ongoing bond-buying economic stimulus.

Leading the companies making large gains today were Amgen, Inc. (AMGN), which surged by 9.6 percent after it confirmed that it would buy out Onyx Pharmaceuticals, Inc. (ONXX) for $10.4 billion.  Social networking giant Facebook, Inc. (FB) saw its stock price improve by 2.3 percent to $41.67, as the Menlo Park, Calif. company’s market value went past the $100 billion threshold.  Among today’s losers, meat processing leader Tyson Foods, Inc. (TSN) lost 6.8 percent due to market analysts from Bank of America reducing its stock rating.

As of noontime, the Dow Jones Industrial Average gained 25.31 points (0.2 percent) to 15,035.82, while the Standard & Poor’s 500 also advanced by 0.2 percent to 1,667.25.  S&P 500 stock trading, however, was still 29 percent below the 30-day average at 12:30 p.m.  U.S. stock prices rallied last week amid another key report indicating that home sales were down in July, and also adding to the possibility of the Fed not following through on its plans to reduce economic stimulus by September.  The Fed’s decision on whether to curtail its bond buying is largely dependent on several economic statistics, and the possibility of the Fed doing so next month has influenced stock market gyrations as of late.  The S&P 500 has increased more than 153 percent since reaching its record low level in March 2009, during the height of the global economic recession.

In a survey undertaken by Bloomberg in the week of August 9 to 13, 65 percent of economists polled were of the belief that stimulus reduction would be announced at the September 17-18 policy meeting.  Some believe this may be delayed as the U.S. Commerce Department’s statistics show that orders for goods meant to last three years or more went down by 7.3 percent in July 2013, the largest drop since August of last year.  Durable goods orders had improved by 3.9 percent in June, and the median forecast of economists polled by Bloomberg had hinted at a 4 percent decrease in July.  Orders were most notably down for products including computer-related goods and electrical equipment.  Separately, the Volatility Index (VIX) of the Chicago Board Options Exchange increased by 0.3 percent to 14.02.  The VIX was at its peak in June 2013, and has dropped by 32 percent over the past two months.

In other related developments, the most recent S&P homebuilder index jumped by 1.3 percent yesterday, following a 3.1 percent downtick the past Friday following the last home sales report.  A spike in interest rates fueled by speculation of the Fed curtailing its stimulus efforts has resulted in this metric dropping 25 percent since May 14.  Still, housing analysts believe that the market is still quite stable at this point.  “The home industry is on firm footing,” opined U.S. Bank Wealth management senior equity strategist James Russell. “We do think the homebuilders are going to be pretty much tied at the hip to the daily interest rate moves, and absolutely tied to what’s decided on the (Fed stimulus) taper.”