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U.S. Stock Futures Advance After China Pledges Reforms

November 18, 2013
Bloomberg
Alexis Xydias & Nick Taborek

U.S. stock-index futures advanced, signaling the Standard & Poor’s 500 Index will extend six weeks of gains, as global equities rallied after China pledged to expand economic freedoms.

Boeing (BA) Co. rose 3.1 percent in early New York trading after securing record plane orders on the first day of the Dubai Air Show. Tyson Foods Inc., the largest U.S. meat processor, advanced 3.9 percent after reporting revenue above analysts’ estimates on a gain in prices and sales volumes for beef and chicken. Microsoft Corp. fell 1.3 percent after Bank of America Corp. cut its rating to underperform from neutral.

Futures on the Standard & Poor’s 500 expiring in December climbed 0.2 percent to 1,796.20 at 8:52 a.m. in New York. Stocks rose for the sixth week to a record after Janet Yellen signaled she will continue Federal Reserve stimulus efforts as the central bank’s chairman. Dow Jones Industrial Average futures added 38 points, or 0.2 percent, to 15,951 today.

“There is room here to take profits from this bullish trend,” Arnaud Scarpaci, who helps oversee about $270 million at Montaigne Capital in Paris, said by phone today. “As we head towards the end of the year and next year’s debt-ceiling debate, I expect volatility to start rising. I am very cautious about the beginning of next year.”

Private Investment

China’s leaders vowed to allow more private investment in state-controlled industries and expand farmers’ land rights as part of the ruling Communist Party’s biggest package of economic reforms since the 1990s. New York Federal Reserve Bank President William C. Dudley and Philadelphia Fed Bank President Charles Plosser are scheduled to speak today. The Fed’s decision to maintain the pace of stimulus has helped the S&P 500 jump 26 percent this year.

China’s stocks rose today, with the benchmark index for mainland companies in Hong Kong surging the most since December 2011. The Stoxx Europe 600 Index rose 0.5 percent.

“We believe China is on the cusp of a massive multiyear bull run,” Christie Ju, managing director at Jefferies Group LLC in Hong Kong, wrote in a note to clients.

The Chicago Board Options Exchange Volatility Index, or VIX (VIX), ended last week at 12.19, less than one point away from a low of 11.30 reached in March.

Shrinking Gap

Cheap is converging with expensive in the American equity market, narrowing options for investors looking for bargains after the broadest rally on record lifted almost 90 percent of the S&P 500 this year. A measure of the dispersion of price-earnings ratios in the S&P 500 compiled by Goldman Sachs Group Inc. narrowed to 41 percent in June, the lowest on record, and held around that level since.

Boeing gained 3.1 percent to $140.25 in early New York trading. The company took an early lead over rival Airbus SAS in the biennial Dubai expo, signing up Etihad Airways PJSC for its new 777X wide-body planes as well as for more 787 Dreamliners.

Tyson climbed 3.9 percent to $29.90. The company said fiscal fourth-quarter sales rose 7 percent to $8.89 billion, beating the $8.87 billion average of 12 analysts’ estimates compiled by Bloomberg.

Mosaic Co. rose 1.7 percent to $49.90 and Potash Corp. of Saskatchewan Inc. gained 2 percent to $33.05. The producers of the crop nutrient potash advanced after billionaire Mikhail Prokhorov’s Onexim Group agreed to buy Suleiman Kerimov’s stake in OAO Uralkali, bolstering prospects that a standoff over a global marketing venture for potash will be resolved.

The sale may defuse a dispute between Russia and Belarus sparked by Uralkali’s July withdrawal from a partnership that marketed 40 percent of global potash exports.

Nvidia Corp. (NVDA) dropped 2.2 percent to $15.81. The shares were cut to underweight, or sell, from equalweight, or hold, at Morgan Stanley.

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