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Gains for US stocks as housebuilders soar

Published 23/08/2016

Luxury housebuilder Toll Brothers rose nearly 9%, while PulteGroup and Lennar rose roughly 3% each
Luxury housebuilder Toll Brothers rose nearly 9%, while PulteGroup and Lennar rose roughly 3% each

US stocks have posted modest gains, bringing indexes nearly back to the record levels they reached last week.

Housebuilders rose sharply following a big jump in sales of new homes last month, and Best Buy soared after the electronics retailer reported a surge in profit as online sales increased.

The Dow Jones industrial average rose 17.88 points, or 0.1%, to 18547.30. The Standard & Poor's 500 index rose 4.26 points, or 0.2%, to 2186.90 and the Nasdaq composite rose 15.47 points, or 0.3%, to 5260.08.

It was another quiet day in trading on Wall Street. Volume on the New York Stock Exchange was again below three billion shares, marking one of the slowest days of the year. Monday was the slowest day so far in 2016.

Investors have had little in the way of economic data or company news to react to for the last couple of weeks, and many traders are on vacation in the ending days of summer.

This week's biggest event is on Friday, when Federal Reserve Chair Janet Yellen is due to speak at an annual conference of central bankers in Jackson Hole, Wyoming.

The Fed is not expected to raise interest rates at its September meeting, but Ms Yellen's comments will be dissected for clues on the likelihood and timing of a future hike.

Investors did respond positively to a survey from the 19-country eurozone that showed business activity expanded in August at a modest but steady pace.

It was a sign that companies were not overly worried about Britain's decision to leave the European Union.

The IHS Markit survey of purchasing managers also reached a seven-month high.

Germany's Dax closed up 0.9%, France's CAC-40 rose 0.7% and the UK's FTSE 100 rose 0.6%.

Stocks also benefited from news that Americans stepped up their purchases of new homes in July at the fastest pace in nearly nine years.

Luxury housebuilder Toll Brothers rose nearly 9%, while PulteGroup and Lennar rose roughly 3% each.

In individual companies, Best Buy jumped 6.43 US dollars (£4.87), or 20%, to 39.23 dollars (£29.73) after the retailer reported results that beat analysts' estimates.

Notably, Best Buy said sales in stores open at least a year rose in the latest quarter, a sign that the company's turnaround strategy is working in the face of strong competition from Amazon and other online retailers.

Drugmaker Mylan fell 2.28 dollars (£1.72), or 5%, to 45.62 dollars (£34.58), the second-biggest drop in the S&P 500, following growing outrage over the sky-rocketing price increases for Mylan's EpiPen product, which is used to treat people who may be suffering from a potentially life-threatening allergic reaction.

Republicans and Democrats in Congress have started asking questions about Mylan's price increases.

The EpiPen, invented in the 1970s, used to be roughly 100 dollars (£75) for two pens only a few years ago, but now costs roughly 600 dollars (£450) for the same two pens.

Analysts at Citi said in a note on Tuesday that the political pressure is likely to continue to weigh on Mylan's stock, referencing the pressure Valeant Pharmaceuticals faced over the past year when it also had to respond to political pressure over its drug pricing tactics.

US government bond prices were little changed. The yield on the benchmark 10-year Treasury note held steady at 1.55%. The dollar slipped to 100.22 yen from 100.29 yen late on Monday. The euro fell to 1.1305 dollars from 1.1323 dollars.

Crude oil closed up 69 cents to 48.10 dollars (£36.45) a barrel while Brent crude, used to price oil internationally, rose 80 cents to 49.96 dollars (£37.87).

AP

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