A Review of the Nigerian Energy Industry

U.S. stocks climb to record as energy shares advance

US stocks24 February 2014 – U.S. stocks rose, pushing the Standard & Poor’s 500 Index to a record, as investors bet that the economy can withstand the slowing down of the Federal Reserve’s bond-buying program.

Comcast Corp. added 1.5 percent as people familiar with the matter said Netflix Inc. agreed to pay for direct access to the cable company’s broadband network. Netflix slipped 0.5 percent. Pfizer Inc. climbed 1.6 percent after saying its community-acquired pneumonia immunization trial in adults showed positive results. Oil producers led gains among 10 main industries in the S&P 500 (SPX) with a 1.6 percent advance.

The S&P 500 increased 0.8 percent to 1,851.02 at 9:57 a.m. in New York. The equity benchmark fell 0.1 percent last week, leaving it 0.7 percent from its record and its level at the end of last year. The Dow Jones Industrial Average added 142.09 points, or 0.9 percent, to 16,245.39 today. Trading in S&P 500 stocks was 2 percent above the 30-day average during this time of the day.

“U.S. equities can go higher in 2014,” Drew Wilson, an investment analyst with Fenimore Asset Management in Cobleskill, New York, said in a phone interview. The firm oversees about $1.7 billion. “I believe the taper is not going to affect the real economy. I don’t know what it’ll do psychologically. I believe the fundamental recovery is real and will be strong enough to overcome the psychology.”

The S&P 500 slumped as much as 5.8 percent after reaching the highest level since its inception on Jan. 15 as investor concern about continued cuts in the Fed’s monthly asset purchases fueled a rout in emerging markets. The index has rebounded 5.4 percent from its low on Feb. 3. It climbed to within six points of the 1,848.38 record on each day last week, without breaking through to a new high.

Fed Stimulus
Fed Chair Janet Yellen said this month that the economy has strengthened enough to withstand stimulus cuts, adding that only a notable change to the outlook would prompt the central bank to slow the pace of tapering. Yellen, in her first global forum as Fed chair, won praise at the Group of 20 nations meeting over the weekend for helping smooth emerging-market concerns as the U.S. tapers monetary stimulus.

Three rounds of stimulus have helped push the S&P 500 as much as 173 percent higher from a 12-year low in 2009.

The Commerce Department publishes its revised estimate for fourth-quarter growth on Feb. 28. The report will probably show that gross domestic product expanded 2.5 percent at an annualized pace, less than the government had forecast, according to a Bloomberg survey of economists.

Underlying Strength
“You can see the underlying strength of the market because the S&P 500 is so close to its all-time high, but investors are not complacent,” Heinz-Gerd Sonnenschein, an equity-market strategist at Deutsche Postbank AG, said by phone from Bonn, Germany. “We’re in a bullish but healthy market. We still need to see hard data confirming the state of the U.S. economy. The Fed has hinted that growth is on the right track, and it’s important that the latest figures support that.”

Investors have dismissed worse-than-forecast U.S. economic data over the past two weeks, speculating that severe winter weather explains the weakness in reports such as housing and hiring. The Bloomberg ECO U.S. Surprise Index, which measures how much recent data has beaten or missed economists’ estimates, fell to minus 0.429 on Feb. 21, the lowest since August 2011.

Comcast, Netflix
Comcast added 1.5 percent to $51.80. Netflix, the world’s largest subscription video-streaming service, agreed to pay Comcast millions of dollars annually to deliver its content with better quality and speed, said one of the three people, who asked not to be identified because the terms are private. The companies announced a multiyear agreement in a statement yesterday without disclosing the terms.

Netflix lost 0.5 percent to $430.11.

Pfizer Inc. climbed 1.6 percent to $31.95. The world’s biggest drugmaker said the study on the Prevenar 13 vaccine in adults at 65 or older achieved its primary clinical objective and both secondary clinical objectives.

Jos. A. Bank Clothiers Inc. rallied 7.4 percent to $59.15. Men’s Wearhouse Inc. raised its offer for the company 10 percent to $63.50 a share. The bid would increase to $65 if Jos. A. Bank ended the Eddie Bauer deal and let Men’s Wearhouse conduct limited due diligence.

Takeover Battle
Men’s Wearhouse is seeking to end a takeover battle that Jos. A. Bank started in October with its own offer for its larger rival. Men’s Wearhouse rejected that offer and has countered with its own bids for Jos. A. Bank, which have been rejected as too low. Jos. A. Bank earlier this month agreed to buy Eddie Bauer in a deal that may make the combined company too big for Men’s Wearhouse to acquire.

Men’s Wearhouse climbed 6.5 percent to $48.02.

Chesapeake Energy Corp. (CHK) climbed 2.2 percent to $27.16 after the second-largest U.S. natural gas producer said it plans to either sell or spin off its oilfield-services unit. About 35 percent of the unit’s drilling rigs work for companies other than its parent, according to a statement.

*Lu Wang – lwang8@bloomberg.net, Cecile Vannucci – cvannucci1@bloomberg.net

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