Gross' Pimco exit hits bonds; U.S. GDP data lifts stocks, dollar

Fri Sep 26, 2014 5:14pm EDT
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By Caroline Valetkevitch

NEW YORK (Reuters) - High-profile investor Bill Gross's departure from Pimco shook the bond market on Friday, while world stock markets and the dollar rose following data showing the U.S. economy grew at its fastest pace in more than two years in the second quarter.

News that Gross, a Pimco co-founder who managed the $222 billion Pimco Total Return Fund, will be joining Janus Capital Group JNS.N pressured short- and intermediate-dated U.S. Treasuries prices as it spurred concerns that Pimco may have to sell Treasuries if investor redemptions increase.

It also drove down shares of German insurer Allianz (ALVG.DE: Quote), the parent of Newport Beach, California-based Pimco. Allianz shares tumbled 6.2 percent, wiping roughly 3.75 billion euros ($4.77 billion) from the group's market value. Shares of Janus Capital ended up 43 percent at $15.89, the stock's best one-day advance in its history.

"This news of Gross's departure is gigantic," said Tom di Galoma, head of rates and credit trading at ED&F Man Capital Markets in New York. "People are concerned that Pimco is going to have to liquidate, so there is some pre-selling going on ahead of the fact that they may have to do some selling."

In a bullish signal for the rest of the year, the U.S. Commerce Department reported the U.S. economy grew at its strongest rate in 2-1/2 years during April, May and June.

The Dow Jones industrial average .DJI rose 167.35 points, or 0.99 percent, to 17,113.15, the S&P 500 .SPX gained 16.86 points, or 0.86 percent, to 1,982.85 and the Nasdaq Composite .IXIC added 45.45 points, or 1.02 percent, to 4,512.19.

"The bottom line is that the outlook is still very solid, so it isn't unusual to see (stock) traders come back in," said Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston.

Among the day's big gainers, shares of Yahoo Inc (YHOO.O: Quote) and AOL Inc AOL.N jumped after Starboard Value LP urged a strategic combination of the companies. Yahoo shares rose 4.4 percent to $40.66, whiles AOL gained 3.7 percent to $44.55.   Continued...

Traders work on the floor of the New York Stock Exchange September 22, 2014. REUTERS/Brendan McDermid