U.S. stocks rose, erasing an early decline, as German Chancellor Angela Merkel said lender recapitalizations will be discussed this weekend and Bank of America Corp. (BAC) rallied as it swung to a third-quarter profit.
Financial shares gained the most in the Standard & Poor’s 500 Index among 10 industries, adding 1.7 percent as a group. Bank of America climbed 5.7 percent as credit quality improved. A gauge of homebuilders in S&P indexes jumped 4.4 percent as data showed that industry sentiment increased more than forecast. International Business Machines Corp. (IBM) tumbled 4.7 percent after missing sales estimates for the second time in nine quarters.
The S&P 500 rose 0.2 percent to 1,203.10 at 11:29 a.m. New York time, after declining as much as 0.8 percent earlier today. The Dow Jones Industrial Average gained 3.22 points, or less than 0.1 percent, to 11,400.22.
“We’re seeing some support here,” Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4 billion in Raleigh, North Carolina, said in a telephone interview. “We’ve got some better-than-expected news, valuations are attractive. Still, the market is likely to tread water until we get the macro concerns behind us.”
The S&P 500 fell yesterday, after the biggest weekly gain since 2009, as financial shares slumped and the German government damped optimism of a quick fix to Europe’s debt crisis. The gauge rose last week amid optimism over corporate earnings and steps by European leaders to support banks.
Europe’s Debt Crisis
German Chancellor Merkel told lawmakers today that a European Union summit in five days will mark an important step, though not the final one, in solving the euro-area debt crisis, a participant at the meeting said. Officials from the 17-nation euro are moving millimeter by millimeter, the official told reporters in Berlin on condition of anonymity because the talks were held in private.
Stocks fell earlier as Moody’s Investors Service said France’s Aaa credit rating is under pressure from deterioration in debt metrics and the potential for additional liabilities from the Europe’s debt crisis. Data showed that China’s economy grew 9.1 percent in the third quarter from a year earlier, the slowest pace since 2009.
In the U.S., wholesale prices rose more than forecast in September, boosted by gasoline, food and trucks. Separate data showed that homebuilders in the U.S. were less pessimistic than forecast in October as near record-low borrowing costs and price decreases raised hopes the market will turn for the better over the next six months.
Most-Tied
The Morgan Stanley Cyclical Index of companies most-tied to the economy added 1.1 percent. The Dow Jones Transportation Average advanced 1.4 percent. Homebuilder Toll Brothers Inc. (TOL) added 5.4 percent to $15.95, while Lennar Corp. (LEN) advanced 4.6 percent to $15.24.
Bank of America rose 5.7 percent to $6.38. Chief Executive Officer Brian T. Moynihan has presided over a 55 percent drop in the stock this year. He vowed to make the lender smaller and more profitable by divesting unnecessary businesses and trimming $5 billion in costs, mostly by eliminating 30,000 jobs. He’s agreed to sell almost $50 billion in assets and units since taking over as CEO last year.
IBM slumped 4.7 percent to $177.82. Revenue showed slowing growth in IBM’s software, hardware and services businesses. Chief Executive Officer Sam Palmisano is focusing on areas such as business analytics, emerging markets and cloud computing to boost sales amid sluggish economic expansion.
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