U.S. stocks advanced, following the biggest weekly decline for the Dow Jones Industrial Average since October 2008, on speculation European leaders will act to prevent the region’s debt crisis from getting worse.
Bank of America Corp. and JPMorgan Chase & Co. jumped more than 1.9 percent, as European Central Bank policy makers are said to consider restarting covered-bond purchases along with further measures to ease monetary conditions. Berkshire Hathaway Inc. Class B shares jumped 5.9 percent as the company plans a stock buyback. Apple Inc. lost 1.4 percent after an analyst said the company is cutting orders for iPad parts.
The Standard & Poor’s 500 Index added 0.8 percent to 1,145.17 at 11:18 a.m. in New York, after rallying as much as 1.1 percent and falling 0.5 percent. The Dow added 135.85 points, or 1.3 percent, to 10,907.33 today.
“This market is starting to get cheap,” Jack Ablin, who helps oversee $55 billion as chief investment officer for Chicago-based Harris Private Bank, said in a telephone interview. “If we don’t see any chips falling, investors will be pleased.”
U.S. stocks fell last week as the Federal Reserve said risks to the economy have increased and concern grew that policy makers will fail to spur growth. Equities rebounded on Sept. 23, following a four-day rout that drove the S&P 500 down 7.1 percent, amid speculation European governments will act to prevent a financial crisis.
$1 Trillion
Last week’s rout erased $1 trillion from U.S. equities amid concern Greek insolvency is inevitable and Europe can’t contain the damage. The S&P 500 last week was trading at 12.4 times earnings in the past 12 months, 4.4 percent below its average valuation at the lowest point during the last nine bear markets, according to data compiled by Bloomberg.
ECB policy makers are likely to next week debate restarting their covered-bond purchases along with further measures to ease monetary conditions, a euro-region central bank official said. The reintroduction of 12-month loans to banks will also be discussed at the ECB’s Oct. 6 policy meeting, said the person, who spoke on condition of anonymity because the information is confidential. Interest-rate cuts are likely to be discussed, though they are not on the current agenda, the official said. A spokesman for the Frankfurt-based ECB declined to comment.
ECB Executive Board member Lorenzo Bini Smaghi said the ECB will do whatever is necessary to supply sufficient funds to European banks. “For liquidity, we are there” and “we are ready to do what is needed,” Bini Smaghi said in New York today. “‘‘We need to reassure the markets.’’
‘Cascading Default’
U.S. Treasury Secretary Timothy F. Geithner warned at the annual meeting of the International Monetary Fund in Washington that failure to combat the Greek-led turmoil threatened ‘‘cascading default, bank runs and catastrophic risk.’’ Billionaire investor George Soros said ‘‘something needs to be done’’ to safeguard Europe’s banks because Greece may be unable to avoid default.
‘‘When you look at Europe, the solutions are not going to be implemented any time soon,’’ Stephen Wood, who helps oversee about $163 billion as the New York-based chief market strategist for Russell Investments, said in a telephone interview. ‘‘That means the market volatility is going to continue.’’
Banks rallied following gains in European lenders. Bank of America added 1.9 percent to $6.43, while JPMorgan advanced 2.5 percent to $30.33.
Companies whose earnings are most-tied to economic growth rose. Boeing rallied 3.1 percent to $61.33. Hewlett-Packard added 2.1 percent to $22.78.
Stock Buyback
Warren Buffett’s Berkshire Hathaway will repurchase shares for as much as 110 percent of their book value, saying the stock is undervalued after falling 17 percent this year. The shares jumped in early trading. Buffett has shunned share buybacks, preferring to use the firm’s profits to buy companies securities. The growth of Berkshire’s cash hoard makes it harder to effectively invest the proceeds, Buffett told investors at the company’s annual meeting in April.
‘‘The underlying businesses of Berkshire are worth considerably more than this amount,” the Omaha, Nebraska-based company said today in a statement. “If we are correct in our opinion, repurchases will enhance the per-share intrinsic value of Berkshire shares, benefiting shareholders who retain their interest.”
Berkshire Class B shares added 5.9 percent to $70.26.
Apple Slumps
Apple Inc. fell 1.4 percent to $398.46, leading technology shares lower. Apple is cutting orders to vendors in the supply chain for its iPad tablet computer, a move that may result in slower sales for companies including Hon Hai Precision Industry Co., JPMorgan Chase & Co. said in a report.
Reduced orders from Apple to iPad suppliers could reflect both weakening demand in Europe due to economic conditions there as well as a strategy by Apple, the world’s biggest company by market value, to operate with reduced inventory, Wanli Wang, a Taipei-based industry analyst at RBS Asia Ltd., said today.
“It’s back to reality,” Wang said. “Now it seems even for Apple, due to the market situation, we need to be conservative.”
PulteGroup Inc. fell 1 percent to $4.01. Purchases of new houses in the U.S. declined in August to a six-month low as the biggest drop in prices in two years failed to lure buyers away from even less expensive distressed properties.
“The economic numbers say -- yes, it’s weak, it’s sluggish, but it still looks different than three years ago,” Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc., said in a telephone interview. His firm oversees $3.66 trillion as the world’s largest asset manager. “If you start to have evidence of the 2008 financial crisis, stocks are going to get cheaper. You had some quasi-positive comments out of Europe. Still, the situation in Europe is a near term risk.”
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