U.S. stocks rose, giving the Standard & Poor’s 500 Index the biggest three-day gain since August, as the Europe took steps to control the region’s debt crisis.
Financial shares rose the most among 10 groups in the S&P 500. Bank of America Corp. (BAC) and JPMorgan Chase & Co. added at least 3 percent. Alcoa Inc. (AA), the largest U.S. aluminum producer, climbed 6.6 percent as commodities jumped. Target Corp. (TGT) rose 4.5 percent as sales beat estimates. Yahoo! Inc. tumbled 4.6 percent as people familiar with the matter said Microsoft Corp. (MSFT) isn’t close to making an offer for the company.
The S&P 500 rallied 0.9 percent to 1,154.26 at 11:36 a.m. New York time. The benchmark gauge advanced 4.1 percent over the last two days. The Dow Jones Industrial Average gained 71.52 points, or 0.7 percent, to 11,011.47 today.
“The market’s been in a trading range,” Wasif Latif, vice president of equity investments at USAA Investment Management Co. in San Antonio, which oversees about $50 billion, said in a telephone interview. “We’ll need clear economic data or policy movements out of Europe to break out that range. Europe was positive on indications that there may be something underway that would help recapitalize their banks.”
Excluding its dip to a 13-month closing low of 1,099.23 on Oct. 3, the S&P 500 has mostly traded between about 1,120 and 1,220 for the past two months. Of the 14 other trading range instances since 1990, more than 75 percent resulted in gains over the following one, three and six months, according to Birinyi Associates Inc., the Westport, Connecticut-based money management and research firm. The average trading range lasts about seven months, with the shortest one beginning in March 1998 and lasting three months, Birinyi data show.
Bear Market
Equities rose over the last two days as economic data topped estimates and investors speculated Europe will act to contain the region’s debt crisis. The S&P 500 was on the brink of a bear market during the worst of this week’s losses, falling more than 20 percent from an April peak. The index was down 16 percent since this year’s high in April through yesterday.
There are “intensified downside risks” to the economic outlook, ECB President Jean-Claude Trichet said at a press conference in Berlin today. He said the ECB will resume covered- bond purchases and reintroduce yearlong loans for banks as the sovereign debt crisis threatens to lock money markets. ECB policy makers left the benchmark interest rate at 1.5 percent, resisting calls to reverse its two rate increases this year.
Coordinated Action
The European Commission is proposing coordinated action to recapitalize banks, according to Commission President Jose Barroso. The Bank of England pledged to buy the most bonds since the depths of the last financial crisis as officials raced to stop the euro-region debt turmoil.
“Europe has been a significant cloud hanging over our heads,” Michael Mullaney, who helps manage $9.5 billion at Fiduciary Trust in Boston, said in a telephone interview. “If there’s something more long-term in nature as compared to a short-term fix, the market will look very favorably on that, especially the financial sector.”
In the U.S., claims for U.S. unemployment benefits rose less than forecast last week to a level that shows companies may be starting to slow the pace of dismissals, Labor Department figures showed today. Employers likely added 59,000 workers to payrolls in September and the unemployment rate held at 9.1 percent, according to the median forecast of economists before tomorrow’s jobs report.
Commodities Rally
The Morgan Stanley Cyclical Index of companies most-tied to the economy rose 1.7 percent today. The Dow Jones Transportation Average, a proxy for the economy, added 1.3 percent. A gauge of raw-material producers in the S&P 500 climbed 1.9 percent as commodities rallied. Alcoa gained 6.6 percent, the most in the Dow, to $9.99.
The KBW Bank Index of 24 stocks jumped 2.8 percent, reversing an earlier decline of 1.8 percent. Bank of America added 5.6 percent to $6.09 after falling as much as 2.1 percent. JPMorgan advanced 3 percent to $31.76.
Target jumped 4.5 percent to $51.98. Revenue at the second- largest U.S. discounter climbed 5.3 percent in September, surpassing the average projection for a 3.9 percent gain from analysts surveyed by Retail Metrics Inc.
Yahoo Slumps
Yahoo tumbled 4.6 percent to $15.19, after surging 10 percent yesterday on a Reuters report that Microsoft may make a bid. Microsoft isn’t anywhere close to making an offer and senior executives of the software maker aren’t involved in discussions, two people familiar with the matter said.
Wall Street strategists say the S&P 500, after falling within 1 percent of a bear market this week, will post the biggest fourth-quarter rally in 13 years even after they cut forecasts at a rate exceeded only during the credit crisis.
The benchmark index for U.S. stocks will climb 14 percent from yesterday to end 2011 at 1,300, according to the average estimate of 12 strategists surveyed by Bloomberg. The last time they were this bullish in October was 2008, when the group predicted a 27 percent gain and the index lost 18 percent.
Analysts from Oppenheimer & Co. to UBS AG and Barclays Plc say equities will rebound from a decline of 19 percent since April as policy makers prevent a default by Greece and profit in the S&P 500 climb to $95.85 a share in 2011. Europe’s worsening debt crisis and the U.S. government’s loss of its AAA credit rating led strategists to cut their S&P 500 forecast in the past two months from an average level of 1,401.
‘Way Too Bearish’
“Investors are way too bearish and are being swayed by macro variables,” Brian Belski, the New York-based chief investment strategist at Oppenheimer, wrote in an e-mail on Oct. 4. “Fundamentals drive stocks,” he said. “U.S. portfolios are not positioned for a positive third-quarter earnings season.”
Alcoa will mark the unofficial start of the earnings- reporting season when it reports results on Oct. 11. Third- quarter profits for S&P 500 companies are projected to have grown 13 percent, according to analyst forecast compiled by Bloomberg, down from an estimate of 17 percent when the index traded at a three-year high at the end of April.
No comments:
Post a Comment