Stocks Gain on Economic Data, Germany Vote

By Stephen Kirkland and Nikolaj Gammeltoft - Sep 30, 2011 4:08 AM GMT+0700

U.S. stocks rose, rebounding from an earlier loss, as lower-than-estimated claims for unemployment benefits and a vote by German lawmakers to expand a European bailout fund helped offset losses by technology and consumer companies. Greek bonds surged and the euro rose.

The Standard & Poor’s 500 Index rose 0.8 percent to 1,160.40 at 4 p.m. New York time, recovering from a 1 percent decline earlier. The Nasdaq Composite Index tumbled 0.4 percent as Apple Inc. declined 1.6 percent, falling for a fourth straight day. The Stoxx Europe 600 Index advanced 0.7 percent as banks rallied. The Greek two-year yield tumbled 453 basis points to 65.24 percent. Natural gas slid 1.4 percent as the U.S. reported a rise in supplies, while oil climbed.

“We got two excellent numbers,” Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., which oversees about $350 billion, said in a telephone interview. “It suggests that we are coming out of the soft patch and not spiraling into a double-dip recession,” he said. “Equities have to go up on this, but the challenge is that domestic economic fundamentals don’t matter as much as what’s happening in the euro zone right now.”

The S&P 500 rallied as much as 2.2 percent early in the trading day, after the U.S. economy grew at a 1.3 percent pace in the second quarter, faster than previously estimated, and applications for jobless benefits dropped by a more-than- forecast 37,000 to 391,000, the fewest since April, according to government data. German Chancellor Angela Merkel gained support from lawmakers to expand the European Financial Stability Facility’s firepower.

Consumer, Technology Stocks

Two industries that have beaten the S&P 500 in the third quarter, computer and software makers and companies dependent on discretionary consumer spending, fell the most today. The S&P 500 Information Technology Index lost 0.4 percent, bringing its two-day loss to 1.8 percent. Among its constituents, Apple, which climbed 16 percent in the quarter, has dropped 5.5 percent since Sept. 20, while Google Inc., up 4.2 percent for the quarter, slid 2.2 percent in the last two days.

Among consumer stocks, Tiffany & Co. (TIF) declined 6.9 percent, Wynn Resorts Ltd. fell 7.3 percent, and Netflix Inc. (NFLX) tumbled 11 percent. Netflix, the movie rental service that has rallied 194 percent since March 9, 2009, plunged 57 percent in the third quarter, the second-biggest retreat behind Alpha Natural Resources Inc., which decreased 59 percent.

‘Bastions of Outperformance’

“They’re shooting the last bastions of outperformance, because consumer stocks have actually done really well,” said Dan Veru, who oversees $3.3 billion as chief investment officer at Fort Lee, New Jersey-based Palisade Capital Management LLC. “They’re selling the winners that have exposure outside of the U.S."

Concern about slower economic growth in China weighed on American retailers with significant business in Asia, including Tiffany and Coach Inc. (COH), which lost 6.1 percent. Most global investors predict Chinese growth will slow to less than half the pace sustained since the government began dismantling Mao Zedong’s communist economy three decades ago, a Bloomberg poll indicated.

Fifty-nine percent of respondents said China’s gross domestic product, which rose 9.5 percent last quarter, will gain less than 5 percent annually by 2016. Twelve percent see such a slowdown within a year, and 47 percent said it will occur in two to five years, the quarterly Bloomberg Global Poll of investors, analysts and traders who are Bloomberg subscribers showed.

Quarterly Losses

Concern Greece will default is dragging global equities and commodities toward their biggest quarterly losses since 2008, during the worst recession since the 1930s. The MSCI All-Country World Index has lost about 16 percent since the end of June and the S&P GSCI Index of commodities has fallen about 9.3 percent. About three-quarters of investors surveyed by Bloomberg say the euro-area economy will fall into recession in the next year and more than half predict China’s growth will slow to less than 5 percent a year by 2016.

Investors are seeking safer assets even as the U.S. Federal Reserve last month pledged to keep rates near zero through mid-2013. Treasuries returned 5.87 percent this quarter as of Sept. 28, on pace for the biggest advance since the three-month period that ended in December 2008, according to Bank of America Corp. data. U.S. government debt has gained 8.2 percent in 2011, poised for the best yearly performance since 2008.

Bank Stocks

Financial stocks in the S&P 500 rallied 2.8 percent, the most among 10 industries. The KBW Bank Index jumped 3.3 percent. Bank of America Corp. climbed 3.1 percent, while JPMorgan Chase & Co. added 3 percent.

About two shares advanced for each that declined in the Stoxx 600. BNP Paribas (BNP) SA and Commerzbank AG helped lead banks higher, climbing more than 4.6 percent. Hennes & Mauritz AB advanced 6.8 percent as Europe’s second-largest clothing retailer reported earnings that beat analysts’ estimates.

The euro appreciated 0.4 percent to $1.3597. The 17-nation European currency rose 0.7 percent against the yen, while the Dollar Index, which tracks the U.S. currency against those of six trading partners, gained less than 0.1 percent.

The yield on the Greek 10-year bond fell for the third day, declining 37 basis points to 22.67 percent. That drove the difference in yield with benchmark German bunds down by 37 basis points to 2,066 basis points. The yield on Italy’s 10-year bond slipped seven basis points to 5.58 percent after the government sold 7.9 billion euros ($10.8 billion) of debt. The Portuguese 10-year yield dropped 42 basis points to 11.16 percent, falling for a second day.

German Vote

Germany’s lower house of parliament approved the expansion of the European Financial Stability Facility with 523 votes in favor and 85 against, freeing the way for European officials to focus on what next steps may be needed to stem the debt crisis.

‘‘Crucially, Merkel won the vote without relying on the opposition,” Geoffrey Yu, a currency strategist at UBS AG in London, wrote in a note to clients. “Fears had initially been voiced that dissent within the party would be high.”

Treasury 30-year bonds advanced for the first time in five days, sending the yield down two basis points, as the Federal Reserve prepared to announce its schedule of purchases of longer-maturing debt under its economic stimulus plan known as Operation Twist.

Oil, Natural Gas

The S&P GSCI index of 24 raw materials climbed 0.5, led by agriculture prices. Crude oil climbed as much as 3.4 percent before paring its gain to 1.1 percent. Natural gas futures declined 1.4 percent after a U.S. government report showed the biggest weekly inventory gain in more than two years. The Energy Department said gas stockpiles rose 111 billion cubic feet in the week ended Sept. 23 to 3.312 trillion cubic feet. Analyst estimates showed an expected gain of 103 billion.

The MSCI Emerging Market Index rose 0.4 percent. The index has dropped 22 percent for the quarter, the worst performance since 2008. Turkey’s ISE National 100 Index rose 1.3 percent, led by banks, on speculation the country’s debt may be upgraded. South Korea’s Kospi Index jumped 2.7 percent and benchmarks in Russia and Hungary climbed at least 1.2 percent.

The Shanghai Composite Index dropped 1.1 percent to a 14- month low on concern growth will slow, and the cost of insuring Chinese government debt rose 9.5 basis points to 182.4, the highest since March 2009, according to CMA.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net