By Rita Nazareth - Nov 11, 2011 4:45 AM GMT+0700
U.S. stocks advanced, rebounding from yesterday’s tumble, as jobless claims declined while a retreat in Italian bond yields and the selection of a new Greek premier tempered concern about Europe’s debt crisis.
Energy shares had the biggest gain in the Standard & Poor’s 500 Index among 10 groups, rising 1.8 percent as oil rallied. Cisco Systems Inc. (CSCO), the largest maker of networking equipment, climbed 5.7 percent as profit and sales beat estimates. Merck & Co. jumped 3.5 percent after raising its dividend. Apple Inc. (AAPL) slumped 2.6 percent amid concern that the company may ship fewer units of its iPad tablet this year due to supply constraints.
The S&P 500 added 0.9 percent to 1,239.70 as of 4 p.m. New York time. The benchmark gauge for American equities lost 3.7 percent yesterday as one out of 500 stocks in the index gained, the fewest since June 2010. The Dow Jones Industrial Average advanced 112.92 points, or 1 percent, to 11,893.86.
“The economic data will come back into focus as we shift our vision away from the political fear in the euro zone,” Mike Ryan, the New York-based chief investment strategist at UBS Wealth Management Americas, said in a telephone interview. His firm oversees $715 billion. “As we remove uncertainties, the market starts focusing less on the risk scenarios,” he said. “A decline in claims is very positive.”
Stocks tumbled yesterday as Italian bond yields surged to a record after Prime Minister Silvio Berlusconi said he won’t resign until austerity measures are passed. Concern about Greece’s leadership also contributed to the selloff as rival parties squabbled over the name of the next premier.
Unity Government
Today, the appointment of Lucas Papademos, the former vice president of the European Central Bank, to lead a unity government in Greece sent stocks higher. Italian government bonds rose after the ECB was said to purchase the securities and the nation sold the maximum amount of one-year bills on offer at an auction. A statement from S&P affirming France’s rating and saying that a “technical error” was to blame for a earlier message suggesting a downgrade also lifted equities.
Speculation that Europe’s crisis would not derail the economy sent the Morgan Stanley Cyclical Index up 0.9 percent today. 3M Co. (MMM) gained 1.7 percent to $80.32. Hewlett-Packard Co. rose 1.6 percent to $26.76. The Dow Jones Transportation Average increased 1.3 percent even as a gauge of airlines sank on higher oil prices. The KBW Bank Index added 0.8 percent.
“I’m not willing to step up and proclaim all clear, but we’re moving in the right direction,” Don Wordell, a fund manager for Atlanta-based RidgeWorth Capital Management, which oversees about $47 billion, said in a telephone interview. “The most positive news of the day was the jobless claims data showing that the U.S. economy is slowly getting better.”
Jobless Claims
The report showed the number of Americans filing applications for unemployment benefits fell to the lowest level in seven months, a sign the recovery may be encouraging companies to limit cuts in headcount. Federal Reserve Chairman Ben S. Bernanke said the central bank is concentrating “intently” on reducing unemployment and projects inflation to stay under control for the “foreseeable future.”
Energy shares rallied as oil rose to the highest level in more than three months on optimism that a recovering economy will boost fuel demand. Exxon Mobil Corp. (XOM) increased 1.7 percent to $78.70. Chevron Corp. (CVX) added 1.2 percent to $105.50.
Cisco climbed 5.7 percent, the most in the Dow, to $18.61. Chief Executive Officer John Chambers is eliminating jobs, scaling back operating expenses and revamping a management structure that slowed decision making. The company also is refocusing on its main products: switches and routers, which ferry data across networks.
Merck Raises Dividend
Merck advanced 3.5 percent, the biggest gain since August, to $34.97. The second-biggest U.S. drugmaker raised its dividend for the first time since 2004 and emphasized drug discovery in a meeting with analysts today.
Viacom Inc. (VIA/B) rallied 8.2 percent, the biggest gain in the S&P 500, to $43.61. The owner of the MTV network and Paramount Pictures reported fourth-quarter profit and revenue that rose more than analysts estimated and boosted its stock-repurchase program by $6 billion.
Apple lost 2.6 percent to $385.22, the lowest since Oct. 7. Analysts at Cleveland Research Co. reduced their predictions for shipments of the iPad to 12 million from 14 million in the quarter ending in December, saying “visibility from supply chain has softened” in recent weeks.
Green Mountain Coffee Roasters Inc. (GMCR) tumbled 39 percent, the most in the Russell 1000 Index, to $40.89. The maker of the Keurig single-cup brewing system reported fourth-quarter sales that trailed analysts’ estimates amid changes in wholesale customers’ buying habits.
200-Day Average
The rally that drove the S&P 500 up 20 percent since October fizzled after it failed to remain above its 200-day average for a second time. Yesterday, the index slid below its average in the past 200 days. The measure closed above the 200- day level on two straight days at the end of October, following the biggest monthly rally since 1991, and again on Nov. 8.
Equities surged worldwide starting in the first week of October on optimism European leaders would solve the crisis, driving the S&P 500 out of a price range where it had been stuck since the start of August. Price indicators such as the stock index’s average price are captivating investors, said Brian Barish of Cambiar Investors LLC.
“The S&P 500 failed to break the 200-day and Italy’s debt yields really blew out, so you have a panicky reaction in the marketplace,” Barish, who helps oversee about $8 billion as Denver-based president of Cambiar, said in a telephone interview yesterday. In early October, “the market was poised to rally on almost anything, and it did,” he said. The 200-day average is “where it ran out of gas.”
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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