By Rita Nazareth - May 11, 2012 4:02 AM GMT+0700
The Standard & Poor’s 500 Index (SPX) rose, rebounding from the lowest level in two months, as Greece attempted to form a new government and a decline in American jobless claims helped allay concern of a labor market setback.
Wells Fargo & Co. (WFC) and U.S. Bancorp rose at least 1.4 percent to pace gains in banks. News Corp., the media company run by Rupert Murdoch, and Monster Beverage Corp. (MNST), an energy- drink maker, rallied more than 4.8 percent as earnings beat estimates. Cisco Systems Inc. (CSCO) sank 10 percent as its forecasts disappointed investors. S&P 500 futures fell 0.5 percent at 5:01 p.m. as JPMorgan Chase & Co. (JPM) slumped 3.8 percent after saying one of its divisions had “significant” mark-to-market losses.
May 10 (Bloomberg) -- David Gerstenhaber, president and founder of Argonaut Management LP, talks about the equity market and investment strategy. He speaks with Betty Liu, Dominic Chu and Sheila Dharmarajan on Bloomberg Television's "In the Loop." (Source: Bloomberg)
The S&P 500 rose 0.3 percent to 1,357.99 at 4 p.m. New York time. The Dow Jones Industrial Average added 19.98 points, or 0.2 percent, to 12,855.04. The Nasdaq-100 Index (NDX) dropped 0.2 percent to 2,616.24, led by Cisco, which comprises 3.1 percent of the measure. About 6.6 billion shares changed hands on U.S. exchanges, almost in line with the three-month average.
“They are still talking in Greece and that brings some relief,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. “The crash off the cliff in terms of an extreme political alliance didn’t play out today. In the U.S., jobless claims didn’t surprise negatively. That was seen as a positive.”
U.S. equities joined a global rally and the euro halted an eight-day slump, its longest since 2008. Greece’s Evangelos Venizelos, the socialist Pasok leader and former finance minister, said his goal is to form a government that keeps the nation in the euro area. Investors also watched economic data as initial claims for jobless benefits fell to a one-month low.
Political Turmoil
Greek political turmoil extended into a fourth day after the inconclusive May 6 elections, with coalition talks deadlocked, raising the possibility that another election will have to be held as early as next month. The standoff has reignited European concerns over Greece’s ability to hold to terms of its two bailouts negotiated since May 2010.
“There’s an attempt to patch things together in Greece,” said Michael Strauss, who helps oversee about $27 billion of assets as the chief investment strategist at Commonfund in Wilton, Connecticut. “They will try to stay in the euro, though I’m not sure they can. Greece is a failed chemistry experiment even if they put something together.”
Banks had the biggest gain in the S&P 500 among 24 groups, adding 1.5 percent, as a measure of European lenders rallied. The KBW Bank Index (BKX) rose 1 percent as 22 of its 24 stocks advanced. Wells Fargo climbed 1.7 percent to $33.19. US Bancorp (USB) increased 1.4 percent to $31.91.
Bernanke on Banks
Federal Reserve Chairman Ben S. Bernanke said the U.S. banking system is stronger and more resilient while still facing challenges on credit quality and liquidity.
“Banks still have more to do to restore their health and adapt to the post-crisis regulatory and economic environment,” Bernanke said today in a speech at the Chicago Fed’s annual conference on banks. As the economic expansion proceeds, “a financially stronger banking system will be well positioned to expand its lending.”
Some corporate reports also helped drive stocks higher today. Per-share profits have topped projections at about 70 percent of S&P 500 companies that reported results since the start of the earnings season.
News Corp. (NWSA) climbed 4.9 percent to $20.32 after revenue growth at its cable networks and film studio helped it exceed analysts’ third-quarter profit estimates. The owner of Fox Broadcasting and Fox News derives at least 70 percent of its annual profit from television, and is working to expand in markets outside the U.S. with investments in pay-TV operators.
International Markets
Monster Beverage surged 9 percent to $71.17. Net sales rose 28 percent to $454.6 million as Chief Executive Officer Rodney Sacks expands into international markets, including Hong Kong and Macau last month.
Big Lots Inc. (BIG) gained 1.4 percent to $36.73. The discount retailer was raised to the equivalent of buy at Barclays Plc. The share-price estimate is $43.
Technology shares had the biggest decline in the S&P 500 among 10 industries, falling 0.8 percent, as 47 out of its 71 stocks retreated. The group comprises 20 percent of the S&P 500.
Cisco, the largest maker of computer-networking equipment, tumbled 10 percent to $16.81. Chief Executive Officer John Chambers said orders from big companies fell in the third quarter, and it’s taking longer to sign large deals with corporate customers. Cisco is also concerned about demand from Europe, India and government agencies, he said.
Rival Juniper Networks Inc. (JNPR) plunged 4.9 percent to $18.07. Salesforce.com Inc. (CRM), the biggest provider of online customer- management software, sank 9.1 percent to $135.44.
Higher Offer
Avon Products Inc. (AVP) dropped 3.3 percent to $20.89. Coty Inc. raised its offer to acquire Avon to about $10.7 billion, or $24.75 a share, and said Warren Buffett’s Berkshire Hathaway Inc. will provide financing as the perfume-maker seeks to draw Avon into negotiations. Avon traded below Coty’s offer, suggesting investors aren’t convinced the bid will succeed.
MEMC Electronic Materials Inc. sank 25 percent to $2.45, the lowest level since November 2001. (WFR) The second-largest U.S. polysilicon maker posted a first-quarter loss 20 times greater than a year earlier as solar sales fell by more than one-third.
Priceline.com Inc. (PCLN) dropped 5.3 percent to $681.11. The biggest U.S. online travel agency by market value forecast second-quarter earnings that trailed analysts’ estimates.
Pessimism about stocks rose to the highest level since October and optimism plunged to an eight-month low, according to a survey from the American Association of Individual Investors.
Bulls vs Bears
The proportion of investors who anticipate a decline in the next six months jumped 13.6 percentage points to 42.1 percent in the past week, according to the Chicago-based company, which has tracked individual investors’ projections since 1987. Bullish sentiment, or expectations that stocks will rise over the next six months, slumped 10 percentage points to 25.4 percent, the data showed.
It’s the fourth time in the past five weeks that bearish sentiment has topped its average of 30 percent, according to the survey. While many technical analysts usually see a surge in pessimism as a contrarian sign that will give way to a rally, AAII Vice President Charles Rotblut said it may not be high enough compared to historical levels.
“A bearish sentiment reading above 50 percent would be a stronger contrarian signal,” he wrote.
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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