U.S. stocks rose, with benchmark indexes turning positive for the year, as a late-day technology- share rally helped the market overcome an early slump spurred by economic reports casting doubts on the strength of the recovery.
Apple Inc. rose 1.7 percent to a record price to pace gains in computer companies on optimism over the new version of its iPhone. First Solar Inc., the world’s largest maker of thin-film solar power modules, rallied 3.9 percent to lead industrial companies higher on Credit Suisse Group AG’s advice to buy the shares. Benchmark indexes recovered as the euro climbed to near its highest level of the day against the dollar, signaling growing confidence the European debt crisis is contained.
The Standard & Poor’s 500 Index increased 0.1 percent to 1,116.04 as of 4 p.m. in New York and remained above its 200-day average for a third day. The Dow Jones Industrial Average gained 24.71 points, or 0.2 percent, to 10,434.17, erasing a drop of as much as 90 points. Both gauges did not turn higher until the final minutes of trading.
“The market over the past two days -- given the economic data we’ve gotten -- it’s actually held up,” said Walter Todd, who helps manage about $800 million at Greenwood Capital in Greenwood, South Carolina. “It’s been able to stay above that 200-day level and that’s good.”
Trading Near Average
The S&P 500 has closed above its average over the past 200 days since June 15 after sinking below it for almost a month. The 2.4 percent rally on June 15 sent the index about 6.5 points above the level, a move considered significant by investors who base trading decisions on chart patterns.
Earlier declines sent the S&P 500 down as much as 0.8 percent after the Federal Reserve Bank of Philadelphia’s general economic index slumped to 8 in June from 21.4 the previous month, below the average economist forecast of 20 in a Bloomberg News survey. Futures of the major indexes had retreated from their highs in pre-market trading after a government report showed an increase in first-time unemployment claims.
“The entire tape is being driven by momentum and day traders,” said Jason Weisberg, director of institutional trading at Seaport Securities in New York. “Long-term players will not return until Europe is fully contained and bottomed.”
The S&P 500 tumbled 14 percent from a 19-month high on April 23 through June 7 as concern grew that Europe’s debt crisis will derail the economic recovery and BP Plc’s leaking well triggered the worst oil spill in U.S. history.
S&P 500’s Rebound
The index has since rebounded 6.2 percent as concern over European budget deficits eased and investors speculated growth in China and the U.S. will bolster the global recovery. Spain sold 3.5 billion euros ($4.3 billion) of 10-year and 30-year bonds today, the maximum set for the auction, as a decline in prices enticed buyers and mollified concern that the nation will struggle to finance looming debt maturities.
The Chicago Board Options Exchange Volatility Index, a benchmark gauge of U.S. stock options known as the VIX, slipped 3.4 percent to 25.05, a six-week low, today. The measure, which tracks prices paid for S&P 500 options, usually falls as stocks climb on lessened demand for options to protect against losses. U.S. June options expire tomorrow.
The upcoming expiration, coupled with the S&P’s quarterly index rebalancing set for the same day, “is resulting in massive technical noise today,” said Peter Boockvar, equity strategist at Miller Tabak & Co. in New York.
Apple rallied 1.7 percent to $271.87, the sixth straight day of gains. Active iPhone subscribers may more than triple to 100 million by the end of 2011, AppleInsider website reported, citing Morgan Stanley analyst Katy Huberty.
“Momentum appears beyond our bullish expectations,” wrote Shaw Wu, an analyst with Kaufman Brothers LP. “Based on our analysis of demand trends and supply chain data, we are raising our already above-consensus estimates, which frankly we find remarkable as we are arguably still in a recession.” Wu reiterated his “buy” rating and raised the price target 6.3 percent to $340.
First Solar climbed 3.9 percent to $123.45. Credit Suisse Group AG raised its recommendation on the stock to “outperform” from “neutral.”
M&T Bank Corp. rose the most in the S&P 500, jumping 9 percent to $89.34 on takeover speculation. Banco Santander SA said it has taken no decision on any possible decision to combine its business with the M&T. Matias Inciarte, the Spanish lender’s third vice-chairman, said “it’s been said” that there have been conversations between the two banks.
Consumer-discretionary stocks fell the most of 10 industry groups in the S&P 500 as initial jobless claims rose by 12,000 to 472,000 last week, figures from the Labor Department showed. The median estimate in a Bloomberg survey of economists was for a decline to 450,000. The consumer price index declined 0.2 percent in May, the Labor Department said, matching the median estimate of economists surveyed by Bloomberg.
Bed Bath & Beyond Inc. decreased the most in the S&P 500, erasing 7.6 percent to $41.70. Home Depot Inc., the world’s largest home improvement retailer, retreated 0.7 percent to $31.91 for the second-biggest drop in the Dow.
Jim Chanos, the hedge-fund manager who made money betting against Enron Corp., said on Bloomberg Television that he is short-selling shares of large oil companies because investment in drilling and exploration is eating up their cash flows.
BP declined 0.4 percent to $31.71 as Chief Executive Officer Tony Hayward said at a hearing of a U.S. House Energy Committee panel that he didn’t take part in decisions on drilling the well in the Gulf of Mexico that blew out, triggering the worst U.S. oil spill.
U.S. stocks are likely to add to the rebound since June 7, said Ralph Acampora, whose career as a technical analyst began in 1966.
The magnitude of the market’s decline in May, as the S&P 500 fell 8.2 percent for its biggest drop in 15 months, and the effect on investor sentiment make possible a rally that might extend the advance to as much as 12 percent, Acampora said in an interview yesterday. Technical analysts view pessimism as a sign that stocks may rise, because it indicates investors have capacity to buy shares after avoiding the market.
“The damage in price and the damage in psychology has set us up on a very short-term basis for a good recovery,” Acampora said. “The low that we made a couple of days ago I think is a good one, and I think we could set the stage for a 10-plus percent recovery.”