U.S. Stocks Rally on Optimism Greece Will Avoid Debt Default

U.S. stocks rallied, giving the Standard & Poor’s 500 Index its biggest four-day gain since September, amid increased optimism Greece will avoid default and after American business activity improved.

Industrial, energy and technology companies led gains in the S&P 500, rising at least 1.4 percent, as investors bought stocks tied to economic growth. Caterpillar Inc. (CAT), United Technologies Corp. (UTX) and 3M Co. (MMM) climbed at least 1.8 percent to help the Dow Jones Industrial Average erase its quarterly loss. Hewlett-Packard Co. (HPQ) added 2.4 percent after a report that private-equity firms want the computer maker to split up.

The S&P 500 advanced 1 percent to 1,320.64 at 4 p.m. in New York, rising 4.1 percent in four days. The Dow average gained 152.92 points, or 1.3 percent, to 12,414.34 today.

“It’s not surprising that the market is rebounding,” said Mike Ryan, the New York-based chief investment strategist at UBS Wealth Management Americas, which oversees $761 billion. “The Greece situation will work out, concerns about a soft patch were overdone and earnings will continue to be strong. The market will do better in the second half.”

The Dow fell 1.2 percent in June amid concern about Europe’s debt crisis and weaker-than-expected economic data. Over the last century, the 30-stock gauge had an average gain of 1.4 percent in July, according to data compiled by Bespoke Investment Group. The index was up 7.2 percent in 2011 amid better-than-estimated earnings and government stimulus measures.

Greece’s Bailout

Global stocks rose today on expectations that Greece will avoid defaulting on its debt. Greek Prime Minister George Papandreou’s drive to stave off the euro area’s first sovereign default stayed on track after lawmakers backed a bill to authorize an austerity plan required to keep rescue aid flowing.

Germany’s biggest banks agreed on a proposal to “roll over” Greek debt holdings, Finance Minister Wolfgang Schaeuble said. That means reinvesting money from maturing bonds into new Greek bonds. German banks have agreed to roll over at least the Greek bonds they’re holding that mature through 2014, which amount to about 2 billion euros ($2.9 billion), Schaeuble said.

“The big driver behind the rally has been Greece,” said Peter Jankovskis, who helps manage about $2.7 billion at Oakbrook Investments in Lisle, Illinois. “The implementation of an austerity plan is certainly an important step. That should be less of an overhang for the market in July.”

Business Barometer

Stocks extended gains after the Institute for Supply Management-Chicago Inc. said its business barometer climbed to 61.1 this month from 56.6 in May. Economists called for the index to drop to 54, according to the median forecast in a Bloomberg News survey. Figures greater than 50 signal expansion. Consumer confidence rose to the highest level in 10 weeks, the Bloomberg Consumer Comfort Index showed.

The Morgan Stanley Cyclical Index gained 1.5 percent as 29 of its 30 stocks rallied. The Dow Jones Transportation Average of 20 stocks, which is considered a proxy for economic growth, advanced 1.3 percent.

Caterpillar, the world’s largest maker of construction equipment, added 3 percent to $106.46. United Technologies rose 2.4 percent to $88.51. 3M increased 1.9 percent to $94.85.

Hewlett-Packard climbed 2.4 percent to $36.40. The world’s largest maker of personal computers is being urged by private equity firms including Blackstone Group to break up and sell some units to them, Reuters reported, citing people familiar with the matter.

EBay Rallies

EBay Inc. (EBAY) climbed 4.6 percent to $32.27. The world’s largest online marketplace was raised to “buy” from “neutral” by Bank of America Corp, which cited the Federal Reserve Board’s vote yesterday to approve a less severe cap on debit-card transaction fees than previously proposed.

First Solar Inc. (FSLR) jumped 2.2 percent to $132.27. The world’s largest maker of thin-film solar modules won $4.5 billion in conditional loan guarantees from the U.S. Energy Department for three projects it’s developing in California.

The S&P 500 today surpassed its average price of the last 50 days of about 1,317, which shows potential for further gains, according to analysts who study charts to make forecasts.

“It just confirms the strength of the rally that we’ve seen here,” said Richard Ross, global technical strategist at Auerbach Grayson & Co. in New York. “If it doesn’t provide any resistance at all and the market continues to power through that level, that would be a bullish signal for the market.”

Key for Rally

The benchmark gauge has made a high on the last day of a week only once since peaking in April, and tomorrow may determine whether the market can build on its current rally, Strategas Research Partners said.

The S&P 500 had its weekly intraday high on a Friday only once over the past eight weeks, as the gauge sank 7 percent, according to data from Strategas and Bloomberg. That marked a shift in trend from the first four months of the year, when the S&P 500 rallied 8.4 percent and Fridays accounted for 10 of the 17 weekly highs.

“We need to see this trend re-emerge,” Christopher Verrone, head of technical analysis at the New York-based firm, wrote in a note yesterday. “The bulls have had trouble sustaining strength late in the week.”

The Institute for Supply Management is scheduled to release tomorrow the factory index, which may show a decrease to 51.8 this month from 53.5 in May, according to the median forecast from economists surveyed by Bloomberg. Worse-than-expected economic reports and concern about the debt crisis in Europe spurred losses for the S&P in six consecutive weeks from April 29 to June 10, the longest streak since July 2008. The index has since climbed 2.9 percent through yesterday.

“If this is going to be more than an ‘oversold bounce,’ it will be important for this trend to improve over coming weeks,” Verrone said.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Cecile Vannucci in New York at cvannucci1@bloomberg.net

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

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