U.S. Stocks Rise, Erasing Earlier Loss, as European Banks Rally
U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a second day, as French banks eased concerns over their access to funding and investors watched for signs of progress in taming Europe’s debt crisis.
All 10 main industries in the S&P 500 advanced as gains were led by industrial, raw material and technology companies. The Dow Jones Transportation Average, a proxy for the U.S. economy, jumped 3.4 percent as airlines rose. Wells Fargo & Co. (WFC) and Fifth Third Bancorp (FITB) added more than 1 percent, following a rally in European lenders. Aetna Inc. (AET) jumped 5.4 percent as the health insurer said profit will probably beat its forecast.
The S&P 500 increased 0.9 percent to 1,172.87 at 4 p.m. in New York, after falling as much as 0.4 percent. The gauge has risen 1.6 percent in two days. The Dow Jones Industrial Average advanced 44.73 points, or 0.4 percent, to 11,105.85 today.
“Stocks are trading on the news of the day and the news was moderately favorable,” Michael Cuggino, who oversees $15 billion at Permanent Portfolio Funds in San Francisco, said in a telephone interview. “While the issues of liquidity and health of the European banking system and the long-term viability of the euro are still out there, today is a day where people are looking beyond that. We’ve had a big correction. Levels really haven’t gotten back to where they were.”
The S&P 500 fell as much as 18 percent from a three-year high on April 29 through Aug. 8 on growing concern over Europe’s debt crisis and an economic slowdown. Since then, the index has risen 4.8 percent.
Global stocks rose as BNP Paribas SA, France’s biggest bank, and Societe Generale SA surged after easing concerns over their access to funding. Societe Generale jumped after Chief Executive Officer Frederic Oudea said in an interview with Bloomberg Television in New York that the bank’s potential losses from European sovereign debt were “manageable” and that it could do without access to U.S. money-market funds.
“For our bank, the exposure to sovereign debt is low, absolutely manageable,” Oudea said. “We have plenty of buffers of liquidity and we are adjusting to the reduction in the money- market fund exposure.”
Stocks briefly trimmed gains after a report that German Finance Minister Wolfgang Schaeuble said Greece should not get any additional aid beyond what has already been agreed upon.
Greece should default on its bonds to stop a deterioration of the economy, said Mario Blejer, a former Bank of England adviser who took the reins of Argentina’s central bank after its 2001 default on $95 billion.
“Greece should default, and default big,” Blejer, who was an adviser to Bank of England Governor Mervyn King from 2003 to 2008, said in an interview in Buenos Aires. “You can’t jump over a chasm in two steps.”
The KBW Bank Index (BKX) added 1.2 percent. Wells Fargo gained 1.1 percent to $24.36. Fifth Third Bancorp rallied 4.2 percent to $10.35.
Aetna rose 5.4 percent to $40.53. Earnings excluding some items this year are now expected to be more than $4.60 to $4.70 a share, the Hartford, Connecticut-based insurer said in a corporate filing today. Demand for medical care continues to be lower than previous expectations, helping to contain costs, Aetna said.
Best Buy Co. sank 6.5 percent to $23.35. The largest consumer electronics retailer reported second-quarter profit that trailed analysts’ estimates and cut its full-year earnings forecast as sales of televisions and mobile phones declined.
The S&P 500 may drop below a one-year low reached last month because too few stocks have declined rapidly enough, according to MF Global Inc.
Using an indicator known as the 10-day stochastic, only 3.2 percent of S&P 500 stocks were “oversold” as of Sept. 9, Craig Peskin and John Kolovos, co-heads of technical analysis research at MF Global, wrote in a note yesterday. While the benchmark gauge for U.S. equities slid 15 percent from a three-year high on April 29 through last week, not enough individual stocks fell quickly and far enough to signal the overall market reached a low point.
“Indicators that measure the degree that equities are oversold are not signaling such a condition has been met,” New York-based Peskin and Kolovos wrote. “One aspect of this market is clear: there is a lot of overhead resistance for equities to get through. However, we do not see evidence that it can be overcome in the near future.”
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