U.S. Stocks Jump as S&P 500 Gains 4.1% in Final Hour; Euro Rises
U.S. Stocks Jump as S&P 500 Gains 4.1% in Final Hour
Richard Drew/AP
Specialist Michael Gagliano, foreground right, calls out prices at his post on the floor of the New York Stock Exchange on Oct. 4, 2011.
Specialist Michael Gagliano, foreground right, calls out prices at his post on the floor of the New York Stock Exchange on Oct. 4, 2011. Photographer: Richard Drew/AP
Oct. 4 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks rallied, driving the Standard & Poor’s 500 Index up 4.1 percent in the final 50 minutes of trading, amid speculation European Union officials are examining how to recapitalize the region’s banks. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
Oct. 4 (Bloomberg) -- Nick Sargen, chief investment officer at Fort Washington Investment Advisors, talks about the performance of U.S. stocks, investor sentiment and Fort Washington's investment strategy. Sargen speaks with Adam Johnson and Lisa Murphy on Bloomberg Television's "Street Smart." Ben Willis, head of floor operations for Sunrise Securities Corp., and Bob Iaccino, founder and president of TraderOutlook.com, also speak. (Source: Bloomberg)
Oct. 4 (Bloomberg) -- Bill Gross, who runs the world's biggest bond fund at Pacific Investment Management Co., talks about global recession risk, fixed-income allocation in the current environment, developing-market equities and monetary policies of the Federal Reserve and European Central Bank. Gross speaks with Lisa Murphy and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Oct. 4 (Bloomberg) -- Alex Au, Hong Kong-based managing director of Richland Capital Management Ltd., talks about the outlook for Hong Kong and South Korea stocks. Au speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
Oct. 4 (Bloomberg) -- Trevor Greetham, director of asset allocation at Fidelity International, talks about his investment strategy. He speaks with Owen Thomas on Bloomberg Television's "On the Move." (Source: Bloomberg)
Oct. 4 (Bloomberg) -- Peter Garnry, an equity strategist at Saxo Bank A/S, talks about his strategy for energy, technology and telecommunications stocks. He speaks from Hellerup, Denmark, with Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)
Oct. 4 (Bloomberg) -- Michael McCarthy, chief market strategist at CMC Markets Asia Pacific Pty Ltd., talks about the valuation of equity markets and his investment strategy for Hong Kong banks and Macau casinos. He speaks from Sydney with Linzie Janis on Bloomberg Television's "First Look." (Source: Bloomberg)
Oct. 4 (Bloomberg) -- Russell Jones, global head of fixed-income strategy at Westpac Banking Corp., talks about Europe's sovereign debt crisis and investment strategy. He speaks with Linzie Janis on Bloomberg Television's "First Look." (Source: Bloomberg)
Oct. 4 (Bloomberg) -- Russ Koesterich, global chief investment strategist at the IShares unit of BlackRock Inc., talks about the outlook for equity markets. Koesterich speaks from San Francisco with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
S&P 500 Poised to Enter Bear Market
Seth Wenig/AP
Traders work on the floor at the New York Stock Exchange on Oct. 3, 2011.
Traders work on the floor at the New York Stock Exchange on Oct. 3, 2011. Photographer: Seth Wenig/AP
U.S. stocks rallied, driving the Standard & Poor’s 500 Index up 4.1 percent in the final 50 minutes, amid speculation European Union officials are examining how to recapitalize the region’s banks. Treasuries fell and the euro rallied.
The S&P 500 surged 2.3 percent to 1,123.95 at 4 p.m. New York time, sparing the benchmark measure of U.S. equities its first bear market, or 20 percent retreat from a peak, since 2009. Yields on Treasury 10-year notes climbed 6 basis points to 1.82 percent. The euro appreciated 1.1 percent to $1.3322. Futures on Germany’s DAX Index pared their loss to 1 percent from 4.9 percent.
Equities rebounded after the S&P 500 fell below 1,090.89, the closing level required to give the index a 20 percent slump from the three-year high reached on April 29. Stocks rose after the Financial Times quoted Olli Rehn, European commissioner for economic affairs, as saying there is an “increasingly shared view” that the region needs a coordinated approach to halt the sovereign debt crisis. After U.S. markets closed, Belgian Prime Minister Yves Leterme said a “bad bank” to hold Dexia SA (DEXB)’s troubled assets will be set up.
“The European crisis has been the market driver,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a phone interview. “If Europe comes out with something to kick the can down the road, it buys them more time. We learned in 2008 how important the financial system is and how a ripple effect can occur.”
Morgan Stanley (MS) Jumps
Banks, brokerages and insurers led the rally as the S&P 500 Financials Index jumped 6.5 percent between 3:18 p.m. and 4 p.m. New York time. Morgan Stanley surged 17 percent and Bank of America Corp. (BAC) soared 10 percent during the same period.
Stocks were due for a rally after the S&P 500 fell 5.3 percent in the previous two sessions, said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management. His firm oversees $550 billion. The S&P 500 is trading for 12.3 times earnings in the last 12 months, close to the cheapest valuation since March 2009.
“The market doesn’t go on a straight line either up or down,” he said in a telephone interview. “There’s no sign of recession in the U.S., and yet the market is pricing for one. So you’re going to have days when things pop up and you’re going to have bear market rallies.”
200-Day Average
About 7 percent of S&P 500 stocks began the day trading above their average price in the last 200 days, according to data compiled by Bloomberg. That matched the proportion following the Aug. 8 rout for the lowest level in 30 months. The full index began today 14.1 percent below its 200-day moving average, the biggest gap since April 30, 2009.
U.S. stocks followed European shares lower earlier as some officials signaled bondholders may have to take bigger losses on Greek debt than previously negotiated. The possible breakup of Belgian bank Dexia and Deutsche Bank AG (DBK)’s abandonment of its profit forecast added to signs that contagion from the debt crisis is spreading. Goldman Sachs Group Inc. cut its global growth forecasts and predicted recessions in Germany and France.
Treasuries extended losses after the Financial Times report. Yields on 30-year bonds rose 9 basis points to 2.81 percent.
“People are looking for optimism anywhere they can get it,” said Christopher Bury, co-head of fixed-income rates at Jefferies & Co., one of the 22 primary dealers that trade with the Federal Reserve. “You have these random stories and the market reacts, but how many times have we been down this road where these are just words?”
To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; 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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