U.S. Stock Futures Drop as Moody’s Reviews Global Banks

U.S. stocks advanced, sending the Standard & Poor’s 500 Index near the highest level in about three years, amid better-than-estimated economic reports and optimism that Greece will receive a second bailout.

Financial (S5FINL) shares rebounded from earlier losses as Bank of America Corp. (BAC) rose 4 percent. Microsoft (MSFT) Corp. climbed 4.1 percent on a report that S&P is likely to increase its weighting in the S&P 500. General Motors Co. (GM) jumped 9 percent after the automaker posted the biggest annual profit in its 103-year- history. NetApp (NTAP) Inc. increased 7.2 percent as the maker of data- storage products reported revenue that beat analysts’ estimates.

The S&P 500 rose 1.1 percent to 1,358.04 at 4 p.m. New York time. The benchmark gauge for American equities is 0.4 percent away from its peak nine months ago of 1,363.61, which was the highest level since June 2008. The Dow (INDU) Jones Industrial Average increased 123.13 points, or 1 percent, to 12,904.08.

“I don’t see what the case is for the market collapsing,” Brian Barish, who helps oversee about $7 billion as Denver-based president of Cambiar Investors LLC., said in a phone interview. “The U.S. economy is doing pretty well. Taking the possibility of a euro-Lehman type of event off the table, that has a big effect on sentiment.”

Stocks rose as Americans filed the fewest claims for jobless benefits since 2008 and builders broke ground on more homes than forecast. Manufacturing (OUTFGAF) in the Philadelphia region expanded in February at the fastest pace in four months as orders and sales picked up.

New Bonds

Benchmark gauges extended gains and banks rallied as three euro-area officials said the European Central Bank is swapping its Greek bonds for new ones to ensure it isn’t forced to take losses in a debt restructuring. European governments are considering cutting interest rates on emergency loans to Greece and using contributions from the ECB to plug a new financing gap in the second bailout program for Athens, two people familiar with the discussions said.

“We’re more important to Europe than Europe is to us,” Liz Ann Sonders, the New York-based chief investment strategist at Charles Schwab Corp., said in a telephone interview. Her firm has $1.68 trillion in client assets. “U.S. economic numbers have been much better than expected. I’m pretty optimistic, but I don’t think we’re going to boom. The debt overhang puts a lid on how fast the U.S. economy can grow.”

Financial shares underperformed the S&P 500 earlier today as Moody’s Investors Service is reviewing 17 banks and securities firms with global capital markets operations.

Banks Rebound

The KBW Bank Index (BKX) rose 2.2 percent as all of its 24 companies gained. The gauge fell as much as 0.6 percent earlier today. Bank of America added 4 percent to $8.09. Morgan Stanley rose 1.2 percent to $19.19, after tumbling as much as 4 percent.

Twenty-nine out of 30 companies in the Dow gained today. Microsoft jumped 4.1 percent, the most in the Dow, to $31.29. The shares rose to the highest price since April 2010. S&P is likely to increase Microsoft’s weighting in the S&P 500 by about 12 percent later this year because Chairman Bill Gates’s stock sales are increasing the amount of shares available for public trading, Adam Holt, an analyst at Morgan Stanley (MS), wrote in a report today.

GM surged 9 percent to $27.17. North America earnings before interest and taxes more than tripled for the year to $7.19 billion. The automaker’s Europe business, including the Opel brand, lost $747 million for the year.

New Customers

NetApp rallied 7.2 percent, the most in the S&P 500, to $42.74. The maker of data-storage products said revenue in the third quarter was $1.57 billion, above the average analyst estimate of $1.56 billion. The company said it won a record number of new customers and significantly increased the amount of units shipped.

CVR Energy Inc. (CVI) surged 5.8 percent to $29.20. Carl Icahn offered to pay $30 a share in cash and give stockholders the right to collect an additional $7 a share if any other bidder tries to buy the oil-refining company.

Even with the stock’s 24 percent gain since Icahn disclosed an investment in January, a buyer could offer about a 40 percent premium and still purchase CVR at the lowest valuation relative to earnings of any takeover greater than $500 million in the U.S. oil refining and marketing industry, according to data compiled by Bloomberg. Icahn, CVR’s biggest investor, urged the company this week to put itself up for sale.

Amazon.com Inc. (AMZN) sank 2.5 percent to $179.93. The world’s largest Web retailer fell after Morgan Stanley downgraded the stock, citing competition from Apple Inc. and the decline of traditional media such as CDs and video games.

Folgers Coffee

J.M. Smucker Co. (SJM) slumped 8.4 percent to $71.60. The maker of Folgers coffee forecast 2012 earnings excluding some items of $4.65 a share at most. On average, the analysts surveyed by Bloomberg estimated profit of $5.

A gauge of homebuilders in S&P indexes dropped 0.8 percent. PulteGroup Inc., the largest U.S. homebuilder by revenue, declined 1.8 percent to $8.87. The shares retreated after David Goldberg, an analyst at UBS AG, cut the rating to “neutral” from “buy,” citing valuation concern.

Price swings by the S&P 500 have narrowed to a nine-month low following the measure’s biggest rally to start a year since 1997. The distance between its intraday low and high has averaged 0.86 percent since Feb. 2, a 10-day level last seen on May 5, according to data compiled by Bloomberg.

Volatility (SPX) has diminished after the S&P 500 advanced 6.8 percent in 2012. When the 10-day average swing was this low in May, the index had just peaked on April 29 and went on to slump 19 percent through October. The current narrowing signals the rally may be running out of steam, said Katie Stockton, chief market technician at Greenwich, Connecticut-based MKM Partners.

“It reflects a loss of momentum, which had been very strong until last week,” Stockton wrote in an e-mail.

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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