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U.S. Stocks Gain for Week, Erasing Loss on JPMorgan Rally

U.S. stocks rose for the week, reversing losses on the final day, as a rally in JPMorgan Chase & Co. (JPM) and speculation China will boost stimulus measures tempered concern about earnings and the global economy.

JPMorgan jumped 6.4 percent for the week as Chief Executive Officer Jamie Dimon said the bank will probably post record earnings for 2012 even after reporting a $4.4 billion trading loss. Procter & Gamble Co. (PG) surged 6.2 percent for the second- biggest gain in the Dow Jones Industrial Average. Technology and raw-material shares in the Standard & Poor’s 500 Index slumped more than 1.2 percent amid concern a slowdown in the global economic recovery will damp demand.

The S&P 500 gained 0.2 percent to 1,356.78 for the week. The index jumped 1.7 percent on July 13 after falling for six consecutive days. The Dow added 4.62 points, or less than 0.1 percent, to 12,777.09 during the week.

“The market was oversold, JPMorgan news was not as bad, and we had some data that was a little bit better,” Sasha Kostadinov, portfolio manager at Cleveland, Ohio-based Shaker Investments LLC, which manages about $100 million, said in a telephone interview. “Any small change in the outlook can cause a big change, because there’s a lot of money to be put to work.”

Concern about earnings and the global economy weighed on stocks during the first four days of the week as investors braced for what is projected to be the first decline in S&P 500 profits in almost three years. The Citigroup Economic Surprise Index for the U.S., which measures how much reports are missing or beating the median estimates in Bloomberg surveys, fell to minus 64.9 on July 10. That signals recent economic data trailed forecasts by the most since August.

Central Banks

Investors looked to central banks during the week for evidence of further stimulus action to spur economic growth. U.S. stocks pared losses on July 11 as minutes from the Federal Reserve’s June meeting showed two participants believed more bond purchases are appropriate, while two others said they would be warranted in the absence of “satisfactory progress” in cutting unemployment or if downside risks increase.

The stock rally on the final day came as China’s growth slowed for a sixth quarter to the weakest pace since the global financial crisis, putting pressure on Premier Wen Jiabao to boost stimulus to secure a second-half economic rebound. The European Central Bank is set to ease monetary policy, including cutting its deposit rate further, if Europe’s debt crisis worsens, according to a Medley Global Advisors report Bloomberg News obtained.

‘Tremendous Liquidity’

“The volatility in stocks should continue,” Philip Tasho, chief investment officer at Alexandria, Virginia-based Tamro Capital Partners LLC, which manages about $1.7 billion, said in a July 12 phone interview. “There is tremendous liquidity across the board from every single central bank, trying to keep the ship afloat so it doesn’t tank.”

Financial shares had the biggest gain among 10 industries in the S&P 500 (SPX) for the week, climbing 1.6 percent. JPMorgan led gains in the group, rising 6.4 percent to $36.07.

By capping the size of the potential loss and revamping management of the businesses responsible, Dimon may help restore investor confidence. The bank’s market value dropped $39.7 billion since April 5, when Bloomberg News first reported that the company had amassed an illiquid book of credit derivatives at the London chief investment office.

Wells Fargo

Wells Fargo & Co. (WFC), the most valuable U.S. bank and largest home lender, climbed 2.6 percent to $33.91 after second-quarter earnings increased 17 percent on strength in mortgage banking and a drop in expenses.

“The degree to which our banking system has come back, particularly compared to the European banks, is dramatic,” Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. said on Bloomberg Television’s “In the Loop With Betty Liu” in an interview from the Allen & Co. media conference in Sun Valley, Idaho.

P&G rallied 6.2 percent to $65.09. Activist investor William Ackman bought a stake in the maker of Tide laundry detergent and Duracell batteries, increasing pressure on Chief Executive Officer Robert McDonald, who came under fire from analysts earlier this year when P&G lost market share to competitors.

Health-care stocks in the S&P 500 rose 1.3 percent as a group. Merck & Co. jumped 4.7 percent to $43.47, its highest value in four years. The company said it will stop testing an experimental drug meant to prevent bone fractures in women with osteoporosis because the therapy worked so well in a trial.

Technology Slumps

Disappointing earnings by Advanced Micro Devices Inc. (AMD) and Lexmark International Inc. (LXK) helped give technology stocks the worst performance as a group, falling 1.7 percent.

AMD, the second-biggest maker of processors for personal computers, lost 15 percent to $4.90 after reporting an unexpected drop in second-quarter sales, citing weakness in China and Europe. Printer-maker Lexmark plunged 25 percent, the most since 2005, to $20.36 after saying second-quarter sales and profit would be lower than it had expected due to poor demand in Europe and unfavorable exchange rates.

Intel Corp. (INTC), the largest semiconductor maker, declined 3.5 percent to $25.25, while Hewlett-Packard Co. (HPQ), the world’s largest personal-computer maker, fell 3 percent to $18.98.

Food Prices

The S&P 500 Materials Index (S5MATR) retreated 1.3 percent on speculation a slowing global economy could curb demand.

Dean Foods Co. (DF), the largest U.S. dairy processor, tumbled the most in 11 months, losing 13 percent to $14.52 after the U.S. Department of Agriculture reduced its production estimate for raw milk and raised its price forecast.

Alcoa Inc. (AA), the first company in the Dow to report second- quarter results this week, slipped 3.5 percent to $8.42.

Four out of the six S&P 500 companies that reported results this week beat analysts’ earnings estimates while one missed, data compiled by Bloomberg show. Overall, profits probably decreased 2.1 percent in the second quarter, the first drop in almost three years, according to a Bloomberg survey of analysts.

To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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