U.S. stocks surged, with the Dow Jones Industrial Average rebounding above 10,000, as China’s commitment to investing in Europe allayed concern the debt crisis will worsen. Energy shares rallied as BP Plc temporarily stopped the flow of oil from a Gulf of Mexico leak.
Halliburton Co. and BP advanced at least 4.6 percent. Alcoa Inc., the largest U.S. aluminum producer, and Exxon Mobil Corp. rose more than 3.6 percent with higher metal and oil prices. Citigroup Inc. and Bank of America Corp. climbed more than 4 percent. Microsoft Corp. rallied 4 percent after its shares were upgraded on prospects for growing corporate demand.
The Standard & Poor’s 500 Index gained 3.3 percent to 1,103.06 as of 4 p.m. in New York. The Dow Jones Industrial Average climbed 284.54 points, or 2.9 percent, to 10,258.99. The gauges ended at their highs for the day after a runup in the last 30 minutes of the session. Eleven stocks advanced for each that fell on U.S. exchanges.
“It’s somewhat of a vote of confidence on behalf of the Chinese for the euro as a currency,” said Matthew Kaufler, a money manager at Federated Clover Investment Advisors in Rochester, New York, which manages $3 billion. “There’s been somewhat of an over-reaction on the downside,” he said of the market’s drop this month. “Our ability to absorb and counter what’s going on in other economies is pretty formidable.”
Erasing a Rally
The S&P 500 erased a rally in the final hour of trading yesterday as reports that China may review investments in Europe spurred concern the credit crisis will spread. China’s foreign exchange regulator dismissed the reports as “groundless.” The S&P 500 has fallen 7.1 percent in May, poised for its worst month since February 2009, on concern the economic rebound will slow as some European nations struggle to fund budget deficits.
China’s official Xinhua News Agency said the $300 billion sovereign wealth fund will maintain its investments in the euro region, citing China Investment Corp. President Gao Xiqing. The Financial Times reported yesterday that the administration met with central bankers because of concerns about potential losses in Europe, without saying where it got the information.
BP continued its latest efforts to plug a well in the Gulf of Mexico that has been leaking for more than a month. The U.S. Coast Guard said the company has succeeded in temporarily halting the flow.
Halliburton Co., the world’s second-largest oilfield contractor, rose 4.7 percent to $26.99. BP’s U.S. shares jumped 7 percent to $45.38, their biggest advance since November 2008. Transocean Ltd., the largest deepwater driller and owner of the rig, jumped 1.9 percent to $59.71.
Europe’s Debt Crisis
Europe’s sovereign debt crisis is likely to be contained within the region as the recovery trajectory in the U.S. and Asia protects them from contagion, Federal Reserve Bank of St. Louis President James Bullard said.
“The recovery in the U.S. is strong, Asia is very strong,” he told reporters in Stockholm today. “Many countries have restructured or even defaulted over the years. In most cases, or nearly all cases, that has not resulted in any kind if global implications. There is no particular reason why a sovereign debt crisis has to mean anything for the global economy.”
Alcoa advanced 5.1 percent to $11.82 as aluminum and nickel rallied in London. Copper rose to the highest price in almost two weeks on speculation that an improving economy in the U.S. will bolster demand. The dollar snapped a three-day gain against the euro, bolstering the investment appeal of commodities.
Financial and energy companies advanced the most of 10 industries in the S&P 500, gaining at least 4.2 percent. Energy companies have lost 13 percent, the most of 10 industries in the S&P 500, since the U.S. stock market fell from its 19-month high on April 23 on concern that European debt contagion would stall a global economic recovery. Financial companies have lost 11 percent.
Citigroup rose 4.2 percent to $4.02. Bank of America increased 4.6 percent to $16.18.
Crude oil rose for a second day in New York, advancing 4.3 percent to $74.55. Exxon gained 3.6 percent to $61.46. Anadarko Petroleum Corp. rose 4.2 percent to $55.57.
Barton Biggs, who runs New York-based hedge fund Traxis Partners LP and recommended buying U.S. stocks last year when benchmark indexes sank to the lowest levels since the 1990s, said U.S. equity markets may rally over the next few days.
“I think they’re going to stabilize in this general area, and then we’re going to have a significant move to the upside,” Biggs, whose flagship fund returned three times the industry average last year, said in a Bloomberg Television interview.
Tiffany & Co. jumped 7.5 percent to $46.86. The world’s second-largest luxury jewelry retailer increased its full-year profit forecast and reported that sales jumped 22 percent in the first quarter as wealthy consumers stepped up discretionary purchases as confidence improved.
A gauge of S&P 500 technology companies surged 3.5 percent, trimming their drop since April 30 to 7.5 percent. NetApp Inc. rose 18 percent to $38.17 for the biggest gain in the S&P 500. The storage-computer maker’s fourth-quarter adjusted earnings of 50 cents a share and first-quarter sales forecast topped the average estimates of analysts surveyed by Bloomberg. Xyratex Ltd., a provider of data storage and network technology, added 16 percent to $16.40.
“Business technology spending is starting to come back,” said Trey Hays, a research analyst with Hodges Capital Management Inc. in Dallas, which has $1 billion under management. Technology companies’ revenue “should surge in the next year,” he said. “Companies really can’t afford to put off updating their systems for too long because they lose their competitive advantage.”
Microsoft Corp. climbed 4 percent to $26 after FBR Capital Markets Corp. raised the shares to “outperform” from “market perform,” citing demand from corporations and a slump that erased 14 percent from the stock since May 17. The company slid 4.1 percent yesterday after Chief Executive Officer Steve Ballmer said that the effects of the European debt crisis will spread and Apple Inc. surpassed it as the world’s biggest technology company by market value.
VeriFone Systems Inc. rose 16 percent to $20.14 after the provider of electronic payment technology forecast 2010 earnings excluding some items that beat analysts’ estimates. Jabil Circuit Inc. advanced 8.3 percent to $13.98 after the St. Petersburg, Florida-based electronics manufacturer was boosted to “buy” from “hold” by Standard & Poor’s.
Monsanto Co. slumped 4.5 percent to $50.27 for the biggest decline in the S&P 500 after the world’s largest seed company cut its profit forecast after deciding to reduce the price of its Roundup herbicide because of an oversupplied market.
Stock-index futures maintained gains before the open of regular trading, even after government data showed the economy grew at a slower pace than previously calculated in the first quarter and jobless claims fell less than economists estimated.
Gross domestic product grew at an annual rate by 3 percent in the first quarter, less than the median estimate of economists surveyed by Bloomberg News and compared with an advance estimate of 3.2 percent issued last month, figures from the Commerce Department showed.