May 31 (Bloomberg) -- U.S. stocks advanced, trimming the biggest monthly drop since August for the Standard & Poor’s 500 Index, amid speculation about additional aid for Greece.
Apple Inc. rallied 3.1 percent after saying Chief Executive Officer Steve Jobs will introduce a cloud-computing product and new software next week. Intel Corp. gained 1.4 percent as the world’s largest chipmaker seeks to challenge tablet makers with a new type of thinner laptop called an “ultrabook.” General Dynamics Corp. climbed 4.2 percent after receiving a $744 million contract from the U.S. Navy.
The S&P 500 rose 1.1 percent to 1,345.20 at 4 p.m. in New York, for its fourth consecutive day of gains. The index declined 1.4 percent in May. The Dow Jones Industrial Average added 128.21 points, or 1 percent, to 12,569.79 today. Equities advanced even as data on consumer confidence and business activity trailed economists’ estimates.
“There’s a roadmap to getting Greece through its crisis,” said Madelynn Matlock, who helps oversee $14.8 billion at Huntington Asset Advisors in Cincinnati. “That’s why investors are reacting positively. In the U.S., we got some softening in economic data. That doesn’t tell me we’re going to have a QE3. It tells me that monetary policy is going to be easy for a while. That should provide room for stocks to move higher.”
The benchmark gauge fell from an almost three-year high on April 29 on concern about Europe’s debt crisis. Still, the gauge rose 7 percent this year amid higher-than-forecast corporate profits and government stimulus measures. The Federal Reserve plans to complete its second round of asset purchases, known as quantitative easing, or QE2, in June, while holding interest rates “exceptionally low” for an “extended period.”
Last 100 Years
Benchmark indexes had a four-week drop, the longest losing streak in more than 15 months. Over the last 100 years, the Dow has returned an average 0.4 percent gain in June, according to data compiled by Bespoke Investment Group. The gauge has fallen 0.6 percent and 1.2 percent in June, respectively, over the last 50 years and 20 years, the data showed.
Global stocks rallied as Jean-Claude Juncker, head of the group of euro-area finance ministers, said European Union leaders will decide on additional aid for Greece by the end of June and have ruled out a “total restructuring” of its debt.
Stocks gained even after the Institute for Supply Management-Chicago Inc. said its business barometer fell to 56.6 this month from 67.6 in April. Figures greater than 50 signal expansion. Economists forecast the gauge would fall to 62, according to the median estimate in a Bloomberg News survey.
Consumer Confidence Slumps
Confidence among U.S. consumers unexpectedly declined in May to a six-month low as Americans’ outlook for business conditions and the labor market soured. Another report showed that home prices in 20 U.S. cities dropped in March to the lowest level since 2003, showing housing remains mired in a slump almost two years into the economic recovery.
“Economic data has been patchy,” Mike Ryan, the New York-based chief investment strategist for Wealth Management Americas at UBS Financial Services Inc., wrote in a note today. “The apparently much more mixed picture represents mostly a transitory headwind. It remains our view that equity markets will outperform over the balance of the year given a still solid earnings outlook, undemanding valuations and continued accommodative policy conditions.”
The longest stretch of declines on a weekly basis for the S&P 500 in a year has left valuations at the lowest level ever compared with speculative-grade debt.
Earnings from the past 12 months for companies in the benchmark gauge for U.S. equities reached 6.64 percent of share prices this month, according to data compiled by Bloomberg. That compared with the 6.61 percent average yield on junk bonds, data from Barclays Plc show. It was the first time the spread, a way of comparing debt and equity values, has shown stocks with a higher yield, according to Bloomberg data going back to 1987.
Technology shares led the gains in the S&P 500 among 10 industries, rising 1.6 percent.
Apple rallied 3.1 percent to $347.83. CEO Jobs will make a public appearance June 6 to introduce a cloud-computing product and a new version of the operating system that powers its iPad and iPhone touch devices. Jobs, in the midst of his third medical leave since 2004 as he battles a rare form of cancer, will deliver a keynote address at Apple’s Worldwide Developers Conference, the Cupertino, California-based company said in a statement today.
Challenging Other Tablets
Intel gained 1.4 percent to $22.51. The world’s largest chipmaker is seeking to help the personal-computer industry fend off a challenge from Apple’s iPad and other tablets. Intel’s new machines will be less than an inch thick, have days of battery life on standby, start up in just seconds and retail for less than $1,000, according to Intel Executive Vice President Sean Maloney. Intel aims to convert 40 percent of consumer laptops to the new category by the end of 2012.
General Dynamics advanced 4.2 percent to $74.22. The second-largest U.S. shipbuilder received a $744 million contract from the U.S. Navy to construct two mobile landing platform ships. The contract comes with an option for the construction of a third ship, which would increase its size to $1.3 billion.
BlackRock Inc.’s Chief Executive Officer Laurence D. Fink said he’s more bullish on U.S. equities than bonds because companies are benefiting from the weak dollar and have surplus cash to invest for growth.
“We love equities, we love dividend stocks,” Fink said in a Bloomberg Television interview today in Hong Kong. “You own Treasuries because you’re worried about the world and the future, but if you believe the world is a good place to invest for the long cycle, you have to be in equities.”
Fink, one of the co-founders of BlackRock in 1988, built what is now the world’s biggest asset manager through acquisitions including the purchase in December 2009 of Barclays Global Investors. He said in a March 3 interview that he’s a “big buyer” of the U.S. dollar, doesn’t see a “bear market” in bonds and would buy Treasuries if yields rise above 4 percent.
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