Stocks Halt Slump on M&A as Oil Drops; Greek, Spain Bonds Slump
June 13, 2011, 4:28 PM EDTBy Nikolaj Gammeltoft and Claudia Carpenter
June 13 (Bloomberg) -- U.S. stocks rose, with the Standard & Poor’s 500 Index rebounding from an almost three-month low, as a pickup in takeovers overshadowed concern the economic rebound is slowing. Oil retreated and Treasuries declined.
The S&P 500 climbed 0.1 percent to 1,271.83 at 4 p.m. in New York and the Stoxx Europe 600 Index closed up 0.2 percent. Crude slid 2 percent to $97.30 a barrel. Greek, Portuguese and Spanish bonds fell and the cost of European government debt- default insurance increased a sixth day as leaders remained at odds over the role of investors in a second rescue package for Greece, which was cut by S&P to the world’s lowest debt rating. Ten-year Treasury yields added two basis points to 2.99 percent.
Equities stabilized today after a six-week slide, the longest slump in almost three years, left the S&P 500 trading at its cheapest compared with forecast earnings since last summer. Transatlantic Holdings Inc., the reinsurer formerly owned by American International Group Inc., surged after agreeing to merge with Switzerland’s Allied World Assurance Company Holdings AG. Timberland Co. rallied as VF Corp. said it will buy the maker of outdoor clothing and footwear.
“M&A always helps the market; we haven’t had too many merger Mondays lately,” said Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co. “It’s time to take a look at stocks again for people who’ve been on the sidelines. Valuations are looking attractive and we still believe that there’s a good chance company earnings will continue to surprise on the upside.”
Tumble From April
The S&P 500 tumbled 6.8 percent from an almost three-year high at the end of April through last week as data on employment, manufacturing and housing trailed economists’ estimates. The slide left the index trading at 12.8 times estimated earnings for 2011 and 12.1 times forecasts for the next 12 months, according to data compiled by Bloomberg.
Financial firms and telephone companies led gains in six of 10 industry groups in the S&P 500 today. Exxon Mobil Corp. and Chevron Corp. paced losses in all 41 energy companies in the S&P 500, limiting the index’s advance, as oil prices slid.
Bank of America Corp. and JPMorgan Chase & Co. rose more than 1.5 percent to help lead gains in the Dow Jones Industrial Average.
Timberland rallied 44 percent, the most since at least 1987, after VF agreed to buy the company for about $1.8 billion. VF, the world’s largest apparel maker, surged 10 percent. Transatlantic Holdings climbed 9.5 percent after agreeing to the $3.2 billion deal that will create a reinsurer with operations in 18 countries.
About $1.1 trillion in mergers and acquisitions has been announced globally so far in 2011, 23 percent more than during the same period last year, data compiled by Bloomberg show.
European Shares
The Stoxx 600’s gain followed a six-week stretch of declines, its longest slump since July 2008. Eurasian Natural Resources Corp. rallied 4.7 after the Sunday Times said Glencore International Plc may make a 12 billion-pound ($20 billion) bid for the mining company. Markets in Switzerland, Norway, Luxembourg, Austria, Denmark, Iceland and Greece are closed for a holiday.
The cost to protect the debt of Greece, Ireland and Portugal surged to records. The Markit iTraxx SovX WE index of credit-default swaps jumped 6.5 basis points to 217.5, approaching the record 221.75 basis points set Jan. 10. Contracts on Greece, Ireland’s and Portugal’s reached records.
The yield on Portuguese 10-year bonds advanced as much as 29 basis points to 10.72 percent, the highest since the euro started in 1999. The similar-maturity Spanish security’s yield gained for the sixth day. Greek 10-year yields increased 25 basis points to 16.97 percent, the highest in three weeks.
Greece had its credit rating cut by three levels to CCC by S&P, which said the nation is “increasingly likely to restructure its debt.” The downgrade comes as European Central Bank President Jean-Claude Trichet and German Finance Minister Wolfgang Schaeuble remain at odds over investors’ role in the second Greek rescue in 14 months.
Greek Negotiations
Luxembourg Prime Minister Jean-Claude Juncker said a bailout for Greece must include “voluntary” investor participation. He is trying to bridge the gap between Schaeuble, who has called for Greek bondholders to extend the maturities of their debt by seven years, and Trichet, who says imposing losses on creditors would be akin to a default. The ECB president is scheduled to speak today in London.
European Competition Commissioner Joaquin Almunia said Spain won’t be able to raise financing if it fails to reach a budget-deficit target.
“Unless the markets gets a whiff of something being sorted, there’s more pressure to come on peripherals,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London. “The market is not comfortable with uncertainty. The general risk world is looking towards Greece.”
Silver, nickel and natural gas lost more than 2.4 percent to lead declines in 19 of 24 commodities tracked by the S&P GSCI Index, which slumped 1 percent.
Oil extended losses after Greece’s downgrade, trading at the lowest level in three weeks. Crude also fell as China’s National Development and Reform Commission said the country’s daily consumption of fuels dropped to 650,000 metric tons in May, down 4 percent from April. China is the world’s second- largest oil consumer after the U.S.
--With assistance from Abigail Moses, Keith Jenkins, Andrew Rummer, Daniel Tilles and Michael Patterson in London. Editors: Michael P. Regan, Jeff Sutherland
To contact the reporters on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
