Bloomberg News

U.S. Stocks Snap Six-Week Decline on Greece Optimism, Economy

June 17, 2011

June 17 (Bloomberg) -- U.S. stocks snapped a six-week decline as European leaders moved closer to a compromise on a financial rescue for Greece and an index of leading American economic indicators advanced more than forecast.

Wells Fargo & Co. and Fifth Third Bancorp rose at least 1.9 percent, following gains in European banks. The Bloomberg U.S. Airlines Index of 11 stocks gained 2.7 percent as oil fell to the lowest level in four months. Research In Motion Ltd. tumbled 21 percent, sparking a slump in technology shares, after forecasting revenue and profit that missed analysts’ estimates.

The Standard & Poor’s 500 Index advanced 0.3 percent to 1,271.50 at 4 p.m. in New York. The benchmark gauge has added less than 0.1 percent since June 10, preventing the longest weekly slump since March 2001. The Dow Jones Industrial Average increased 42.84 points, or 0.4 percent, to 12,004.36 today.

“This may be an excellent entry point for stock investors,” said James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $340 billion. “There are expectations that an agreement on Greece’s bailout may be reached. If we can get rid of the fears over Europe, it all comes down to -- do we believe the economy will reaccelerate in the second half of this year? If that’s the case, stocks have room to rally.”

The S&P 500 has retreated 6.8 percent from this year’s high at the end of April amid weaker-than-expected economic data and concern about Europe’s debt crisis. The decline threatened the 2011 gain for the S&P 500 this week and left the index up 1.1 percent this year.

Global Stocks

Global stocks rose today as Chancellor Angela Merkel retreated from German demands that bondholders be forced to shoulder a “substantial” share of a Greek rescue, saying she’ll work with the European Central Bank to avoid disrupting markets.

“We would like to have a participation of private creditors on a voluntary basis,” Merkel told reporters in Berlin today at a joint press conference with French President Nicolas Sarkozy. This “should be worked out jointly with the ECB and there shouldn’t be any dispute with the ECB on this.”

Merkel and Sarkozy signaled a reconciliation between German calls for investors to help bail out Greece with warnings from the ECB and France that a compulsory move risked triggering the euro area’s first sovereign default. Attention now shifts to Athens, where Prime Minister George Papandreou overhauled his Cabinet to try and secure passage of austerity measures needed for a bailout.

Leading Indicators

Stocks extended gains after data showed that the index of U.S. leading indicators rebounded in May after declining for the first time in almost a year, a sign economic growth may pick up by the end of 2011. The Conference Board’s gauge of the outlook for the next three to six months rose 0.8 percent after a revised 0.4 percent decline in April, the New York-based group said today. Economists forecast a 0.3 percent gain, according to the median estimate in a Bloomberg News survey.

Benchmark gauges rose even after the Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 71.8 from 74.3 in May. Economists forecast a reading of 74, according to the median estimate in a Bloomberg News survey.

“The economy is not as good as hoped, not as bad as feared,” said Stephen Wood, the New York-based chief market strategist for Russell Investments, which manages about $161 billion. “It’s most likely a soft patch and the economy is going to do better toward the end of the year. We expect a volatile ‘risk-on, risk-off’ market.”

Banks Rally

A gauge of banks in the S&P 500 rose 1.3 percent, the biggest gain within 24 industries. Wells Fargo added 2 percent to $27.33. Fifth Third advanced 2.2 percent to $12.55.

Airlines rallied amid expectations for lower costs as crude oil fell. U.S. oil supplies rose to the highest level in 31 years for the month of May as refineries processed less crude amid a decline in gasoline demand, according to the American Petroleum Institute.

Ten of 11 stocks in the Bloomberg U.S. Airlines Index gained. United Continental Holdings Inc. added 5.8 percent to $24.04. AMR Corp. gained 1.3 percent to $5.69.

Energy shares had the second-biggest decline in the S&P 500 within 10 industries, falling 0.3 percent as a group. Halliburton Co. dropped 0.8 percent to $46.02. Occidental Petroleum Corp. retreated 0.6 percent to $102.19.

Gauges of computer companies and chipmakers had the two biggest declines in the S&P 500 within 24 industries.

RIM Tumbles

RIM tumbled 21 percent to $27.75, the lowest since September 2006. RIM is losing market share in the U.S. to Apple Inc.’s iPhone and handsets running Google Inc.’s Android software, in part because it hasn’t introduced a major new BlackBerry model since August. Cheaper Google phones are also making inroads in Latin America, Asia and Europe, threatening the popularity of less expensive BlackBerry models.

Marvell Technology Group Ltd., the maker of chips for personal computers and mobile phones, slumped 4.2 percent to $13.21. Jabil Circuit Inc., a contract electronics manufacturer, dropped 1.7 percent to $18.29.

Credit-rating companies declined after the Wall Street Journal reported that the U.S. Securities and Exchange Commission is considering laying civil fraud charges against some of the firms for their actions on mortgage-backed bonds, which helped trigger the financial crisis.

Moody’s Corp. slipped 5 percent to $36.35 for the biggest loss in the S&P 500. McGraw-Hill Cos. retreated 3.6 percent to $39.61.

--Editors: Joanna Ossinger, Michael Regan

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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