U.S. Stocks Rise to Highest Level Since May on Manufacturing
July 02, 2011, 1:48 PM EDTBy Rita Nazareth and Cecile Vannucci
July 1 (Bloomberg) -- U.S. stocks advanced, sending benchmark indexes to their highest levels since May and the biggest weekly gains in almost two years, amid an unexpected pickup in American manufacturing growth.
Home Depot Inc., 3M Co. and Intel Corp. rallied at least 1.4 percent, pacing gains among companies most-dependent on economic growth. Apollo Group Inc. jumped 6.4 percent as the operator of for-profit schools reported earnings that beat analysts’ estimates. KB Home climbed 4 percent as the homebuilder said it doesn’t plan to issue equity. Eastman Kodak Co. tumbled 14 percent after a ruling on patent claims against Apple Inc. and Research In Motion Ltd. was postponed.
The Standard & Poor’s 500 Index rose 1.4 percent to 1,339.67 at 4 p.m. in New York. The index rallied 5.6 percent this week, the most since July 2009. The Dow Jones Industrial Average gained 168.43 points, or 1.4 percent, to 12,582.77. About 6.3 billion shares changed hands on U.S. exchanges at 4:27 p.m., 12 percent less than the three-month average through yesterday ahead of the Independence Day holiday.
“Clearly, today is good news with the manufacturing data,” said Michael Vogelzang, chief investment officer at Boston Advisors LLC, which manages $1.9 billion. “This is just a recovery off of a very difficult period. People are putting the risk trade back on.”
The S&P 500 fell 1.8 percent in June, spurring the first quarterly loss in a year, on concern about Europe’s debt crisis and weaker-than-expected economic data. The index was still up 6.5 percent in 2011 as government stimulus measures and higher- than-estimated corporate earnings lifted investors’ confidence.
Manufacturing Expands
Stocks extended gains after a report showed that U.S. manufacturing unexpectedly expanded at a faster pace in June, a sign the industry is rebounding after shortages of parts and components from Japan slowed production. The Institute for Supply Management’s factory index rose to 55.3 last month from 53.5 in May. Economists estimated the index would drop to 52, according to the median forecast in a Bloomberg News survey. Figures greater than 50 signal expansion.
The ISM report was a positive surprise at a time when manufacturing growth is slowing from China to Europe, creating a dilemma for central bankers considering higher interest rates to combat inflation. China’s factory index fell to the lowest level since February 2009, while in the 17-nation euro area, a gauge slipped to an 18-month low. German manufacturing expanded at the weakest pace in 17 months, while Italy, Ireland, Spain and Greece contracted.
Greece’s Financing
Global stocks also rose. Greece may receive as much as 85 billion euros ($124 billion) in new financing, including a contribution from private investors, in a second bailout aimed at preventing default and ending the euro-region’s debt crisis, according to an Austrian Finance Ministry official.
“Greece is probably going to avert the default,” said Don Wordell, a fund manager for Atlanta-based RidgeWorth Capital Management, which oversees about $48 billion. “It’s a long process, but near-term, I believe they will resolve everything they need there.”
Stocks should rally during the second half of the year, sending the S&P 500 to 1,550 by the end of 2011, as corporate earnings grow and equities remain cheap, Deutsche Bank AG said.
Equities are less expensive, earnings will expand faster than the U.S. economy and there will be a pickup in growth for domestic cyclical industries such as financials, industrials and technology, Bankim “Binky” Chadha, Deutsche Bank’s New York- based chief U.S. equity strategist, said.
The Morgan Stanley Cyclical Index added 1.9 percent as 29 of its 30 stocks gained. The Dow Jones Transportation Average of 20 stocks, a proxy for economic growth, rose 2.3 percent.
Home Depot Rallies
Home Depot, the largest U.S. home-improvement retailer, added 1.4 percent to $36.73. 3M rose 1.9 percent to $96.67. Intel increased 1.7 percent to $22.53.
Apollo Group gained 6.4 percent to $46.46. The operator of for-profit schools forecast fiscal year 2012 revenue of as much as $4.25 billion, versus an average analyst estimate is for sales of $4.13 billion. The company also reaffirmed its projection for fiscal year 2011 revenue.
KB Home added 4 percent to $10.17 as investors became less concerned about capital dilution after the Los Angeles-based homebuilder provided additional details on capital structure.
Blackboard Inc. rallied 1.8 percent to $44.17. Providence Equity Partners Inc. agreed to buy the maker of online educational software for $1.64 billion. Providence will pay $45 a share in cash. The price represents a 21 percent premium over Blackboard’s closing price on April 18, the day before the company said it would evaluate strategic alternatives.
Eastman Kodak tumbled 14 percent to $3.07. The ruling faces at least a two-month delay after a trade panel ordered a judge to take a second look at the patent in dispute. Kodak is counting on the case to help extract $1 billion in licensing fees from Apple and RIM.
--With assistance from Victoria Stilwell in New York. Editors: Joanna Ossinger, Chris Nagi
To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Cecile Vannucci in New York at cvannucci1@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
