Bloomberg News

U.S. Stocks Advance as Greek Lawmakers Approve Austerity Plan

February 13, 2012

Feb. 13 (Bloomberg) -- U.S. stocks rose, after the first weekly loss for the Standard & Poor’s 500 Index in 2012, as Greece approved austerity plans to secure rescue funds.

Bank of America Corp., JPMorgan Chase & Co. and Caterpillar Inc. increased at least 1.7 percent to lead gains in the Dow Jones Industrial Average. Apple Inc. climbed 1.9 percent to trade above $500 for the first time. Chesapeake Energy Corp. added 2.4 percent after the natural-gas driller said it’s targeting as much as $12 billion in asset sales and joint ventures this year. Advanced Micro Devices Inc. surged 3.4 percent after being raised at Sanford C. Bernstein & Co.

The S&P 500 advanced 0.7 percent to 1,351.77 at 4 p.m. New York time. The Dow increased 72.81 points, or 0.6 percent, to 12,874.04. The Nasdaq Composite Index gained 1 percent to 2,931.39, the highest level since 2000. The Russell 2000 Index of small companies climbed 1.4 percent to 824.81.

“This has been a risk-on rally,” Mike Ryan, the New York- based chief investment strategist at UBS Wealth Management Americas, said in a telephone interview. “The fact that the Greek Parliament was able to push through the austerity measures was widely expected. This eliminates one of the stumbling blocks, but it doesn’t solve the Greek issue. Our view is that Greece is going to struggle to make payments going forward.”

Today’s rally put the S&P 500 less than 1 percent away from its peak nine months ago of 1,363.61, which was the highest level since June 2008. The index has climbed 7.5 percent in 2012, on expectations the global economy will withstand the impact of the euro area’s debt crisis.

From the Brink

Global stocks gained today as Germany and the European Commission welcomed Greek approval of the austerity steps demanded for a financial lifeline, suggesting euro finance chiefs will pull Greece back from the brink when they meet in two days.

“I’m confident that the other conditions, including for instance the identification of the concrete measures of 325 million euros ($430 million), will be completed by the next meeting” of finance ministers, EU Economic and Monetary Affairs Commissioner Olli Rehn said.

The Morgan Stanley Cyclical Index of companies most-tied to the economy gained 1.1 percent. Caterpillar, the largest construction and mining-equipment maker, rose 1.7 percent to $113.70. The KBW Bank Index added 0.8 percent as 19 of its 24 stocks advanced. Bank of America rose 2.2 percent to $8.25. JPMorgan advanced 1.8 percent to $38.30.

Apple Rallies

Apple added 1.9 percent to $502.60, after rallying for four straight weeks. On Jan. 24, the largest technology company reported quarterly profit that more than doubled. Its earnings are expanding so fast that even with the rally, the shares are trading at less than half their median valuation since 1990, data compiled by Bloomberg show. The gain since Apple reported results is almost four times as large as the advance in the Nasdaq 100 Index.

“It reminds us all of the amazing transformation of Apple over the past eight years,” Timothy Ghriskey, who oversees $2 billion as chief investment officer of Solaris Group LLC in Bedford Hills, New York, said in a telephone interview today. “We think the stock has higher to go, $600 is next,” he said.

Chesapeake added 2.4 percent to $22.66. The sales will help the company reduce debt and fund its drilling operations as it faces gas prices that hit a 10-year low in New York last month. Chairman and Chief Executive Officer Aubrey McClendon has vowed to cut long-term debt 25 percent by year end as the company reduces output.

AMD, Regeneron

Advanced Micro Devices surged 3.4 percent to $7.29. The maker of processors for personal computers was raised to “outperform” from “market perform” at Sanford C. Bernstein.

Regeneron Pharmaceuticals Inc. jumped 12 percent, the most in the Russell 1000 Index, to $114.65 as the company raised its sales forecast for the eye drug Eylea to exceed analyst estimates.

First Solar Inc. tumbled 5 percent, the biggest decline in the S&P 500, to $41.72 after being downgraded to “hold” from “buy” at Brigantine Advisors.

AmerisourceBergen Corp. sank 3.6 percent to $37.21. The drug distributor said Chief Financial Officer Michael DiCandilo left the company. The company was cut to “neutral” from “outperform” at Robert W. Baird & Co.

U.S. stocks may extend gains this year and mirror the performance of 1995, when the S&P 500 rallied 34 percent even after Mexico devalued its currency and Treasury yields dropped, Laszlo Birinyi said.

Investor Sentiment

Improved investor sentiment, central-bank actions and optimism that U.S. economic data will beat estimates, will sustain gains even after the best January for the S&P 500 since 1997, the president of Birinyi Associates Inc. in Westport, Connecticut, said in a Bloomberg Television interview today.

“We still think you should buy stocks,” the fund manager said in London. “It’s a continuation of the bull market and we’re encouraged by what we are seeing in Europe. I look at the markets, I find they are strong. There’s real buying going on. This is not short-covering or a temporary or transitory thing.”

The fund manager reiterated recommendations to buy General Motors Co., Research In Motion Ltd., Hermes International, People’s United Financial Inc. and BlackRock Inc.

--Editors: Jeff Sutherland, Michael P. 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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