The Standard & Poor’s 500 Index (SPX) advanced, halting a three-day decline, as bank shares rallied after Warren Buffett said American lenders are in “fine shape” and investors weighed elections in France and Greece.
Banks had the biggest gain among 24 groups in the S&P 500 as Buffett said the nation’s lenders have “liquidity coming out of their ears” and are in better shape than European rivals. Walt Disney Co. (DIS:US) rose 2.1 percent as the movie “Marvel’s The Avengers” earned a record $200.3 million in its opening weekend. American International Group Inc. retreated 3 percent as the U.S. Treasury Department sold $5 billion (AIG:US) of shares.
The S&P 500 advanced less than 0.1 percent to 1,369.58 at 4 p.m. New York time, following a 2.6 percent drop in three days. The measure fell as much as 0.4 percent earlier today. The Dow Jones Industrial Average slid 29.74 points, or 0.2 percent, to 13,008.53. About 6.3 billion shares changed hands on U.S. exchanges today, or 5.1 percent below the three-month average.
“U.S. banks are in pretty good shape,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management. His firm oversees $160 billion. “In addition, the perception is that European governments are not going to do anything stupid. We’re not talking about a wholesale change in fiscal policy. There was a big reaction to well-telegraphed news. It’s good to see a bounce from the lows.”
Stocks swung between gains and losses after Francois Hollande’s election as France’s president and as Greek voters flocked to anti-bailout parties. Hollande, who defeated Nicolas Sarkozy, pledged to push for less austerity. European stocks rebounded as German Chancellor Angela Merkel said she will receive Hollande with “open arms” as they work together to tackle the debt crisis.
Barton Biggs, founder of the Traxis Partners LP hedge fund, said he isn’t adding to bearish equity bets in Europe. Biggs said on Bloomberg Television’s “In the Loop” with Betty Liu today that he continues to short German and French benchmark equity indexes, while being 70 percent net long on U.S. stocks. The region’s shared currency is “50/50 on surviving,” he said.
Voters are “signaling to their politicians that they want more stimulus and less austerity,” Biggs said today in a telephone interview. “If they don’t get it, they’re going to vote in new leaders. That’s a big deal, and I happen to think stimulus combined with reforms is the way to go.”
The S&P 500 dropped the most since December last week as a report showed employers added fewer jobs than forecast. The gauge was still up 8.9 percent in 2012 on better-than-estimated earnings. About 70 percent of S&P 500 companies that reported results since the start of the earnings season have topped projections, according to data compiled by Bloomberg.
A measure of banks in the S&P 500 rose 1.2 percent. All 24 stocks in the KBW Bank Index (BKX) advanced as the gauge rose 1 percent. Bank of America Corp. (BAC:US) added 2.8 percent, the most in the Dow average, to $7.96. Wells Fargo & Co. gained 1.4 percent to $33.50.
“I would put European banks and American banks in two very different categories,” Buffett, Berkshire’s chief executive officer, said May 5 at the firm’s annual meeting in Omaha, Nebraska. “The American banking system is in fine shape. The European system was gasping for air a few months back” until getting assistance from the European Central Bank, he said.
Wall Street firms including JPMorgan Chase & Co. (JPM:US) and Bank of America, emboldened after raising capital levels ahead of stricter international guidelines, are contesting efforts by U.S. policy makers to limit trading and risk. European banks have struggled amid the continent’s sovereign debt crisis and turned to the ECB for 1 trillion euros ($1.3 trillion) in three- year loans at a 1 percent interest rate.
Walt Disney rose 2.1 percent to $43.82. “The Avengers” surpassed the previous-best opening weekend of $169.2 million in the U.S. and Canada, set last year by “Harry Potter and the Deathly Hallows: Part 2,” researcher Hollywood.com Box-Office said yesterday in a statement.
Tyson Foods Inc. climbed 3.3 percent to $18.63. The largest U.S. meat processor reported second-quarter earnings that beat analysts’ estimates and said it will boost stock buybacks by 35 million shares.
Vertex Pharmaceuticals Inc. (VRTX:US) surged 55 percent to $58.12. The maker of the first medicine to target the underlying cause of cystic fibrosis said a combination of the drug and a second therapy improved some patients’ ability to breathe in a mid- stage study.
AIG (AIG:US) lost 3 percent to $31.84. The Treasury is selling 163.9 million shares at $30.50 each, compared with the May 4 closing price of $32.83, the department said yesterday. The transaction reduces the Treasury’s stake in the insurer to 63 percent from 70 percent.
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