Bloomberg News

S&P 500 Caps Best June Since 1999 on European Agreement

June 29, 2012

Wall Street

The floor of the New York Stock Exchange on June 28, 2012. Photographer: Richard Drew/AP Photo

The Standard & Poor’s 500 Index (SPX) capped the biggest June rally since 1999 after European leaders reached an agreement that alleviated concern banks will fail.

All 10 groups in the S&P 500 rose as industrial, technology and commodity shares had the biggest gains. Caterpillar Inc. (CAT:US), Apple Inc. and Bank of America Corp. (BAC:US) climbed at least 2.6 percent to pace rallies among the biggest companies. Exxon Mobil (XOM:US) Corp. jumped 3 percent as oil surged 9.4 percent, the most in more than three years as commodities surged. KB Home climbed 13 percent after the homebuilder reported a narrower loss.

The S&P 500 jumped 2.5 percent, the most in 2012, to 1,362.16 at 4 p.m. New York time. It rallied 4 percent this month for the biggest advance since February. The Dow Jones Industrial Average added 277.83 points, or 2.2 percent, to 12,880.09. It had the biggest monthly advance since October, rising 3.9 percent. The Nasdaq Composite Index and the Russell 2000 Index rose at least 2.9 percent today, the most in 2012. Volume for exchange-listed stocks in the U.S. was 7.9 billion shares, or 16 percent above the three-month average.

“We are getting a pretty nice relief rally,” said Christopher Orndorff, who helps oversee $450 billion as senior portfolio manager at Western Asset Management Co. in Pasadena, California. He spoke in a telephone interview. Europe’s deal “appears to be a step in the right direction in terms of solving the problem from a longer term perspective.”

Stocks gained, joining a global rally, as European leaders agreed to relax conditions on emergency loans for Spanish banks and possible help for Italy as an outflanked German Chancellor Angela Merkel gave in on expanded steps to stem the debt crisis.

Second Quarter

Today’s gain trimmed the second-quarter decline in the S&P 500 to 3.3 percent. The index still capped the worst quarter since September. More than $1 trillion was erased from U.S. equity values from the end of March through yesterday on concern about a worsening of Europe’s debt crisis and a global slowdown.

The Dow slumped 2.5 percent this quarter. Over the last century, July has been the best month for the 30-stock gauge, with an average return of 1.4 percent, according to data compiled by Bespoke Investment Group. It has rallied an average 0.8 percent in July over the last 50 years, the data showed.

In the U.S., business activity unexpectedly expanded in June at a faster pace. Other reports showed that consumer spending stalled in May, while household sentiment dropped in June to the lowest level of the year.

The Morgan Stanley Cyclical Index (CYC) of companies most-tied to the economy jumped 2.7 percent. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against S&P 500 losses, tumbled 13 percent to 17.08, extending its monthly plunge to 29 percent.

Apple, Exxon

Caterpillar, the world’s largest maker of construction equipment, gained 2.8 percent to $84.91. Apple, the most- valuable company, added 2.6 percent to $584. Bank of America increased 5.7 percent to $8.18. Exxon Mobil jumped 3 percent to $85.57. Alcoa Inc. (AA:US), the first company in the Dow to report quarterly results (AA:US) on July 9, added 2.8 percent to $8.75.

A measure of homebuilders in S&P indexes jumped 4.8 percent, to the highest level since 2008. KB Home (KBH:US) climbed 13 percent to $9.80 as the company sold more houses at higher prices during its fiscal second quarter ended May 31.

Constellation Brands Inc. (STZ:US) surged 24 percent to $27.06 after agreeing to buy the other half of its Crown Imports joint venture with Grupo Modelo SAB (GMODELOC) for about $1.85 billion, becoming the sole U.S. importer of top-selling Corona beer.

ValueClick Inc. (VCLK:US) soared 16 percent to $16.39. The Internet- advertising company said second-quarter revenue (VCLK:US) was probably at the higher end of its forecast range.

Truck Engine

Navistar International Corp. (NAV:US) climbed 11 percent to $28.37. The company, which is trying to get its 13-liter truck engine certified for sale in the U.S., rallied after a report that it may start offering Cummins Inc. engines in addition to its own MaxxForce product.

Nike Inc. (NKE:US) tumbled 9.4 percent, the most since 2008, to $87.78. Fourth-quarter profit at the world’s largest sporting- goods company unexpectedly declined for the first time since 2009 as marketing costs increased and sales growth slowed.

Car companies had the biggest loss in the S&P 500 among 24 industries, dropping 1 percent. Ford Motor Co. (F:US) slumped 5 percent to $9.59. The automaker said its pretax operating profit will be “substantially lower” in the second quarter in part because overseas losses tripled from the year’s first three months.

Research In Motion Ltd. (RIM) plunged 19 percent to $7.39, the lowest since 2003, after posting a loss (RIMM:US) and delaying the next BlackBerry operating system, increasing pressure on the company to find an acquirer. The Waterloo, Ontario-based smartphone maker also said it would cut 5,000 jobs.

34% Decline

Initial public offerings fell 34 percent this quarter as Facebook Inc.’s disappointing debut and worsening economic conditions rattled investors, pressuring companies to lure buyers with cheaper valuations.

IPOs globally raised $41.3 billion, the worst second quarter since 2009, Bloomberg data show. That compared with $62.7 billion a year ago. At least 50 companies shelved sales as Europe’s debt crisis spread, growth prospects slowed in China and Facebook’s stock sank 18 percent from its May 17 IPO (FB:US) price.

“With the economy and with Europe, there are more questions than answers in investors’ minds, and they want some clarity before they put their money down,” said Matt McCormick, who helps oversee $6.2 billion at Cincinnati-based Bahl & Gaynor Inc. “After what happened with Facebook, people want IPOs to go off without a hitch.”

Monthlong Drought

Facebook flopped after pricing its IPO at more than 100 times earnings and kicked off a monthlong drought in the U.S. Global IPOs that followed, including Felda Global Ventures Holdings Bhd, a Malaysian palm-oil plantation operator, and EQT Midstream Partners LP, offered discounts to investors.

Coty Inc., the perfume maker that pulled a takeover offer for Avon Products Inc. (AVP:US), filed for an initial public offering seeking as much as $700 million.

All the shares in the IPO will be offered by existing shareholders, the company said in a filing today. Coty, based in New York, withdrew its sweetened $10.7 billion offer for Avon on May 15, citing the cosmetics seller’s refusal to negotiate. The company hired Bank of America, JPMorgan Chase & Co. and Morgan Stanley to help manage its share sale, it said.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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Companies Mentioned

  • CAT
    (Caterpillar Inc)
    • $94.57 USD
    • -1.32
    • -1.4%
  • BAC
    (Bank of America Corp)
    • $16.4 USD
    • -0.20
    • -1.22%
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