U.S. stocks rose, paring the biggest weekly loss since April for the Standard & Poor’s 500 Index, as a rally in Amazon.com Inc. and EBay Inc. and deal activity overshadowed concern over financial stress in Europe. Portuguese bonds advanced while oil slumped.
The S&P 500 rose 0.1 percent to 1,967.57 at 4 p.m. in New York, reversing an earlier intraday drop of 0.3 percent. The Nasdaq Composite Index climbed 0.4 percent as Amazon.com jumped 5.6 percent. The Stoxx Europe 600 Index added 0.2 percent, after reaching a two-month low yesterday. The yield on 10-year Portuguese government notes retreated for the first time in five days. Treasury 10-year rates fell 2 basis points to 2.52 percent. Oil tumbled to an eight-week low.
EBay and Amazon.com increased more than 2.3 percent amid optimism in the companies’ growth potential, while Lorillard Inc. jumped amid merger talks. Wells Fargo & Co. (WFC:US) slipped after reporting per-share results. More than $1 trillion has been wiped from the value of global stocks since a peak on July 3 as analysts brought forward estimates for the Federal Reserve to raise interest rates and a parent of Banco Espirito Santo SA missed a debt payment.
“People are going to keep one eye on earnings and one eye on peripheral debt,” Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co., which oversees about $160 billion, said in a phone interview. “Debt concerns may trump earnings in the short-term, but as long as we have solid numbers for this quarter, markets overall should be fine.”
The S&P 500 (SPX) fell 0.4 percent yesterday, paring intraday losses of as much as 1 percent, as signs of financial stress among Portuguese banks fueled concern over the strength of the European recovery. The equity gauge has dropped 0.9 percent this week, its biggest slump in three months. The Russell 2000 Index (RTY) has tumbled 4 percent over five days for the worst performance in more than two years.
The benchmark gauge ended last week at an all-time high, and the index has not had a drop of 10 percent in more than two years. The gauge trades at a valuation of 18 times reported earnings, the highest since 2010.
The Chicago Board Options Exchange Volatility Index fell 4.1 percent today to 12.08. The gauge known as the VIX (VIX) has surged 17 percent this week, the biggest rally since April. It finished last week at a seven-year low.
EBay climbed 2.3 percent as data compiled by ChannelAdvisor showed sales for the online trading community grew more than 12 percent in June. Amazon.com increased 5.6 percent, the most since October. Sales for the world’s largest online retailer have exceeded those for EBay by an average of 4 percent over the last four quarters, according to a Piper Jaffray Cos. report.
Lorillard added 4.6 percent as Reynolds American Inc., the producer of Camel and Pall Mall cigarettes, confirmed it is in talks to acquire the company. Whirlpool Corp. increased 1.1 percent after agreeing to pay 758 million euros ($1 billion) for a controlling stake in Italian appliance maker Indesit Co.
U.S. Steel Corp. climbed 3.2 percent. The Obama administration imposed duties on steel pipe from South Korea and eight other countries in a victory for U.S. Steel and the United Steelworkers union, which said they were hurt by unfair competition from overseas, according to two people told of the decision.
Wells Fargo and Fastenal Co. posted earnings today after Alcoa Inc. unofficially started the second-quarter financial reporting season earlier in the week. Banks including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. will announce results next week.
Profit at S&P 500 companies probably rose 4.5 percent in the three months through June, while sales gained 3.1 percent, analyst estimates compiled by Bloomberg show. The projections have decreased from the start of April, when analysts predicted a 7.3 percent jump in earnings and a 3.7 percent sales increase.
Fastenal sank 4.2 percent after sales fell short of analysts’ estimates. Wells Fargo dropped 0.6 percent as the bank (WFC:US) reported quarterly profit of $1.01 per share, in line with estimates. The result ended a 17-quarter streak of rising per-share earnings at the bank.
Earnings for financial companies are forecast to fall 3.9 percent in the second quarter, according to data compiled by Bloomberg. It’s the only sector expected to see declining profits, the data show.
Systemic risks for Europe from Portugal’s banks are limited, Bank of America Merrill Lynch analysts including Athanasios Vamvakidis and Sphia Salim said in a note.
Banco Espirito Santo sought to reassure investors today, saying it has exposure of 1.18 billion euros ($1.6 billion) to companies of Grupo Espirito Santo and that it had a buffer of 2.1 billion euros above the regulatory minimum following a capital increase in June. The bank provided the update after a parent company, Espirito Santo International, said it missed payments on commercial paper.
“Banco Espirito Santo’s executive committee believes that the potential losses resulting from the exposure to Grupo Espirito Santo do not compromise the compliance with the regulatory capital requirements,” the Lisbon-based bank said.
Banco Espirito Santo retreated 5.5 percent as trading resumed, following yesterday’s 17 percent slide.
Portuguese 10-year yields fell 12 basis points to 3.85 percent after soaring 34 basis points in the past two days. Spain’s 10-year yield declined five basis points to 2.77 percent and Italy’s dropped six basis points to 2.89 percent.
The Stoxx 600 lost 3.2 percent for the week, the worst showing since March. Deal activity helped lift the index to a 0.2 percent gain today.
Imperial Tobacco Group Plc jumped 3.1 percent after the U.K. tobacco company said it is in discussions with Reynolds American and Lorillard to acquire some assets and brands. Indesit added 2.9 percent after the Whirlpool deal was announced.
The yen rose against most of its 31 major peers as concern over Portugal’s banking sector prompted demand for safer assets.
The Japanese currency was little changed at 101.31 yen against the dollar, having gained 0.8 percent this week. The yen was at 137.86 per euro. The dollar traded at $1.3609 per euro.
West Texas Intermediate oil dropped 2 percent to $100.83 a barrel, falling 3.1 percent this week to the lowest level since May 12 as supply risks ease in Iraq and Libya while crude inventories expand where U.S. crude is stored.
The MSCI Emerging Markets Index slipped 0.4 percent, capping its first weekly decline since the period ended June 20.
The Jakarta Composite Index (JCI) tumbled 1.3 percent on speculation investments will be delayed until a clear winner emerges from the nation’s disputed presidential election. The gauge jumped 1.5 percent yesterday to a 13-month high as Joko Widodo said unofficial counts showed him winning the nation’s presidency. Rival candidate Prabowo Subianto disagreed, saying counts done by companies he used for guidance showed him leading.
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