BLBG: U.S. Stocks Rise Amid Speculation Central Banks May Act
U.S. stocks advanced, indicating the Standard & Poor’s 500 Index will complete a second weekly rally, amid speculation central banks will take steps to boost economies as investors awaited Greek elections this weekend.
All of the 10 main industries in the S&P 500 (SPX) rallied as commodity and technology shares had the biggest gains. Microsoft Corp., the world’s largest software maker, and Dow Chemical Co. (DOW), the biggest U.S. chemical company by revenue, climbed at least 2 percent. Citigroup Inc. (C) retreated 1.8 percent.
The S&P 500 rose 0.6 percent to 1,337.18 at 11:21 a.m. New York time. The Dow Jones Industrial Average added 66.56 points, or 0.5 percent, to 12,718.47 today. Trading in S&P 500 companies was up 20 percent from the 30-day average at this time of day.
“There’s hope of some coordinated action if bad news does occur,” said Tim Ghriskey, who oversees about $2 billion as chief investment officer of Solaris Group in Bedford Hills, New York. “That seems to be supporting the stock market. Yet investors are still skittish. There’s the Greek election. It could be an ongoing process.”
Central banks intensified warnings that Europe’s failure to tame its debt crisis threatens to roil the world’s financial markets and economy as Greece’s election in two days looms as the next flashpoint for investors. A victory by Syriza, the party that promises to renege on Greece’s end of the bailout deal, could speed the nation’s exit from the euro. The Group of 20 leaders prepare to meet in Mexico next week amid the weakest international economy since the 2009 recession.
‘Magic Candles’
“Ahead of Sunday’s election in Greece, central bankers stand ready, again,” Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, wrote in a note. “With all the water central banks have expended out of their fire hoses over the past few years in their attempt to ’do something,’ I can only think of magic candles. Those candles you blow out that only flare up again immediately after.”
Industrial production in the U.S. unexpectedly fell in May for the second time in three months as factories turned out fewer vehicles and consumer goods. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment for June fell to 74.1 from 79.3 at the end of last month. Manufacturing in the New York region expanded in June at the slowest pace in seven months.
Concern about a global economic slowdown and a worsening of Europe’s debt crisis put the S&P 500 on the brink of a so-called correction earlier this month. The index dropped 9.9 percent from an almost four-year high in April through June 1. The lowest valuation in six months and expectations of global policy action drove the benchmark gauge up 4 percent through yesterday.
Least-Tied
The S&P 500 has risen 0.8 percent this week as companies that are least-tied to the pace of economic growth had the biggest gains. Measures of telephone and health-care providers added at least 1.8 percent since June 8.
Some of the largest companies gained today. Microsoft (MSFT) had the biggest advance in the Dow, adding 2 percent to $29.94. Dow Chemical increased 2.7 percent to $32.86. Chevron Corp. (CVX) added 1.4 percent to $103.36.
Intercontinental Exchange Inc., the second-largest U.S. futures market, rallied 4.5 percent to $134.56 for the biggest gain in the S&P 500. Hong Kong Exchanges & Clearing Ltd. agreed to pay 1.39 billion pounds ($2.15 billion) for the London Metal Exchange, which handles more than 80 percent of global trade in industrial-metal futures. ICE had been a bidder for the LME.
SAIC Inc. (SAI) jumped 3.1 percent to $12.01. The defense contractor specializing in computer services was raised to overweight from neutral at JPMorgan Chase & Co. The 6-month share-price estimate is $13.
Financial Shares
Financial shares rose 0.4 percent after swinging between gains and losses earlier today. Citigroup retreated 1.8 percent to $27.41 Huntington Bancshares Inc., based in Columbus, Ohio, added 1 percent to $6.27.
David Trone, an analyst at JMP Securities LLC, expects some of the largest financial institutions to underperform as recent developments in Europe increase concern the region will experience “significant” damage.
Any multiyear rally in U.S. stocks may depend on a signal that the bond market has yet to send, according to Michael Hartnett, Bank of America Corp.’s chief global equity strategist.
Bond yields have to reach “an inflection point” before shares can move into what’s known as a secular bull market if history is any guide, Hartnett wrote in a June 12 report.
Chart Comparison
The CHART OF THE DAY compares the Dow and the yield on 10- year Treasury notes since 1900, as Hartnett did in his report. The yield figures were compiled by Yale University Professor Robert J. Shiller and obtained from his website.
Hartnett highlighted three inflection points in the past century, as shown in the chart. They foreshadowed stock-market booms during the 1920s, after World War II, and throughout most of the 1980s and 1990s.
A comparable surge in share prices is unlikely, he wrote, “until Treasury yields rise in response to stronger growth and a healthier global economy.” The 10-year yield fell to a record 1.4387 percent this month.
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
