Most U.S. Stocks Gain on Optimism on Manufacturing, Lenders
By Kelly Bit
June 30 (Bloomberg) -- Most U.S. stocks gained, with the Standard & Poor’s 500 Index rising from an eight-month low, on a report that business activity grew for a ninth month and signs that European lenders are stronger than investors speculated.
Wells Fargo & Co. and Citigroup Inc. rose at least 1 percent to pace gains in financial shares after the European Central Bank said it will lend the region’s banks less money than economists had forecast. 3M Co. and Caterpillar Inc. led industrial companies higher as the Institute for Supply Management-Chicago Inc.’s business barometer showed manufacturing is overcoming turmoil in financial markets.
More than five stocks advanced for every two that fell on U.S. exchanges. The Standard & Poor’s 500 Index, which tumbled to an eight-month low yesterday, increased 0.2 percent to 1,043.78 at 10:05 a.m. in New York to trim its quarterly decline to less than 11 percent. The Dow Jones Industrial Average increased 3.63 points, or less than 0.1 percent, to 9,873.93.
“From a risk-reward standpoint these are good entry prices,” said Robert Doll, who helps oversee $3.36 trillion as vice chairman and chief equity strategist at New York-based BlackRock Inc. “I think the risk of a double-dip recession is low.”
The S&P 500 plunged 3.1 percent yesterday to its lowest level since Oct. 30, on concern over weakening growth in China and a slump in American consumer confidence. The decline pushed the gauge to its cheapest valuation relative to expected company earnings since March 2009, when an 80 percent rally followed.
Jobs Concern
Gains were limited today after companies in the U.S. added fewer workers to payrolls in June than forecast, according to data from a private report based on payrolls. The 13,000 gain followed a revised 57,000 increase the prior month, data from ADP Employer Services showed today. Economists surveyed by Bloomberg News had anticipated an increase of 60,000, according to the median forecast.
The ADP data came as investors awaited a Labor Department report July 2 that will show the U.S. lost jobs for the first time this year, reflecting a drop in federal census workers as the population count began to wind down, economists said.
U.S. futures rallied in trading before the open of exchanges after the European Central Bank said banks sought 131.9 billion euros ($161.8 billion) in three-month loans as a yearlong facility expires. The figure amounts to about half the level the market was expecting to be borrowed from the central bank, said Jacques Porta, a fund manager at Ofi Patrimoine.
‘Stress Tests’
“This amounts to the stress test the U.S. banking industry had last year and we didn’t,” said Paris-based Porta, who oversees about $425 million in stocks. “European banks are one of the weakest links in global equities. Investors were afraid the ECB would confirm this, so it’s good news.”
The S&P 500 is valued at 12.8 times projected profits, according to Bloomberg data, after falling 11 percent this quarter. The index has tumbled 14 percent from this year’s high on April 23 on concern a sovereign-debt crisis in Europe and China’s moves to slow the world’s largest emerging economy will dent global growth.
Stocks are the cheapest relative to bonds in three decades, a sign it’s time to buy, Michael Darda, the chief economist for MKM Partners LLC, said in a phone interview.
“For the moment, the bulls are looking to pick up cheaper stock,” said Simon Denham, executive director at London Capital Group in London. “The S&P has made a habit of returning to the 1,035-to-1,040 level and traders may be actually looking for longs today so long as the index remains above this mark.” S&P 500 futures rebounded at 1,035 in May and at 1,038 earlier this month.
General Mills Inc. retreated 4.3 percent to $35.31. The maker of Lucky Charms cereal and Progresso soup reported a 41 percent drop in fourth-quarter profit and gave a full-year earnings forecast that trailed analysts’ estimates.
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