Bank Stocks Advance as S&P 500 Fluctuates; Oil Rises on Storm
By Nick Baker and Rita Nazareth
June 25 (Bloomberg) -- U.S. bank stocks rose after Congress diluted financial-reform legislation, and the Standard & Poor’s 500 Index swung between gains and losses following slower-than- estimated economic growth and consumer confidence that topped forecasts. Oil surged as a storm intensified in the Caribbean.
Financial companies in the S&P 500 rallied 1.3 percent, the most among 10 industries, at 12:01 p.m. in New York. The S&P 500 fell 0.1 percent after adding as much as 0.4 percent. Crude advanced 2.7 percent to $78.55 a barrel in New York after the National Hurricane Center said an area of low pressure near Honduras and Grand Cayman has a 70 percent chance of developing into a tropical cyclone this weekend and may disrupt production in the Gulf of Mexico.
Congressional negotiators agreed on an industry-reform bill that doesn’t prevent hedge-fund and buyout-fund investing. A ban on derivative-trading by commercial banks proposed by Senator Blanche Lincoln, a Democrat from Arkansas, was amended to allow trades on interest rates and foreign-exchange swaps.
“Banks have mechanisms to get around the most onerous proposals in the bill,” said Dick Bove, a Lutz, Florida-based analyst at Rochdale Securities LLC. “The industry has been pummeled because everybody believed that banks caused the financial crisis. That pummeling is over.”
Traders including Michael Nasto of U.S. Global Investors Inc., which manages about $2.5 billion in San Antonio, said the S&P 500 may have failed to maintain gains or losses because the annual adjustments to Russell Investments’ equity indexes take effect after the close of trading today.
$3.9 Trillion
Russell estimates that $3.9 trillion is benchmarked to its U.S. stock market measures, which include the Russell 1000 Index of the biggest American companies and the Russell 2000 Index of smaller stocks. Investors that mimic the performance of those gauges must buy and sell shares to match Russell’s adjustments.
The S&P 500 headed for a weekly decline of 4 percent, the most since May, after the Commerce Department said U.S. gross domestic product grew at a 2.7 percent annual rate in the first quarter, missing the median economist forecast of 3 percent, reflecting a smaller gain in consumer spending and a bigger trade gap.
The stock index briefly rallied after the Thomson Reuters/University of Michigan index of consumer sentiment increased to 76, the highest since January 2008. The gauge was projected to rise to 75.5, according to the median forecast of economists surveyed by Bloomberg News.
Treasuries, Yen
Treasury 10-year notes rose, heading for a second straight weekly advance, following the report on U.S. gross domestic product. Yields were at almost a one-month low on evidence the global economic recovery is slowing, encouraging investors to seek the relative safety of government debt. The recovery pace is “likely to be moderate for a time,” the Federal Reserve said in its June 23 statement.
The yield on the 10-year note dropped 5 basis points, or 0.05 percentage point, to 3.09 percent.
The yen rose for a sixth day versus the euro, the longest since January, on speculation the Group of 20 will fail this weekend to agree on how to tackle Europe’s debt crisis, fueling the haven appeal of the Japanese currency.
The yen rose 0.3 percent per euro to 110.18, from 110.52 yesterday, when it strengthened to 109.54, the strongest level since June 10. Japan’s currency appreciated 0.3 percent to 89.33 per dollar, from 89.61 yesterday, when it gained to 89.23, the strongest since May 21. It has risen 1.5 percent this week.
The euro was little changed at $1.2334, poised for a 0.5 percent decline this week. Australia’s dollar slipped 0.1 percent to 77.58 yen, headed for a 1.9 percent weekly drop.
Wheat fell the most in three weeks on speculation that U.S. farmers are resuming harvests after rain delays in Kansas and Oklahoma, the biggest growers of winter varieties.
Wheat for September delivery fell 5.25 cents, or 1.1 percent, to $4.7225 a bushel in Chicago. A close at that price would be the biggest decline since June 4 and would leave the contract down 1.2 percent for the week. Before today, the price dropped 12 percent this year, partly on increased stockpiles.
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