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Stocks Gain as Greece Hopes Prevail; Dow Up 1.3%

Monday, 26 Sep 2011 09:51 AM

 

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U.S. stocks rose Tuesday, with benchmark indexes weathering a final-hour selloff, after Greece made progress in meeting requirements for more international aid and Germany vowed continued support for the country.

All 10 groups in the Standard & Poor’s 500 Index rose as gains were led by commodity and industrial shares. Dow Chemical Co. and United Technologies Corp. climbed at least 2.2 percent to pace a rally in companies most-tied to the economy. Financial stocks pared gains as the Financial Times reported that some euro-area countries are demanding private creditors take bigger writedowns on their Greek bond holdings. Bank of America Corp. reversed a 3.8 percent advance, falling 1.8 percent.

The S&P 500 increased 1.1 percent to 1,175.38 at 4 p.m. New York time, rising 4.1 percent in three days, the biggest gain over that same period since Aug. 30. The Dow Jones Industrial Average rose 146.83 points, or 1.3 percent, to 11,190.69.

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“The chorus is getting louder that Europe needs to do something,” James Dunigan, who helps oversee $109 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “If we step away from the edge and avoid a recession, then there’s no doubt there’s value there.”

A four-day rout last week erased $1 trillion from U.S. equities amid concern Greek insolvency is inevitable and Europe can’t contain the damage. The decline left the S&P 500 trading at 12.4 times earnings in the past 12 months, 4.4 percent below its average valuation at the lowest point during the last nine bear markets, according to data compiled by Bloomberg.

‘Hospital Patient’

“Think of Europe as a hospital patient,” David Sowerby, a Bloomfield Hills, Michigan-based portfolio manager at Loomis Sayles & Co., which oversees $150 billion, said in a phone interview. “There are lots of doctors in the room, but no clear-cut remedy.”

The MSCI All-Country World Index rallied 2.9 percent as European stocks surged. German Chancellor Angela Merkel said Greece is ready to fulfill the conditions laid down by the so- called troika assessing Greek progress at meeting the terms of its international rescue.

Greek Prime Minister George Papandreou won parliamentary backing for a property tax to meet deficit-reduction targets required to avoid default. Finance Minister Evangelos Venizelos told Greeks they face economic collapse if they don’t plug a budget gap that is exceeding the target set in a bailout, putting an 8 billion-euro ($11 billion) aid payment due next month at risk.

‘Finally Get It’

European leaders “finally get it,” Pacific Investment Management Co.’s Mohamed El-Erian said in a radio interview with Tom Keene and Ken Prewitt on “Bloomberg Surveillance.” “Let’s not underestimate both the political challenges and the engineering challenges,” El-Erian said. “There is a lot that has to happen just today.”

The Morgan Stanley Cyclical Index of companies most-tied to the economy added 2.2 percent. The Dow Jones Transportation Average, a proxy for the economy, gained 1.6 percent. Dow Chemical rose 4.4 percent to $25.59. United Technologies climbed 2.2 percent to $73.15.

PulteGroup Inc., the largest U.S. homebuilder by revenue, added 1.2 percent to $4.16, as a report showed that home prices in the U.S. fell less than forecast. The S&P/Case-Shiller index of property values in 20 cities fell 4.1 percent in July from the same month in 2010, after a revised 4.4 percent drop in the 12 months to June. The median forecast of 28 economists surveyed by Bloomberg News projected a 4.4 percent drop.

Bank of America

Financial shares in the S&P 500 pared a gain of as much as 3.2 percent, rising 0.4 percent. Bank of America declined 1.8 percent, the most in the Dow, to $6.48.

The S&P 500 has climbed 5.5 percent since falling as low as 1,114.22 on Sept. 22, the first time this month it slipped below its closing level of 1,119.46 on Aug. 8. The index is within 3.5 percent of erasing its 6.5 percent loss for last week, the biggest since the period ended Aug. 5, according to data compiled by Bloomberg.

Stocks rose Tuesday even after a report showed that confidence among U.S. consumers stagnated in September near a two-year low as the share of households saying it was difficult to find a job climbed to the highest level in almost three decades.

Lapsing Back

Most advanced economies are lapsing back into recession while the U.S. is already in the throes of an economic contraction, according to Nouriel Roubini, co-founder and chairman of Roubini Global Economics LLC.

“The way I see the global economy, I think we’re entering into a recession again in most advanced economies,” Roubini said in a panel discussion Tuesday at the Bloomberg Dealmakers Summit in New York. “I think we’re already into one in the U.S. based on the hard and soft data -- same with most of the euro zone, same with the United Kingdom.”

Walgreen Co. slumped 6.3 percent, the most in the S&P 500, to $33.77. The largest U.S. drugstore chain said failure to renew a contract to provide prescriptions for Express Scripts Inc.’s customers will reduce its fiscal 2012 earnings.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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