US stocks rose, giving the Standard & Poor’s 500 Index its first back-to-back weekly rally since April, on speculation central banks will act to boost the economy as investors awaited Greek elections this weekend.
Microsoft Corp. gained 2.3 per cent as a person familiar with the matter said the company will announce plans next week to sell a tablet computer running the next version of Windows. IntercontinentalExchange Inc. added 4.7 per cent as its bid for the London Metal Exchange was rejected in favor of Hong Kong Exchanges & Clearing Ltd.’s offer. Facebook Inc. jumped 6.1 per cent and capped the first weekly gain since it went public.
What you need to know
- ASX ends week with a loss
- AUD holds above parity
- Gold extends rally
- Oil edges higher
- European stocks higher as Greek vote looms
- Australian finance calendar: June 18-23
- Wall Street week ahead: All eyes on Europe
Australian stock futures point to a modest rise when trade opens on Monday, but the result of elections in Greece on Sunday could substantially change the outlook. On the ASX24, the SPI futures index was nine points higher to 4053.
The Australian dollar has positioned itself above parity with its US counterpart and could move higher in the wake of this weekend’s Greek elections. At the local close, the dollar was trading at $US1.0016 US cents up from 99.48 US cents on Thursday.
The S&P 500 rose 1 per cent to 1,342.84 at 4pm New York time, the highest since May 11. The Dow Jones Industrial Average climbed 115.26 points, or 0.9 per cent, to 12,767.17. Trading volume for exchange-listed stocks in the US was about 7.5 billion shares, 11 per cent above the three-month average.
“Ahead of Sunday’s election in Greece, central bankers stand ready,” Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, wrote today. “With all the water central banks have expended out of their fire hoses 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.”
Expectations for global policy action grew as central banks intensified warnings that Europe’s failure to tame its crisis threatens the economy. European Central Bank policy makers have overcome a key concern about taking the benchmark rate below 1 per cent, two euro-area central bank officials said. The June 17 vote will turn on whether Greeks accept open-ended austerity to stay in the euro or reject the conditions of a bailout and risk becoming the first to exit the 17-member currency.
Stocks also rose on speculation the Federal Reserve may join central banks in taking steps to boost growth. Data today showed that industrial production unexpectedly fell and consumer confidence slid, adding to evidence of US economic weakness. US policy makers meet June 19-20.
“There’s hope of some coordinated action if bad news does occur,” said Tim Ghriskey, who oversees about $US2 billion as chief investment officer of Solaris Group in Bedford Hills, New York. He spoke in a telephone interview.
“There’s the Greek election. It could be an ongoing process.”
David Bianco, Deutsche Bank AG’s chief US equity strategist, withdrew a forecast that the S&P 500 will post a near-term gain of 5 per cent or more, citing uncertainty before Greece’s elections. While Bianco maintained his year-end projection of 1,475 for the index, he said he’s no longer convinced the next 5 per cent move in the gauge is higher.
Concern about Europe’s debt crisis and a global slowdown put the S&P 500 on the brink of a so-called correction this month. It fell 9.9 per cent from an almost four-year high in April through June 1. Since then, the lowest valuation in six months and bets on policy action drove the gauge up 5.1 per cent. The S&P 500 rose 1.3 per cent this week.
All 10 groups in the S&P 500 rose today as energy and technology shares had the biggest rallies. Chevron Corp., the second-largest US energy company, added 2.4 per cent to $US104.33. Oracle Corp., the biggest maker of database software, added 2.9 per cent to $US27.70 after ThinkEquity LLC recommended buying the shares.
Microsoft jumped 2.3 per cent to $US30.02. The company may demonstrate the tablet computer at an event scheduled in Los Angeles on June 18, said a person familiar with the plans. The company has said it aims to release the new Windows 8 operating system in time for the holiday season. Frank Shaw, a spokesman for Microsoft, declined to comment.
IntercontinentalExchange, the second-largest US futures market, rallied 4.7 per cent to $US134.80. ICE and Hong Kong Exchanges were the two parties left in a bidding process announced by the LME in September. The LME said today it would no longer be seeking competing takeover offers.
Facebook rose 6.1 per cent to $US30.01, extending its weekly advance to 11 per cent. The company asked a court to consolidate more than 40 shareholder lawsuits over its initial public offering last month. Investors sued Facebook and Nasdaq OMX Group Inc. over problems in trading company shares on May 18, the first day they were publicly available.
Navistar International Corp. soared 7.6 per cent to $US29.95. MHR Fund Management LLC disclosed a 13.6 per cent stake in the truckmaker, more than billionaire investor Carl Icahn’s 11.9 per cent holding. MHR is run by Mark Rachesky, a former protege of Icahn’s. MHR “may seek to engage in discussions with management,” according to a regulatory filing.
Financial shares in the S&P 500 advanced 1.4 per cent. Bank of America Corp. added 3.1 per cent to $US7.90, after slumping as much as 1.4 per cent earlier today.
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.
SAIC Inc. jumped 5.1 per cent to $US12.24. The defense contractor specializing in computer services was raised to overweight from neutral at JPMorgan Chase & Co.
The Bloomberg US Airlines Index of 10 stocks slumped 2.2 per cent. AMR Corp. Chief Executive Officer Tom Horton asked an ad hoc bondholder group to study his plan for a stand-alone American Airlines before reviewing a possible merger for the bankrupt carrier, two people familiar with the matter said. Horton expressed frustration with attention being given to a pending US Airways Group Inc. merger bid, the people said.
US Airways tumbled 3.6 per cent to $US12.03. Southwest Airlines Co. dropped 2.9 per cent to $US8.93.
Any multiyear rally in US stocks may depend on a signal that the bond market has yet to send, according to Michael Hartnett, Bank of America’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 this week.
Hartnett highlighted three inflection points in the past century that 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 per cent this month.