S&P 500 Heads for Best Week in 2012 Ahead of Spain Talks
By Rita Nazareth - Bloomberg - Jun 8, 2012 9:08 AM PT
U.S. stocks rose, sending the Standard & Poor’s 500 Index toward its best week in 2012, as investors awaited weekend discussions of European finance officials for news of a potential bailout of Spain.
Wal-Mart Stores Inc. (WMT) and Intel Corp. (INTC) added at least 1.4 percent to pace gains among the biggest companies. Facebook Inc., which this week fell to the lowest price since it went public, added 3.7 percent. McDonald’s Corp. (MCD), the largest restaurant chain, slid 1 percent as its May sales trailed analysts’ estimates. Alpha Natural Resources Inc. (ANR) slumped 4 percent as the nation’s second-biggest coal producer is shutting mines in Kentucky and closing U.S. regional offices.
The S&P 500 rose 0.1 percent to 1,316.89 at 12:07 p.m. New York time, after declining as much as 0.6 percent earlier. The benchmark measure has rallied 3 percent this week. The Dow Jones Industrial Average increased 16.84 points, or 0.1 percent, to 12,477.80 today. Treasuries rose for a second day.
“You’ve got both sides hedging their bets,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. “Stocks are up and bonds are up. There’s uncertainty going into the weekend. Anything that could address the Spanish situation in a favorable way could have a positive impact. Yet it’s not a big rally. The risk-off trade is very much alive predicting an economic slowdown.”
Investors watched Europe’s attempts to tame its debt crisis. Spain is poised to become the fourth of the 17 euro-area countries to require emergency assistance as the currency bloc’s finance chiefs plan weekend talks on a potential aid request to shore up the nation’s lenders.
Economic Data
Earlier today, U.S. equities joined a global slump as German exports dropped in April for the first time this year as weaker global growth curbed demand. French business confidence and Italian output also declined. The trade deficit in the U.S. narrowed in April as a drop in imports overshadowed the first decline in exports in five months.
“Short-term investors aren’t enamored with risk,” said Lawrence Creatura, who helps oversee $363.6 billion as a Rochester, New York-based fund manager at Federated Investors Inc. “The economic data coming out of Europe just served as a reminder that all is not well yet.”
The S&P 500 rallied this week as China cut interest rates and European Central Bank President Mario Draghi said officials stand ready to act. Most stocks fell yesterday as an early gain fizzled after Federal Reserve Chairman Ben S. Bernanke said the central bank will assess the economy before deciding if more stimulus is needed.
Wal-Mart
Telephone service providers and companies that sell consumer necessities gained today, while energy shares slumped. Wal-Mart Stores, the world’s largest retailer, rose 2.9 percent to $67.77. Intel, the biggest chipmaker, added 1.4 percent to $26.29.
Facebook rose 3.7 percent to $27.28. The social-networking company that held an initial public offering last month introduced an online directory for downloadable apps, taking a page from Apple Inc. and Google Inc.
Six newly public companies including Facebook (FB) will probably join the Russell 1000 Index amid the smallest annual shift in the gauge of large U.S. companies since at least 2004, according to Credit Suisse Group AG.
Stocks representing 1.5 percent of the index’s value will be swapped during Russell’s annual rebalancing on June 22, the smallest proportion in eight years, Credit Suisse estimates. The preliminary list of changes for Russell Investments’ gauges including the Russell 1000 and Russell 2000 Index will be announced after the close of U.S. trading today.
Cost Savings
Fewer changes may mean cost savings for fund managers because they won’t have to trade as much to match Russell’s adjustments. At the same time, brokerages and exchanges may miss out on volume at a time when their profits suffer from a slowdown in transactions. The annual revisions usually spur one of the busiest sessions of the year. Russell’s global stock indexes are used by investors with $3.9 trillion in assets.
“If you don’t have a lot of need for changes, then the demand won’t be there, then you wouldn’t have these huge up volume events like we traditionally have,” Jason Cooper, who helps oversee $2.5 billion in South Bend, Indiana at 1st Source Investment Advisors, said in a phone interview. For some managers, “it would be a breath of fresh air” amid rising market volatility, he said. “It requires less of them to make changes that could be a problem or be detrimental to the weighting that they’re currently managing.”
McDonald’s dropped 1 percent to $87.50. Sales at stores open at least 13 months rose 3.3 percent globally last month, falling short of analysts’ estimates, as sales declined in Japan and China. Analysts projected a gain of 5.2 percent, the average of 13 estimates compiled by Consensus Metrix.
Yum! Brands
Yum! Brands Inc. (YUM), owner of the KFC and Pizza Hut restaurant brands, slumped 4.7 percent to $63.64 for the second-biggest decline in the S&P 500.
Alpha Natural Resources dropped 4 percent to $9.19. Operations will end at eight mines in Kentucky, including four owned by affiliates and four contract facilities, and production will be cut at others, Bristol, Virginia-based Alpha said today in a statement. The moves will reduce thermal-coal shipments by 2 million tons this year and 4 million tons in 2013, Alpha said. About 150 jobs will be eliminated.
NetApp Inc. (NTAP) retreated 2.6 percent to $30.49. The seller of hardware and software for storing data was downgraded at Barclays Plc. The share-price estimate is $34.
Nasdaq OMX Group Inc. persuaded Kraft Foods Inc. (KFT) to move its listing from the New York Stock Exchange, scoring the largest-ever company to switch markets three weeks after it botched Facebook’s initial public offering.
To contact the reporter on this story: {Rita Nazareth} in New York at rnazareth@bloomberg.net
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