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Broadgate: Market News 19/6

19 June 2012

Most U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a third day, as optimism about Greece’s attempts to form a coalition government tempered concern about a surge in Spanish bond yields.

Apple Inc., the world’s most valuable company, added 2 percent to pace gains in technology shares. D.R. Horton Inc. and Lennar Corp. climbed at least 3.9 percent as confidence among homebuilders rose to a five-year high. Facebook Inc. rallied 4.7 percent in the one-month anniversary of its initial public offering. Energy and financial shares in the S&P 500 declined.

Ten stocks gained for every nine falling on U.S. exchanges at 4 p.m. New York time. The S&P 500 rose 0.1 percent to 1,344.78, after dropping 0.6 percent. The Dow Jones Industrial Average lost 25.35 points, or 0.2 percent, to 12,741.82. The Nasdaq Composite Index added 0.8 percent to 2,895.33. Trading volume for exchange-listed stocks in the U.S. was about 5.8 billion shares, 13 percent below the three-month average.

“We managed not to drive off the cliff in Greece, but we still got flat tires,” said Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. “The challenges in Spain are very much in front of us. There’s not a lot of conviction.”

The Nasdaq advanced on Monday, propelled by a rally in Apple and other big-cap tech stocks, but fears Europe’s debt crisis is in danger of worsening limited broader gains.

Positive analyst comments lifted both eBay, up 4.5 percent to $42.49, and Groupon Inc, up 10.8 percent at $11.15. Apple Inc accounted for about half the Nasdaq’s rise, climbing 2 percent to $585.78.

The S&P eked out a slight gain as it bumped up against its 50-day moving average around 1,347 while the Dow ended lower.

Oracle Corp shares climbed 5.3 percent to $28.57 in after-hours trading after the software maker reported fourth-quarter revenue that beat expectations, helped by record sales of new software licenses.

A weekend election victory by pro-bailout parties in Greece removed one headwind facing the euro zone. But rising bond yields in Spain and Italy reinforced views that Europe has yet to control its debt crisis.

The election “wasn’t a game changer and does little to alleviate the larger issues that remain in Europe,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

A senior official with Greece’s New Democracy party, the conservatives who won Sunday’s election and who back Athens’ international bailout plan, told Reuters that Greece would form a government on Tuesday.

But there were conflicting signals about the way forward. The leader of New Democracy, Antonis Samaras, pledged his commitment to Greece’s international bailout package, but also said there would have to be “some necessary amendments.”

Meanwhile, Germany’s chancellor, Angela Merkel, said any loosening of agreed reform pledges would be unacceptable.

The election results also offered little reprieve from contagion concerns as yields on both Italian and Spanish bonds rose, with Spain’s 10-year yield climbing above the 7 percent mark at which other highly indebted euro-zone nations were forced to seek bailouts.

European authorities have already agreed to a 100-billion-euro ($125 billion) rescue for Spain’s troubled banks.

Market participants were also reluctant to take bets ahead of the U.S. Federal Reserve’s two-day policy meeting, with investors keen to see if the Fed will announce new stimulative measures in its policy statement at the meeting’s close on Wednesday afternoon.

“Without knowing what will come from the Fed meeting on Wednesday, the market doesn’t want to get ahead of anything,” Luschini said.

The Dow Jones industrial average was down 25.28 points, or 0.20 percent, at 12,741.89. The Standard & Poor’s 500 Index was up 1.94 points, or 0.14 percent, at 1,344.78. The Nasdaq Composite Index was up 22.53 points, or 0.78 percent, at 2,895.33.

Last week, U.S. stocks rallied on Thursday and Friday on news that central banks of major economies would take steps to stabilize markets if necessary after the Greek vote. As a result, much of the bullish bias of the election news was priced in. The S&P 500 rose 5.1 percent in the last two weeks.

An index of energy shares fell 0.8 percent on Monday, with the sector ranking as the S&P 500’s worst performer. U.S. crude futures dropped 1 percent after falling for six of the last seven weeks.

European shares erased early gains and closed flat, with the FTSEurofirst 300 index up 0.04 percent.

Also in the technology sector, Facebook struck a deal to acquire Face.com, whose facial-recognition technology has been in use on the social network. Facebook shares jumped 4.7 percent to $31.41, taking its cumulative gains in the last three sessions to about 16 percent.

DSW Inc plunged 11.3 percent to $52.13 after the footwear retailer gave a quarterly earnings outlook below analysts’ expectations.

Volume was light, with about 5.78 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year’s daily average of 7.84 billion.

About 57 percent of stocks traded on the New York Stock Exchange closed higher while the number of advancers and decliners on the Nasdaq was about even.

Equities rebounded as Antonis Samaras, leader of Greece’s New Democracy party, said he had a constructive discussion with Democratic Left leader Fotis Kouvelis. German Chancellor Angela Merkel’s said Greece shouldn’t be granted leeway on terms for its bailout. Group of 20 chiefs began a two-day meeting as Spain’s borrowing costs soared to a euro-era record. Policy makers are discussing ways to stimulate the economy if necessary, a Canadian official said.

Commodities

Oil fell a second day in New York as rising bad loans in Spain fueled speculation that Europe’s debt crisis will spread and threaten global economic growth.

Oil for July delivery, which expires tomorrow, fell as much as 35 cents to $82.92 a barrel in electronic trading on the New York Mercantile Exchange at 1:20 p.m. Singapore time. It slipped 0.9 percent yesterday to $83.27, the lowest close since June 13. The more-actively traded August contract slid 38 cents to $83.22 a barrel today. Front-month prices are 16 percent lower this year.

Brent oil for August settlement was at $95.90 a barrel, down 15 cents, on the London-based ICE Futures Europe exchange. It slipped $1.56 yesterday to $96.05. The front-month price for the European benchmark contract was at a premium to West Texas Intermediate of $12.68, from $12.45 yesterday.

Gold rose for an eighth consecutive session on Tuesday, the longest winning streak since July last year, after a weekend victory for pro-bailout parties in Greek elections failed to shake off worries about a worsening debt crisis in Europe.

Gold hit an intraday high of $1,630.59 an ounce and was steady at $1,627.95 an ounce by 0300 GMT. Gold rallied to a record of around $1,920 in 2011, when investors turned to the metal as a safe haven during the debt crisis in Europe.

Currencies

The dollar slid against the euro and yen before the Federal Reserve begins a meeting today amid prospects policy makers will consider further monetary easing steps to sustain the U.S. economy.

The dollar declined 0.2 percent to $1.2606 per euro at 6:30 a.m. in London from yesterday, when it touched $1.2748, the lowest level since May 22. The greenback dropped 0.2 percent to 78.99 yen. Japan’s currency fetched 99.58 per euro from 99.49.

The information set out herein has been obtained from various public sources and is by way of information only. Broadgate Financial can accept no liability of any sort in relation thereto and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

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