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Wall Street up as banks rally but gains could be brief

Wall Street up as banks rally but gains could be brief
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First Published: Tue, Jun 28 2011. 09 06 AM IST
Updated: Tue, Jun 28 2011. 09 06 AM IST
New York: US stocks rose from three days of losses on Monday, led by banks after news of more favorable capital requirements and optimism over Greece’s austerity plan, but investors cautioned against high hopes.
Monday’s gains were a welcome sign of strength but investors were cautious about reading too much into the move. The S&P 500 has fallen as much as 7% since April and Monday’s volume was lower than average.
“We don’t see this being the start of a major rally,” said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York. “But this is welcome strength in the market and hopefully a welcome short-term bottom.”
Financials, the worst performing sector this year, posted strong gains. The S&P financial index rose 1.1%, with shares of Bank of America up 3.1% to $10.85 and JPMorgan Chase up 1% at $39.88.
On Saturday, global banking regulators in Basel said bank’s need to boost capital by 2.5 percentage points, not the 3 percentage points originally feared. The rules mean banks could have more funds for dividends and share buybacks.
Other sectors that have sold off sharply in the recent bout of weakness posted strong gains. The S&P’s technology sector gained 1.4% and the consumer discretionary index rallied 1.2%.
Investors are hoping the Greek parliament this week will pass an unpopular austerity program needed to get the next bailout payment. Also helping to ease worry, French President Nicolas Sarkozy said his government had an agreement with French banks on rolling over Greek debt into new 30-year bonds.
The Dow Jones industrial average gained 108.98 points, or 0.91%, to 12,043.56. The Standard & Poor’s 500 Index rose 11.65 points, or 0.92%, to 1,280.10. The Nasdaq Composite Index added 35.39 points, or 1.33%, to 2,688.28.
Jim Awad, managing director at Zephyr Management in New York, said the market was becoming overly optimistic.
“The rally is meaningless and suspect based on premature hopes about Greece,” he said.
“It seems certain the Greek situation over time is likely to get worse rather than better.”
The fact the benchmark S&P 500 index was holding above its 200-day moving average of around 1,260 was seen as a sign of technical support after two months of heavy selling.
In economic news, US consumer spending stagnated in May, according to a government report, while a reading on Midwest manufacturing rose slightly. But stock futures barely moved after the data.
Bristol-Myers Squibb Co shares slid 1.6% to $28.47 and US-listed shares of AstraZeneca Plc lost 0.9% to $48.56 after a new type of diabetes pill was shown in a two-year study to lead to more bladder and breast cancers.
Continucare Corp climbed 31% to $6.25 after primary healthcare provider Metropolitan Health Networks Inc offered to buy the rival for about $416 million. Metropolitan fell 2.7% to $4.75.
About 6 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq -- below the daily average so far this year of around 7.57 billion.
Advancing stocks outnumbered declining ones on the New York Stock Exchange by a ratio of 2 to 1. On the Nasdaq, about two stocks rose for every one that fell.
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First Published: Tue, Jun 28 2011. 09 06 AM IST
More Topics: Markets | US stocks | US markets | Dow Jones | Nasdaq |