U.S. Stocks Up; Banks Rally After Long-Awaited Moody's Downgrades
06/22/2012| 11:05am US/Eastern
--Stocks bounce from previous session's sharp losses
--Europe mostly lower on weak German Ifo data, but Spain rallies
--Financials rally after Moody's global banks downgrades
By Matt Jarzemsky
NEW YORK--U.S. stocks bounced from Thursday's steep decline, led by financial shares, after Moody's Investors Service completed its long-anticipated downgrade of more than a dozen global banks.
The Dow Jones Industrial Average rose 51 points, or 0.4%, to 12627 in mid-morning trade. J.P. Morgan led the benchmark higher with a 2.1% increase. The Dow fell 250.82 points, or 2%, to 12573.57 on Thursday, the second-biggest point and percentage loss of the year.
The Standard & Poor's 500-stock index tacked on five points, or 0.3%, to 1330. Financial shares led gains across eight of the index's 10 sectors, while industrials and materials lagged behind. The Nasdaq Composite added 12 points, or 0.4%, to 2871.
"My sense is it's mostly the downgrades, and, ironically, people trading the downgrades in the opposite direction," said Uri Landesman, president of New York hedge fund Platinum Partners. "Today you're just seeing a little bit of a relief rally, a little bit of buying on the bad news, which had already been discounted."
Investors had braced for downgrades since Moody's said in February that it was reviewing more than 100 global banks. Late Thursday, Moody's cited significant exposure to volatility and risk of large losses from capital markets activities in its ratings cuts.
European markets were mostly lower, with the Stoxx Europe 600 down 0.5%, as more downbeat economic data weighed on sentiment. June data showed Germany's Ifo index of business confidence fell to a two-year low of 105.3, below expectations of 105.6.
Meanwhile, Spain's IBEX-35 index bucked the trend by rallying 2.2%, after an external audit said the country's banks will need to increase capital by up to EUR62 billion ($77.75 billion) to survive a worst-case scenario. That number was a lot lower than many had feared.
Asian markets were broadly lower on the back of U.S. weakness Thursday, with Japan's Nikkei Stock Average losing 0.3%. Hong Kong's Hang Seng Index slumped 1.4%.
In the corporate arena, Ryder slid 12% after the truck rental company lowered its second-quarter and full-year earnings outlooks, citing lower-than-expected demand for commercial rental products.
Harvest Natural Resources soared 74% after the energy company agreed to sell its Venezuela assets to Indonesia's PT Pertamina for $752 million.
Darden Restaurants declined 1.1% after the operator of Olive Garden and Red Lobster projected continued weak growth for its major brands, citing expectations of a "frustratingly slow" economic recovery.
Associated Estates Realty dropped 3.1% after the real-estate investment trust said it planned a public offering of 5.5 million shares of its common stock.
Write to Matt Jarzemsky at firstname.lastname@example.org