US Stocks Rise; Dow Set to Trim Weekly Loss as Banks Rally
06/22/2012| 03:40pm US/Eastern
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--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--Stocks bounced from Thursday's steep decline, led by financial and health-care shares, following long-anticipated cuts to global banks' credit ratings.
The Dow Jones Industrial Average rose 77 points, or 0.6%, to 12650, in late-afternoon trading Friday. The benchmark was on pace to trim a weekly decline that would be its first in three weeks, due to a Thursday selloff on global economic growth concerns. J.P. Morgan Chase was among the Dow's biggest advancers, rising 1.9%. Bank of America, Morgan Stanley and Wells Fargo also gained.
The Standard & Poor's 500-stock index tacked on 11 points, or 0.8%, to 1336. All 10 of the index's sectors traded higher, though industrials and utilities lagged behind. The Nasdaq Composite added 30 points, or 1.1%, to 2889.
"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," said Uri Landesman, president of New York hedge fund Platinum Partners.
Investors had braced for ratings revisions 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 market activities in its ratings cuts.
But analysts largely took a positive view, contending that the decisions were on the whole slightly less negative than many investors feared. Only one company, Credit Suisse Group, had its rating cut by three notches. Two others, Morgan Stanley and UBS, had faced three-notch reductions but were downgraded only two levels.
The immediate effect was to dispel concerns that had hung over the market since February. "It appears that a headwind has been removed," Keefe, Bruyette & Woods analyst David Konrad wrote in a note to clients.
The U.S.-listed shares of Credit Suisse rose 1.5%, while UBS saw a 2.1% increase and Morgan Stanley increased 1.4%.
In Europe, markets were mostly lower, with the Stoxx Europe 600 down 0.7%, as more downbeat economic data weighed on sentiment. June data showed Germany's Ifo index of business confidence fell more than expected to a two-year low. Benchmark indexes in the U.K., Germany and France all rose on the week for the third week in a row.
Meanwhile, Spain's IBEX 35 index rallied 1.5% after an external audit said the country's banks will need to increase capital by up to 62 billion euros ($77.75 billion) to survive a worst-case scenario. That number was a lot lower than many had feared.
The European Central Bank said it would offer loans to euro-zone banks in exchange for a wider range of collateral, accepting securities such as car loans and certain mortgage-backed securities, in a move seen as an attempt to provide liquidity to Spanish banks.
Asian markets were broadly lower on the back of U.S. weakness Thursday, with Japan's Nikkei Stock Average losing 0.3%, but rising 2.7% on the week, its third weekly gain in a row. Hong Kong's Hang Seng Index slumped 1.4%, down 1.2% on the week and six of the past seven.
In corporate news, Ryder System slid 13%, the biggest decline among S&P 500 components, after the truck-rental company lowered its second-quarter and full-year earnings outlooks, citing lower-than-expected demand for commercial rental products.
Facebook rose 4.2%, extending its more than 20% rally from its early June lows, which followed concerns about the social network's valuation and botched initial public offering.
Harvest Natural Resources soared 89% after the energy company agreed to sell its Venezuela assets to Indonesia's PT Pertamina for $752 million.
Darden Restaurants declined 0.5% 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 2.4% 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 matthew.jarzemsky@dowjones.com
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