U.S. stocks rose, rebounding from a slump driven by JPMorgan (JPM) Chase & Co.’s $2 billion trading loss, after an unexpected rise in a gauge of consumer confidence.
Telephone and technology shares in the Standard & Poor’s 500 Index gained, while financial companies retreated. Nvidia Corp. (NVDA) surged 8.9 percent after predicting sales that beat analysts’ estimates. JPMorgan tumbled 8 percent as Chief Executive Officer Jamie Dimon said the lender made egregious mistakes and that trading losses were “self inflicted.” Bank of America Corp. (BAC) and Citigroup Inc. (C) lost at least 1.1 percent.
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon. Photographer: Peter Foley/Bloomberg
The S&P 500 rose 0.3 percent to 1,362.49 at 10:46 a.m. New York time. The benchmark gauge for American equities has fallen 0.5 percent this week. The Dow Jones Industrial Averageadded 28.34 points, or 0.2 percent, to 12,883.38 today. The Nasdaq-100 Index advanced 0.9 percent to 2,638.99.
“The U.S. economy is doing OK, corporate earnings continue to impress, but there’s a lot of headline risk in financials,” Stephen Wood, the New York-based chief market strategist for Russell Investments, said in a telephone interview. His firm oversees $140.8 billion. “There will be volatility.”
Stocks rebounded after data showed consumer confidence rose in May to the highest level in four years. Financial shares declined, led by JPMorgan. The firm’s chief investment office, run by Ina Drew, 55, took flawed positions on synthetic credit securities that remain volatile and may cost an additional $1 billion this quarter or next, Dimon told analysts yesterday.
Technology Rallies
Nine out of 10 groups in the S&P 500 rose today. Technology companies, which comprise 20 percent of the benchmark measure, added 0.9 percent led by some of the world’s largest companies. Intel Corp. advanced 2.4 percent, the most in the Dow, to $27.90. Microsoft Corp. increased 2.1 percent to $31.39.
Nvidia surged 8.9 percent to $13.52. Revenue for the period ending in July will reach $990 million to $1.05 billion, the Santa Clara, California-based company said today in a statement. Analysts had estimated $976.3 million, the average of predictions compiled by Bloomberg.
Bed Bath & Beyond Inc. gained 3.4 percent to $71.10. The company was raised to the equivalent of buy at Credit Suisse Group AG. The share-price estimate is $91.
Arena Pharmaceuticals Inc. (ARNA) jumped 64 percent to $6. The company’s weight-loss pill gained the backing of an advisory panel, putting two obesity drugs in line for U.S. approval almost two years after regulators rejected them as too risky.
A measure of diversified financial institutions in the S&P 500 tumbled 2.5 percent, for the biggest decline among 24 groups. JPMorgan slumped 8 percent to $37.48. Bank of America lost 1.1 percent to $7.62. Citigroup retreated 3.4 percent to $29.60. Goldman Sachs Group Inc. (GS)slipped 3.3 percent to $102.79. Morgan Stanley (MS) slumped 3.9 percent to $14.99.
‘Black Eye’
“It’s a black eye for JPMorgan,” said Michael Shaoul, chairman of Marketfield Asset Management in New York, which oversees more than $1.9 billion. “It was considered to be one of the better big banks. There’s already a debate about regulation. Jamie Dimon will be in a weaker position to push back against it, JPMorgan will be in a weaker position.”
U.S. lawmakers and interest groups favoring tighter restrictions on proprietary trading said JPMorgan’s loss bolsters their case. Senator Carl Levin, the co-author of the so-called Volcker rule and chairman of the Permanent Subcommittee on Investigations, said the disclosure served as a “stark reminder” to regulators drafting the proprietary- trading ban required by the 2010 Dodd-Frank Act.
‘This Doesn’t Help’
“The regulatory and political environment is already a headwind and clearly this doesn’t help,” wrote Deutsche Bank AG New York-based analysts, including Matt O’Connor, in a report. Bank of America analyst Guy Moszkowski wrote separately that JPMorgan’s losses are “very poorly timed for the industry” and will be taken by those seeking stricter regulation as “an example of prop trading dangers.”
Financial companies in the S&P 500 had the biggest gain among 10 groups in 2012 through yesterday, surging 15 percent, or almost double the benchmark measure’s advance. The industry’s earnings grew 12 percent in the first quarter, and on average, 66 percent of financial companies in the S&P 500 beat analysts’ estimates, according to data compiled by Bloomberg.
“It’s never a good time to lose $2 billion, but this a particularly bad one given all the variables out there,” Walter Todd, who oversees about $950 million as chief investment officer at Greenwood Capital in Greenwood, South Carolina, said in a telephone interview. “Investors are nervous because of the situation in Europe, they are nervous because of the Chinese slowdown. This is not something that the market needed.”
Concern about Europe’s debt crisis grew as Greece’s political leaders began a fifth day of talks to carve out a unity government amid speculation of a euro exit. Spain will force the country’s banks to lift provisions against losses on real estate loans by 30 billion euros ($38 billion). China’s industrial production grew the least since 2009 in April.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
Source : bloomberg.com
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