The S&P 500 has recovered all its losses following a 4.8% drop between June 19 and 24, triggered when Chairman Ben S. Bernanke said the central bank may reduce the pace of bond purchases later this year as economic risks subside. Minutes from the Fed’s June meeting will be released tomorrow at 2 p.m. New York time. The S&P 500 is still down 1% from its last record on May 21, the day before Bernanke told Congress the Fed could taper purchases.
Financial shares recovered after briefly erasing early gains as regulators proposed capital standards at the biggest lenders should rise to 5% of assets for parent companies and 6% for their banking units. The Office of the Comptroller of the Currency proposed a leverage ratio that’s 2 percentage points more than the 3% international minimum for holding companies, the agency said in a statement. The Federal Deposit Insurance Corp. is set to vote on the proposal later today.
The KBW Bank Index lost as much as 0.5% before recovering and rising 0.4%. Earnings at financials firms increased 17% in the second quarter, according to analysts’ estimates, to lead growth among the 10 main industries in the S&P 500. Excluding financials, S&P 500 profits fell 1%, according to data compiled by Bloomberg.
Cisco Systems Inc. jumped 2.1%, helping lead the Dow Jones Industrial Average higher, after announcing a deal with Microsoft Corp. on cloud computing infrastructure. Caterpillar Inc., Chevron Corp., Bank of America Corp. and General Electric Co. rose at least 1.4% for the other top gains in the Dow. Homebuilders accounted for three of the four biggest gains in the S&P 500, with D.R. Horton Inc., PulteGroup Inc. and Lennar Corp. jumping at least 5.8%. By Mary Schlangenstein
FedEx Corp. rose 4.5%, the most in nine months on speculation that it may be an investment target for William Ackman’s Pershing Square Capital Management LP, an Edward Jones analyst said.
Alcoa, America’s largest aluminum producer, lost 0.4% even after reporting earnings and sales that topped analysts’ estimates. Operating income at its engineered products business, which supplies components to aerospace and power companies, rose 12% from the first quarter. The company was the first member of the Dow to report results for the second quarter.
“A positive earnings season would help in an environment where data may still not provide an obvious picture of the U.S. economy,” said Luca Paolini, who helps oversee about $66 billion in equities as chief strategist at Pictet Asset Management Ltd. in London. “The most critical issue we are looking at is company guidance for the next few quarters.”
The S&P 500 advanced for a fourth day, its longest rally in almost two months. The gauge has climbed 16% this year, compared with a 13% drop in the MSCI Emerging Markets Index and a 5.3% advance for the Stoxx Europe 600 Index.