--Stocks rise as investors cheer possible Europe banking union;
DJIA UP 116
--Federal Reserve bank president's statements renew stimulus
hopes
--Optimism offsets Fitch downgrade to 18 Spanish banks
By Chris Dieterich
NEW YORK--Stocks rebounded as investors cheered comments from a
Federal Reserve Bank president and as Europe's central bankers said
unified efforts are needed to combat the Continent's financial
issues.
The Dow Jones Industrial Average rose 116 points, or 0.9%, to
12527 in afternoon trading. Tuesday's gains pull blue chips closer
to flat for the week following Monday's 143-point slide.
The Standard & Poor's 500-stock index rose 10 points, or
0.8%, to 1318. Industrial and materials stocks led all 10 of the
S&P 500's sectors higher.
Boeing (BA) shot up 3.2% to lead among the Dow stocks after
analysts at Bernstein raised its stock recommendation to
"outperform," citing a better outlook for the firm's 787
Dreamliner. American Express (AXP) rose 2.5%, and JPMorgan Chase
(JPM) rose 2.1%.
The Nasdaq Composite added 21 points, or 0.7%, to 2830.
Markets continue to take their cues from Europe. After bobbing
around the flat line early, major benchmarks pushed higher when the
European Central Bank reiterated the euro zone needs to create a
banking union.
Many expect volatile trading to continue ahead of a key election
in Greece this weekend that could determine the country's future in
the 17-nation euro currency bloc.
"A headline breaks, and everybody tries to get in front of
everyone else, and then we can get these big moves," said Brian
Lazorishak portfolio manager at Chase Investment Counsel. "It just
feels like there's not a lot of conviction, it's just everybody to
one side of the boat," Mr. Lazorishak said.
Also supporting Tuesday's gains were comments from Federal
Reserve Bank of Chicago President Charles Evans, who reiterated his
support for additional monetary stimulus from the central bank in
an interview with Bloomberg Television.
"This market seems to embrace the idea that flooding the system
with money is going to somehow make things better. It's almost
Pavlovian; someone says more stimulus, and boom," said Mike Shea,
managing partner at Direct Access Partners.
In Europe, the Stoxx Europe 600 added 0.6%. The index briefly
turned negative after Fitch Ratings downgraded the credit ratings
on a host of Spanish banks. European markets moved higher even as
the yield on 10-year Spanish government bonds hit a euro-era high,
underscoring lingering concerns about an eventual bailout for the
euro zone's fourth-largest economy on the heels of a bailout plan
for its troubled banks.
Asian markets were broadly lower, pulling back from sharp gains
in the previous session, as enthusiasm over Spain's bank bailout
waned. Japan's Nikkei Stock Average shed 1% and China's Shanghai
Composite gave up 0.7%.
In U.S. economic news, the National Federation of Independent
Business's index of optimism among small businesses slipped
slightly in May from the previous month, falling short of
expectations for an unchanged reading.
Elsewhere, the Labor Department reported import prices for May
posted their biggest monthly drop in nearly two years, an affirming
signal for investors who view lower-inflation environment as
hospitable to additional stimulus measures from the Fed.
Crude-oil futures rose 0.9% to $83.45 a barrel, while gold
futures gained 0.7% to $1608 a troy ounce. The U.S. dollar lost
ground against the euro but rose against the yen. The yield on the
benchmark 10-year U.S. Treasury note rose to 1.658% as demand
fell.
In corporate news, Apple (AAPL) rose 0.5% after unveiling a
series of software features for its mobile phones and computers
Monday at the company's annual developer conference in San
Francisco. A new mapping and navigation service, to be provided by
Dutch navigation-equipment maker TomTom (TOM2.AE), will replace
Google Maps as the default on iPhones and iPads.
Harman International Industries (HAR) fell 5.9% as investors
worried that Apple's new service could take market share from
makers of dashboard global positioning-system devices.
Facebook (FB) rose 0.9% as the company defended itself against
claims the advertising on the social network doesn't work. Research
firm comScore released a study partially commissioned by Facebook
that attempts to show the value of marketing on the site.
Zynga (ZNGA) shares slumped 10% to a fresh all-time low amid an
analyst report by Cowen that its number of daily users declined for
two months in a row.
Texas Instruments (TXN) gained 2.4% after the company was more
optimistic about its second-quarter earnings and revenue
outlooks.
FactSet Research Systems (FDS) slid 11% after the company
reported fiscal third-quarter earnings that topped estimates, but
gave a somewhat downbeat outlook for fourth-quarter revenue.
Michael Kors Holdings (KORS) rose 4.8% after the luxury retailer
reported quarterly earnings more than doubled, beating
expectations. The company issued guidance that was more positive
than expected.
Write to Chris Dieterich at
christopher.dieterich@dowjones.com