Caterpillar Inc. (CAT), United Technologies Corp. (UTX) and 3M Co. (MMM) jumped at least 6.3 percent, pacing gains among companies most- dependent on economic growth. Nike, the world’s largest sporting-goods company, climbed 13 percent. Visa Inc. (V) surged 20 percent, the most in the Standard & Poor’s 500 Index, as the Federal Reserve moved to set a less-severe limit on debit-card swipe fees than previously proposed.
The S&P 500 surged 5.6 percent to 1,339.67. The Dow Jones Industrial Average advanced 5.4 percent to 12,582.77 this week. Both indexes rose all five days for the biggest weekly gains since July 2009.
“It’s a week of major reversal,” said Stephen Lieber, chief investment officer of Alpine Woods Capital Investors LLC, which manages about $7 billion, in Purchase, New York. “As soon as you got the first manufacturing indexes that began to turn positive and then culminated by the Chicago manufacturing index above estimates, it shifted confidence very positively.”
The gain helped the S&P 500 erase about 75 percent of the decline suffered since reaching its high for the year on April 29. Through June 24, U.S. equities had fallen for seven of the previous eight weeks on concern the European debt crisis would spread and the U.S. economy slow. The index is up 6.5 percent for the year, data compiled by Bloomberg show.
Greece’s New Financing
The Chicago Board Options Exchange Volatility Index, also known as the VIX, which measures the cost of using options as insurance against declines in the S&P 500, tumbled 25 percent this week, the biggest weekly drop since March.
The advance in equities marked a partial reversal of returns that had favored companies and industries that are less sensitive to economic growth. Since the S&P 500 slipped to its low for the year on March 16, drugmakers, phone companies, utilities and household-products producers have gained the most, rising at least 9.7 percent, according to data compiled by Bloomberg.
The biggest gains in last week’s rally were among so-called cyclical stocks. Energy companies climbed 7.2 percent, computer and software makers increased 6.8 percent, a group of retailers, hoteliers and automakers added 6.6 percent and industrials rose 6.4 percent, the data show.
Greek Austerity
Stocks rose this week after Greek Prime Minister George Papandreou on June 29 clinched enough votes to pass the first part of an austerity plan aimed at meeting European Union aid requirements and staving off default for his debt-laden nation. Lawmakers backed a bill on June 30 to authorize the measure.
Greece may receive as much as 85 billion euros ($124 billion) in new financing, including a contribution from private investors, in a second bailout aimed at preventing default and ending the euro-region’s debt crisis, an Austrian Finance Ministry official said.
“The major issue that was weighing down the market in the prior five or six weeks was the issue in Greece,” said John Canally, investment strategist at Boston-based LPL Financial Corp., which manages $330 billion in advisory and brokerage assets. “Now that’s cleared up, the market’s got a little more clarity. The move of this week in markets is pricing in a sizable bounce in economic activity.”
Manufacturing Expands
Stocks extended gains after a report yesterday showed that U.S. manufacturing unexpectedly expanded at a faster pace in June, a sign the industry is rebounding after shortages of parts and components from Japan slowed production. The Institute for Supply Management’s factory index rose to 55.3 last month from 53.5 in May. Economists estimated the index would drop to 52, according to the median forecast in a Bloomberg News survey. Figures greater than 50 signal expansion.
The ISM report was a positive surprise, according to investors, at a time when manufacturing growth is slowing from China to Europe, creating a dilemma for central bankers considering higher interest rates to combat inflation. China’s factory index fell to the lowest level since February 2009, while in the 17-nation euro area, a gauge slipped to an 18-month low. German manufacturing expanded at the weakest pace in 17 months, while Italy, Ireland, Spain and Greece contracted.
Business Expansion
Another report on June 30 showed businesses in the U.S. unexpectedly expanded at a faster pace in June. The Institute for Supply Management-Chicago Inc. said its business barometer climbed to 61.1 this month from 56.6 in May. Economists called for the index to drop to 54, according to the median forecast in a Bloomberg News survey. Figures greater than 50 signal expansion. Consumer confidence rose to the highest level in 10 weeks, the Bloomberg Consumer Comfort Index showed June 30.
The Morgan Stanley Cyclical Index added 6.6 percent as all of its 30 stocks gained. The Dow Jones Transportation Average of 20 stocks, a proxy for economic growth, rose 6.4 percent.
Caterpillar, the world’s largest maker of construction equipment, surged 8.6 percent, the most in the Dow, to $108.62. Jet engine maker United Technologies added 6.9 percent to $90.13. 3M, the maker of Post-It Notes and films to brighten TV screens, climbed 6.4 percent to $96.67.
Nike, Visa
Nike rallied 13 percent to $91.82, the highest price since December, after posting better-than-expected profit projections on June 28. Nike Chief Executive Officer Mark Parker has boosted sales and reduced marketing costs from a year earlier, when Nike promoted around the World Cup, to fight rising costs for cotton, labor and transportation that have reduced profitability in the apparel industry this year.
Visa jumped 20 percent to $87.97, its highest price in more than a year, after the Fed moved to cap debit-card transaction fees at 21 cents. MasterCard Inc. (MA) gained 15 percent reaching its highest price since June 2008, $314.47.
An index of energy shares in the S&P 500 rose 7.2 percent, the most among 10 groups as crude for August delivery settled at $94.94 a barrel on the New York Mercantile Exchange.
Marathon Petroleum Corp., which replaced RadioShack Corp. (RSH) in the S&P 500, increased 1.6 percent to $42.06 in its first day of trading after the second-largest independent U.S. oil refiner was spun off by Marathon Oil Corp. Halliburton Co. (HAL), the world’s second-largest oilfield services provider, advanced 12 percent to $51.29 for the week.
Investors “are buying in front of the quarterly earnings estimates that are going to be coming out,” said Michael Vogelzang, chief investment officer at Boston Advisors LLC, which manages $1.9 billion. “It probably says something about expectations for quarterly earnings.”
Alcoa Inc. (AA), the first Dow-average company to report second- quarter earnings, will give its results on July 11. Earnings at S&P 500 companies rose 13 percent in the second quarter, according to a Bloomberg survey of analysts. Net income will rise 19 percent in 2011, the data show.
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