July 3rd, 2012

S&P 500 Futures – U.S. stocks advanced, sending the Standard & Poor’s 500 Index to an almost two-month high, as a report showing factory orders exceeded forecasts bolstered optimism in growth at the world’s largest economy.

Commodity, industrial and technology shares had the biggest gains among 10 S&P 500 groups. Alcoa Inc. (AA), Caterpillar Inc. (CAT) and Chevron Corp. (CVX) added at least 1 percent. Ford Motor Co. (F) rallied 3 percent as deliveries of cars and light trucks beat estimates. Microsoft Corp. (MSFT) fell 0.5 percent as it’s taking a $6.2 billion writedown for almost the entire amount it paid for Internet- advertising company AQuantive Inc.

The S&P 500 advanced 0.3 percent to 1,369.18 at 10:31 a.m. New York time. The Dow Jones Industrial Average increased 25.20 points, or 0.2 percent, to 12,896.59. The American stock market will close at 1 p.m. today, and will be shut tomorrow for a holiday. Trading in S&P 500 companies was down 21 percent from the 30-day average at this time of day.

“The factory orders data take the edge off the bad numbers,” said John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York. His firm oversees $201 billion. “In addition, there’s the notion that the Federal Reserve will do whatever it has to do. The question is — will the Fed let us slip into a recession? The answer is no.”

Equities climbed as orders placed with U.S. factories rose in May for the first time in three months, easing concern that manufacturing is faltering. Yet declining employment data in the U.S. this week may prompt the Fed to initiate fresh stimulus, BNP Paribas SA said. The European Central Bank is forecast to cut interest rates this week to help curb the debt crisis, while a state-owned newspaper in China said the time is ripe for a reduction in banks’ reserve-requirement ratios.

Manufacturing Data

Most U.S. stocks rose yesterday, recovering from earlier losses triggered by data showing a contraction in manufacturing. Concern about a slowdown put the S&P 500 last month on the brink of a so-called correction, or a 10 percent decline from a recent peak. The index slumped 3.3 percent in the second-quarter, the biggest retreat since the period ending in September.

The Morgan Stanley Cyclical Index of companies most-tied to the economy rose 0.9 percent. Alcoa added 2.3 percent to $8.82. Caterpillar advanced 1.9 percent to $85.27. Chevron rose 1 percent to $106.94.

Car companies in the S&P 500 added 1.9 percent for the biggest gain among 24 groups. Ford rallied 3 percent to $9.68. The company’s deliveries of cars and light trucks climbed 7.1 percent in June, exceeding the 3.7 percent average estimate of 11 analysts.

Microsoft Falls

Microsoft retreated 0.5 percent to $30.41. The non-cash charge means the company will probably post a loss for the quarter, which ended in June. Before yesterday’s statement, analysts had predicted Microsoft would report profit of $5.3 billion in the period, data compiled by Bloomberg show.

Duke Energy Corp. (DUK) lost 1.4 percent to $68.87. The company unexpectedly announced the resignation of Bill Johnson, previously named to be the chief executive officer after its $17.8 billion takeover of Progress Energy Inc. (PGN) James Rogers, the head of Duke, is CEO of the merged companies effective immediately.

Johnson, 58, is resigning “by mutual agreement,” the company said. The takeover, announced in January 2011, received its final regulatory approval yesterday. Tom Williams, a spokesman for Duke, declined to comment on the reason for the change. Johnson has been the chairman and CEO of Raleigh, North Carolina-based Progress since 2007.

Bearish sentiment in an individual investors’ survey has surpassed the historical average for the longest stretch since October, when stocks began a rally that lifted the S&P 500 24 percent.

25 Years

A poll by the American Association of Individual Investors showed 44.4 percent of respondents say U.S. stocks will fall over the next six months. That’s the eighth week that pessimism stayed above the 25-year average of 30 percent.

Concern Europe’s debt crisis will deepen and the recovery weaken have erased as much as $1.8 trillion from U.S. equities since March. The last time the proportion of bears topped the average for this long was in the 14 weeks through Oct. 20, 2011, just after the S&P 500 bottomed at 1,099.23. The benchmark measure for U.S. stocks went on to surge as much as 29 percent, reaching a four-year high of 1,419.04 on April 2.

“Individual investors tend to get in when the markets are red hot and they tend to get out when the markets are at the bottom,” Robert Carey, who helps oversee $53 billion as chief investment officer of Wheaton, Illinois-based First Trust Portfolios, said in a telephone interview. “It’s been one series of issues after another, but, ultimately, fundamentals will weigh out and overwhelm any sentiment that people have.”

- Rita Nazareth in New York at Bloomberg.