Stocks rise, but Greece's woes keep bears on prowl
The Dow and S&P 500 rose on Friday after France and Germany outlined an agreement to aid debt-burdened Greece, but analysts said a recent bearish trend may not be over.
The S&P 500 barely squeaked out a gain for the week after six straight weeks of losses. The uncertainty surrounding a resolution of the debt crisis kept investors wary of committing cash to the market.
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France and Germany said they would ask banks holding Greek debt to voluntarily shoulder some of the burden. Meanwhile, Greece's prime minister appointed a new finance minister to try to push through harsh economic reforms.
The debt crisis escalated this week as Moody's Investors Service said it may cut the credit ratings of French banks, citing exposure to Greek debt. Late Friday, Moody's said it was reviewing Italy's sovereign credit ratings for a possible downgrade.
The question now in many people's minds is whether or not a credit event in Europe, the ripple effect, will be strong enough to put the U.S. economy in a recession. I honestly don't see that, said Natalie Trunow, chief investment officer of equities of Calvert Investment Management in Bethesda, Maryland, which manages about $14.8 billion.
But, she said, people are finally starting to connect the dots between the sovereign debt crisis and the potential impact on some of the larger companies involved in those countries and some of the banks.
The S&P financial index <.GSPF> was up 0.9 percent for the day, but is down about 7 percent since the start of the year. The KBW Bank Index <.BKX> rose 1.1 percent on Friday.
The Dow Jones industrial average <.DJI> rose 42.84 points, or 0.36 percent, to end at 12,004.36. The Standard & Poor's 500 Index <.SPX> gained 3.86 points, or 0.30 percent, to 1,271.50. But the Nasdaq Composite Index <.IXIC> fell 7.22 points, or 0.28 percent, to 2,616.48.
For the week, the Dow was up 0.4 percent and the S&P 500 was up just 0.04 percent, with both snapping six weeks of losses. The Nasdaq, however, ended the week down 1 percent.
Friday's volume was slightly better than average, as activity picked up amid options expiration.
But bearish signals for the market abound, including in equity-only put-call ratios, according to Larry McMillan, president of McMillan Analysis Corp. in Morristown, New Jersey.
Recent gains in the CBOE Volatility Index <.VIX> also show investors are skittish.
All of the intermediate-term indicators are on 'sell' signals, he said.
The S&P 500 is roughly 7 percent below a three-year high hit in early May, and many strategists see a test of 1,250 on the index as likely.
Economic data was mixed, with the index of leading economic indicators rising more than forecast in May to a record high, but U.S. consumer sentiment for June was weaker than expected.
Most of the more important reports (this week) indicated the world is not coming to an end, contrary to popular belief, said Charles Lieberman, chief investment officer of Advisers Capital Management, LLC in Hasbrouck Heights, New Jersey.
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The day's volume was active, with about 8.29 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, above the daily average of 7.58 billion.
Advancing stocks outnumbered declining ones on the NYSE by about 3 to 2. On the Nasdaq, advancers beat decliners by nearly 14 to 13.
(Reporting by Caroline Valetkevitch; Additional reporting by Doris Frankel; Editing by Jan Paschal)
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