The MSCI All-Country World Index added 1.5 percent at 4 p.m. in New York, snapping a seven-day retreat, and the Standard & Poor’s 500 Index gained 1.7 percent. The euro rose 0.3 percent to $1.2240 as Medley Global Advisors predicted the European Central Bank will ease monetary policy further. Cotton and nickel advanced more than 2.4 percent to lead a gains in 22 of 24 commodities tracked by the S&P GSCI Index. Ten-year Treasury yields increased two basis points to 1.49 percent.
JPMorgan rose 6 percent to lead the Dow Jones Industrial Average (INDU) up 204 points, while the KBW Bank Index jumped the most since March, as Chief Executive Officer Jamie Dimon said the bank will still likely post record earnings for 2012 even after a $4.4 billion trading loss from its chief investment office in the second quarter. Warren Buffett said the firm’s reputation is intact as far as he’s concerned.
“The degree to which our banking system has come back, particularly compared to the European banks, is dramatic,” Buffett, the billionaire chairman of Berkshire Hathaway Inc., said today on Bloomberg Television’s “In the Loop With Betty Liu” in Sun Valley, Idaho. “Our banking system is in terrific shape and that can’t be said for banks around the world and it couldn’t be said for our banks four years ago.”
China Economy
Stocks and commodities also increased after China’s economy grew a less-than-estimated 7.6 percent last quarter, putting pressure on policy makers to increase monetary easing and investment.
“China’s growth is slowing, which will urge their policy makers to respond with a fiscal thrust,” said Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $115 billion of assets.
The S&P 500 rebounded following six days of losses, the longest slump in almost two months. U.S. equities maintained gains even as confidence among consumers unexpectedly slid in July to the lowest level this year as the labor market showed few signs of improvement. The Thomson Reuters/University of Michigan index of consumer sentiment dropped to 72 this month from 73.2 in June, trailing the median economist projection for a rise to 73.5.
Banks Rally
Financial shares in the S&P 500 led gains among the 10 main industries in the index, rallying 2.8 percent as all 81 companies increased. Wells Fargo & Co., the most valuable U.S. bank and largest home lender, climbed 3.2 percent after earnings increased 17 percent on strength in mortgage banking and a drop in expenses.
Bank of America Corp., Microsoft Corp. and Caterpillar Inc. climbed more than 2.6 percent to helped lead gains in the Dow, with all 30 stocks in the gauge advancing except for Hewlett- Packard Co. Phillips 66 rallied 5.9 percent after Buffett said Berkshire Hathaway has invested in the refiner.
Procter & Gamble Co., the world’s largest consumer-products company, rose 2.2 percent. Board members are dissatisfied with Chief Executive Officer Robert McDonald’s performance and are discussing a possible leadership change, according to people familiar with the situation. P&G jumped 3.8 percent yesterday as the Federal Trade Commission cleared William Ackman’s hedge-fund company to buy a stake.
JPMorgan Results
JPMorgan’s net income fell to $4.96 billion, or $1.21 a share, from $5.43 billion, or $1.27, in the same period a year earlier. The largest U.S. bank by assets also restated first- quarter earnings, reducing net income by $459 million, and used securities gains and an $800 million accounting benefit to help boost profit.
Dimon said he hopes the company can buy back stock in the fourth quarter of 2012 after it completes a review of trading losses in the chief investment office.
By capping the size of the potential loss and revamping management of the businesses responsible, Dimon may help restore investor confidence after the bank’s market value dropped $39.7 billion since April 5, when Bloomberg News first reported that the company had amassed an illiquid book of credit derivatives at the London chief investment office.
“They laid it all out,” said Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co. in Elmira, New York. “The overall earnings report is showing the company is on the upswing. Earnings will continue to do fairly well as loans come back.”
European Markets
Eight shares gained for each that declined in the Stoxx Europe 600 Index. (SXXP) Storebrand ASA rallied 8.2 percent as Norway’s second-largest publicly traded insurer said it plans to reduce costs and meet stricter European capital requirements without selling new shares. Basic-resource and telephone companies rallied more than 2.7 percent to lead gains in all 19 industry groups in the Stoxx 600.
European stock strategists are backing away from their most-pessimistic forecasts as policy makers agree on measures to tackle the region’s debt crisis. While sticking to predictions for losses of as much as 16 percent, Morgan Stanley’s Ronan Carr raised his recommendation on European equities to neutral on July 2 and Alain Bokobza of Societe Generale SA said he has started to reduce the underweight call he’s had for at least two years. Exane BNP Paribas said investors can find bargains among companies most reliant on economic growth.
The euro recovered after earlier slumping as much as 0.3 percent to $1.2163, the lowest since June 2010. The shared currency strengthened against nine of 16 major peers, rising at least 0.3 percent versus the Taiwanese dollar, Brazilian real and Swedish krona.
ECB Speculation
The ECB is prepared to further ease monetary policy, including lowering its deposit rate below zero percent and implementing more non-standard liquidity measures as early as September, if warranted, Medley Advisors wrote in a report.
The MSCI Emerging Markets Index added 1.4 percent, rebounding from a two-week low. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong increased 0.8 percent, the biggest one-day gain since July 3. South Korea’s Kospi Index, Russia’s Micex and the Bovespa in Brazil each rallied at least 1.5 percent.
Italy’s 10-year bond yield increased 15 basis points to 6.06 percent. The yield spread above benchmark German bunds was 14 basis points higher at 4.80 percentage points. Moody’s Investors Service reduced Italy’s bond rating by two levels and reiterated its negative outlook.
Crude oil rallied 1.2 percent to $87.10 a barrel in New York, climbing for a third straight day. Copper surged 2.6 percent. Corn climbed 1.1 percent and soybeans rose 1.5 percent as drought in the U.S. worsens crop conditions.
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