Tue Jun 12, 2012 5:17pm EDT


* Volatile trading before weekend Greek elections * Spanish bond yields come off euro-era high * Short interest on NYSE highest since October * Michael Kors stock rallies after results, outlook * Dow up 1.3 pct, S&P 500 up 1.2 pct, Nasdaq up 1.2 pct By Edward Krudy NEW YORK, June 12 (Reuters) - U.S. stocks took their cuesfrom Europe's troubled debt markets on Tuesday, staging acomeback rally to end up more than 1 percent as Spanish bondyields came off euro-era record highs. Trading has been choppy this week as investors struggle forclarity over whether the $125 billion bailout for Spanish banksagreed over the weekend will be effective and have turned tobond yields as a thermometer for risk aversion. Economically sensitive sectors that had sold off recentlywere the strongest performers, suggesting investors saw value inbeaten down shares, while traders looked for an oversold bounceas the S&P 500 slipped back toward 1,300. "We are just being held hostage by all the news flow," saidFrank Lesh, a futures analyst and broker at FuturePath TradingLLC in Chicago. "I don't think anyone has a handle on this." "Right now everyone has got a pretty short-term tradingmentality," he said. "You have to be ready to abandon yourthoughts and change your mind at a moment's notice." Economically sensitive shares that rise and fall as fearsebb and flow were the biggest gainers. Materials, financial andindustrial shares were up over 1.5 percent. Boeing Co led the Dow, climbing 3.5 percent, helpedby an upgrade by Sanford C. Bernstein, which said it saw abetter outlook for the company's new Dreamliner plane. For the week so far, the S&P is close to flat, reflectingthe uncertainty in the market. For the day the Dow Jones industrial average gained162.57 points, or 1.31 percent, to 12,573.80. The Standard &Poor's 500 Index rose 15.25 points, or 1.17 percent, to1,324.18. The Nasdaq Composite Index added 33.34 points,or 1.19 percent, to 2,843.07. The S&P financial sector gained 1.7 percent, almostreversing Monday's decline. Bank of America Corp said itwill reduce its long-term debt by about $40 billion in thesecond quarter, reducing its interest expense by $230 millionper quarter. Its shares rose 2.9 percent to $7.49. The S&P 500 index lost 6.3 percent in May on concerns aboutthe European financial crisis and signs of an economic slowdownin the United States and China. Despite initial enthusiasm over the EU aid package for Spainagreed over the weekend, the S&P fell more than 1 percent onMonday on questions about the terms of the bank-rescue deal andthe impact it could have on Spanish debt levels. Trading was volatile during the day. Wall Street dippedearlier as yields on Spain's 10-year bond hit 6.86 percent, thehighest level since the 1999 launch of the euro, pointing tostress in the nation's debt markets shortly after the bailoutdeal was agreed. With the news flow so uncertain many traders are takingtheir cues from market levels, with 1,300 on the S&P 500emerging again as a focus this week. "We held 1,300 on the S&P, so OK I'll buy against it andhere's what you got," said Lesh. "But do I have any confidenceto be holding the positions or feel comfortable with it short orlong? This stuff reverses against you and usually overnight." "At this point I have at least a break-even stop so if themarket does reverse it takes me out with no loss or a minimalloss," he said. Volume was low for a third day. Around 6.2 billion sharestraded hands on the NYSE, the Amex and the Nasdaq, about 12percent below the 20-day moving average. Data late Monday showed that short interest on the NYSEjumped 6.1 percent to 14.3 billion shares in late May, thehighest level since early October, indicating an increasedexpectation that stocks will fall. Investors are also staring down the barrel of upcomingelections in Greece. The ballot on Sunday is viewed as a majorrisk that could result in the country leaving the euro zone. Butit could also spark a rally if the outcome favors Greece'sbailout agreement with international lenders. "It's certainly possible that we recover all the May losses,I think that is on the table," said Peter Jankovskis, co-chiefinvestment officer at OakBrook Investments LLC in Lisle,Illinois. Nasdaq halted short sales of Zynga Inc asshares of the social gaming company plummeted 10.3 percent onincreased concerns that the craze for games on Facebook has already peaked. The stock was the most traded on Nasdaq. Also in company news on Tuesday, shares of Michael KorsHoldings Ltd jumped 7.6 percent to $41.10 after thedesigner clothing company reported a stronger-than-expectedfourth-quarter profit and gave a full-year outlook that exceededWall Street's forecast.
  • Link this
  • Share this
  • Digg this
  • Email
  • Reprints