S&P 500 Index Advances 1.2%; Berlusconi Offers Conditional Resignation

Bikram Pandey
08 Nov, 2011
New York City

U.S. indexes gained more than 1% led by an increase in financial and resource stocks. Italian Prime Minister offered a conditional resignation that may lead to early elections. Banks in Europe took more write down on Greek bonds and UK retail sales were weaker than expected. M&S sales dropped 10%.

[R]5:20 PM New York – U.S. indexes gained more than 1% led by an increase in financial and resource stocks. Italian Prime Minister offered a conditional resignation that may lead to early elections. Banks in Europe took more write down on Greek bonds and UK retail sales were weaker than expected. M&S sales dropped 10% in the first half.[/R]

U.S. stocks traded higher after financials led the gainers for the second day and commodities gained after positive domestic earnings. McDonald’s said U.S. comparable sales in October increased 5.2%. General Dynamics agreed to acquire Force Protection for $360 million.

Across the Atlantic, Italian turmoil deepened the political crisis in Europe after Berlusconi lost a key vote. The statement issued by office of the President of Italy Girgio Napolitano was terse and left the options open for both leaders.

The statement issued noted that the prime minister understand the “implications” of the vote results in the lower house today and went on to add that suggested that reforms agreed with European partners needs to be passed urgently.

Prime Minister Berlusconi offered a conditional resignation if the lawmakers passed the reforms agreed with the European Union. The decision also throws open several possibilities including an early election or a technical government appointed by the president of Italy.

Italian bond yields surged near 7%, with markets expressing its deep reservation to the continued turmoil in the government.

In corporate earnings, AmeriGas said fourth quarter net loss widened to $45.2 million. Fossil third quarter net rose 2.1% to $69.6 million. General Dynamics agreed to acquire Force Protection. priceline.com third quarter net soared to $469.5 million. Rockwell fourth quarter soared 53% to $201.8 million.

European markets advanced after investors looked beyond Italian turmoil. Societe Generale third quarter earnings decline on Greek bonds write down and the French bank suspended its dividend.

Marks & Spencer reported better than expected earnings and first half earnings declined 10% to 315 million. The decline was less than expected on stronger than expected grocery sales increase of 4.6% in the twelve weeks to October.

Primark, discount apparel retailer controlled by Associated British Foods reported adjusted operating profit declined to 309 million in the year ended September 17.

Separately, UK retail chain association reported same store sales declined in October 0.6% from a year ago.

Stocks in Japan declined for the second day in a row as the yen hovered near recent highs. Toyota Motor reported worse than expected operating profit in the first half. Olympus plunged 29% to a 16-year low after the company admitted securities laws violations.

Toyota reported lower than expected earnings in the second half and also withdrew its annual earnings and unit sales outlook on the production disruption linked to Thailand.

Australian stocks closed higher and the dollar declined. Trade surplus in September declined to A$2.56 billion after exports fell 3% and imports edged down 1%. Short term tourist arrivals were nearly flat in the month at 500,600.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond closed up to 2.08% and 30-year bond increased to 3.14%.

The U.S. dollar rose 0.5% at $1.3784 to one euro and closed lower against the Japanese yen to 77.68.

Immediate delivery futures of Texas crude oil increased $1.42 to $96.94 a barrel and futures of natural gas increased 6 cent to $3.76 per mbtu and gasoline prices decreased 1.3 cents to 271.46 cents a gallon.

In metals trading, copper increased 1.35 cents to $3.55 per pound, gold decreased $4.70 to $1,786.40 per ounce and silver increased $0.17 to $35.01.