NEW YORK, NY - JUNE 29: Traders work on the floor of the New York Stock Exchange on June 29, 2012 in New York City. The market soared over 2% in New York in response to the Euro Zone bail out package. (Photo by Andrew Burton/Getty Images)
Today: Europe's economic deal gives Wall Street gigantic gains, but second quarter still a disaster for stocks. Also: Facebook's run of positive weeks ends, put tech IPOs kick into gear again; and other tech stocks find gains.
A huge Europe-fueled rally puts cherry on top of sour second-quarter sundae
Wall Street's sad second quarter ended Friday with a rally that felt like an ice-cold lemonade to investors stranded in a desert for months, with a long-awaited deal for European security providing immediate relief and hopes that the summer will bring even more gains.
The spark was a deal European leaders agreed on Thursday night, which guarantees funding for troubled banks across Europe, bypassing governments that had been told they had to adopt strict austerity measures in order to receive bailout funds. The move -- which came from a summit many investors and experts expected would accomplish nothing -- is a relief to those who have been concerned that the European economy was on the brink of collapse.
"The move to recapitalize banks directly is a big deal and will help to break the 'vicious
circle' between banks and sovereigns that has been at the very heart of this crisis," ABN AMRO economist Nick Kounis told Reuters.The effect on Wall Street was immediate, as stocks took off as Friday's trading session began and ended with the most positive day of 2012 for the tech-heavy Nasdaq and broad-based Standard & Poor's 500 indexes, which rose 3 percent and 2.5 percent, respectively. The blue-chip Dow Jones industrial average had its second-best day of 2012 with a 2.2 percent rise.
"Uncertainty is diminishing," David Kelly, chief global strategist at JPMorgan Funds, told the Associated Press. "These are all big question marks that have been out there, and as those question marks decrease, stock prices and interest rates increase."
The large gains pushed the S&P to its best June in more than a decade, as investors who typically sell off stocks before the lull of the summer months pushed back into the market. For the month, the Dow rose 3.9 percent, the S&P climbed 4 percent and the Nasdaq added 3.8 percent.
Thos gains could not offset the large losses from April and May, however, as concerns about the economy -- domestically and abroad -- had investors selling their stocks for the relative security of bonds. For the second quarter, which also ended on Wall Street at the end of Friday's session, the Dow fell 2.5 percent, the S&P 500 lost 3.3 percent and the Nasdaq dropped 5.1 percent.
With a European deal complete, however, investors hope the summer quarter continues Friday's momentum.
"You are going to be see a nice summer rally out of this. Think of where this market would be if it hadn't been for the euro crisis," Paul Mendelsohn, chief investment strategist at Windham Financial Services, told Reuters. "The market is now looking at least six to eight months forward on what is the economic landscape going to look like in an improving European growth environment."
Facebook returns to losses as IPO market tries to get back on track
The biggest news of the second quarter from Wall Street was Facebook's record-breaking initial public offering, which was followed by the stock tanking hard for two weeks after its debut. As a result of Facebook's struggles, as well as the negative economic outlook, the second quarter was dismal for IPOs, according to Renaissance Capital, with only $37.5 billion raised in IPOs worldwide -- nearly half of that coming from Facebook.
Even with Facebook's IPO -- which Renaissance said was the 7th largest public debut of all time -- there was a 52 percent drop year-over-year in the number of IPOs and a 35 percent drop in proceeds. "The global IPO market will need an improvement in overall market conditions and IPO price discounts to get back on track," the IPO tracker wrote in its second-quarter report.
Technology IPOs experienced a warm return to Wall Street on Friday, however, as the first major tech company to debut publicly since Facebook saw its shares jump 37 percent in its first day of trading. ServiceNow, a San Diego-based enterprise software company, sold 11.7 million shares for $18 apiece -- above its initial range of $15 to $17 -- and saw the stock end Friday at $24.60.
Facebook, meanwhile, was one of the few technology stocks that failed to move higher Friday, as the Menlo Park company broke a string of two consecutive positive weeks. After gaining more than 10 percent in each of the past two weeks, Facebook fell 5.9 percent this week as analysts from the company's underwriting banks issued lukewarm reports about the stock that sowed doubts about the company's earnings capability, and the company admittedly flubbed a change to users' email preferences.
Analysts will get their chance to see what Facebook's earnings look like on July 26, when the company will issue its first quarterly earnings report as a public company. Facebook notified investors and analysts of the date Friday on its investor relations page, which had been noticeably scant of information.
Facebook fell 0.9 percent Friday, its third consecutive negative session and fourth daily fall of the week. The world's most popular social network ended the second quarter with a stock price of $31.09, 18.2 percent lower than the IPO price of $38 but 21.8 percent higher than the lowest price paid for the stock so far, $25.52.
Tech stocks bounce back with large gains
Facebook was certainly the outlier in Friday's trading, however, as other Silicon Valley tech stocks shot higher after recent struggles.
Palo Alto-based VMware rebounded strongly from Thursday's losses with a gain of 8.3 percent after FBR Capital Markets analyst Daniel Ives issued a report rebutting beliefs that lessening demand globally would hammer the company's earnings. Redwood City software giant Oracle (ORCL) moved up 5.4 percent after RBC Capital Markets analyst Robert Breza upgraded the company's outlook and price target.
Hardware companies received a needed bounce after falling Thursday on doubts that European customers would be yearning for their products. Apple (AAPL) gained 2.6 percent, Hewlett-Packard (HPQ) increased 3.9 percent, and NetApp rose 6.5 percent. Even social-media stocks (not named Facebook) gained Friday, with LinkedIn rising 3.4 percent, Zynga increasing 1.1 percent and Yelp moving up 1 percent.
Silicon Valley tech stocks
Up: VMware, NetApp, Splunk, Advanced Micro Devices, Oracle, Symantec, Juniper, Nvidia, Cisco (CSCO), Intuit (INTU), HP, Electronic Arts (ERTS), Adobe (ADBE), SunPower (SPWRA), LinkedIn, Intel (INTC), eBay (EBAY), Google (GOOG), Apple
Down: Facebook, Tesla
The tech-heavy Nasdaq composite index: Up 85.56, or 3 percent, to 2,935.05
The blue chip Dow Jones industrial average: Up 277.83, or 2.2 percent, to 12,880.09
And the widely watched Standard & Poor's 500 index: Up 33.12, or 2.49 percent, to 1,362.16
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.
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