Stocks Volatile on Fed Moves and Euro Debt

Wall Street started off June with weak jobs numbers, and the Commerce Department released a first quarter economic growth report that was softer than expected. The churning mess of debt woes in Europe kept volumes down early, but stocks moved into more active and positive terrain as the month wore on.

As our trading session ended June 29, various reports, both globally and at home, pointed arrows in different directions, but investors listened to the positive reports and sent stock numbers higher, especially at the month and quarter end. China cut its benchmark lending rate for the first time in four years. Moody’s downgraded a dozen banks worldwide, but banking stocks rallied on the news, and also on word that the G20 nations would help stabilize global banking systems. Economic growth news from China and European powerhouse Germany showed further signs of deterioration.

Consumers joined Europe to pressure the gains in the market, with The Conference Board reporting a drop in consumer confidence from 64.4 in May to 62.0 in June. Economists were expecting a reading of 63.5. This was the lowest reading of the index since last November and the fourth drop in four months. The Thomson Reuters/University of Michigan index on consumer sentiment was off in June, to a reading of 73.2, from 79.3 in May; economists were expecting a reading of 74.1.

One bright spot was the long-suffering Standard & Poor’s/Case-Shiller index, which revealed home price increases in 19 of 20 cities that the index tracks. Stocks of homebuilders jumped on the news. “There’s some good news out there, especially if you look at the housing market, ” said John De Clue, regional investment director of U.S. Bank’s wealth management unit in Minneapolis. “But there’s this overriding theme: concerns over global growth. Things are pretty much slowing everywhere you look.”

Business Alabama stocks were stronger than the national indices, with local stocks up a strong 49.59 points, or 6.20 percent, and closing at 848.80. Advancing issues dominated declining issues by a 6-to-1 margin. The Comprehensive Index also was strong, posting a gain of 36.81 points, or 4.40 percent, and ending at 873.56. Advancing issues overpowered declining issues by a 36-to-11 count.

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Vulcan Materials jumped 5.06 points, or 14.60 percent, this month. S&P Ratings took VMC off its credit watch after the company repelled overtures by Martin Marietta to acquire the company. Vulcan had been on S&P’s Credit Watch since mid-December 2011. S&P also affirmed VMC’s “BB” corporate rating with an outlook of stable. Susquehanna Investment Group upped its rating on Vulcan Materials to “positive” from “neutral.” VMC closed at 39.71 and was the top dollar gainer in the Alabama Index.

Walter Energy had a dismal month and crumbled 4.29 points, or 8.85 percent, to end at 44.16. The company said at the end of June that it expects a poor second quarter because of weaker prices for metallurgical coal. Although WLT said that production was higher for the quarter, revenue and earnings will suffer because of lower coal pricing. Walter ended at 44.16 and was the top dollar loser in Alabama stocks.

HealthSouth gained on news that it plans to construct an inpatient rehabilitation hospital in the Orlando area. HLS said that the 50-bed hospital will treat victims of stroke, brain and orthopedic injuries and other trauma. The construction of the facility is expected to begin in the first quarter of 2013 and to start operations by the same time the following year. HLS closed at 23.26, an increase of 4.12 points, or 21.53 percent. HealthSouth was the top percentage gainer in the Alabama Index.

VF Corp. lost 7.59 points, or 5.38 percent, this month despite robust growth expectations announced by the company’s Vans unit. The shoe and clothing brand said it anticipates adding $1 billion in revenue over the coming five years. Vans said it expects revenues to reach $2.2 billion by the close of 2016, an estimated 13 percent growth per year. The company said it expects growth to come from direct sales to consumers, from new markets and new products. VFC closed at 133.45, and was the top dollar loser in the Comprehensive Index.

Raytheon added 6.27 points, or 12.46 percent, with a new $338 million contract from the Navy for its Tomahawk Block IV tactical cruise missile. The contract includes replacements for armaments used last year and for additional purchases for this year. Research firm Stifel Nicolaus resumed coverage of Raytheon with a rating of “buy.” The investment firm said that it thinks defense stocks are close to a bottom but that Raytheon presents long-term buying opportunities. Stifel Nicolaus has a $63 price target on the stock. Raytheon ended at 56.59 and was the top dollar gainer in the Comprehensive Index.

Margot Crabtree, publisher of Trade Trends Inc., covers Alabama stocks exclusively for Business Alabama. She lives in Spokane, Wash.

by Margot Crabtree

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