Wall St rebounds after steep drop, banks lead

Bank shares among the worst hit on Thursday, rose after Moody's announced credit downgrades

U.S. stocks rose on Friday, led by gains in bank shares, as the S&P 500 index bounced back from its second-worst decline of the year.

The benchmark index slid 2.2 percent on Thursday, its biggest drop since June 1, on signs of a global slowdown in manufacturing growth.

Bank shares, among the worst hit on Thursday, rose after Moody's Investors Service announced credit downgrades, ranging from one to three notches, for 15 of the world's largest banks. The downgrades reflected the banks' risk of losses from volatile capital market activities.

JPMorgan Chase & Co shares rose 2 percent to $36.21 following a 2.6 percent drop Thursday. The KBW Bank index <.BKX> gained 1.6 percent.

 

"It was such a hard selloff yesterday, a relentless selloff with a lot of downside volume at the close. Coming out of that, you usually get at least some kind of a rebound," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

"As for Moody's downgrade, it was pretty much expected. The focus continues to be Europe at this point."

Boosting market sentiment, leaders of Germany, France, Italy and Spain agreed on a 130 billion euros package to revive growth in the region.

The Dow Jones industrial average <.DJI> was up 76.33 points, or 0.61 percent, at 12,649.90. The Standard & Poor's 500 Index <.SPX> was up 9.49 points, or 0.72 percent, at 1,335.00. The Nasdaq Composite Index was up 27.97 points, or 0.98 percent, at 2,887.06.

Merck & Co was the top points gainer on the S&P 500, up 1.9 percent at $40.21.

Trading volume was light with only about 3.3 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq in late afternoon trade.

But the volume is expected to spike toward the market's close, just before Russell Investments announces the rebalancing of its indexes. Assets totaling $3.9 trillion are benchmarked to the indexes globally.

Facebook shares , which Russell named in its preliminary list of additions to the Russell 3000 index, have rallied more than 21 percent in the past two weeks. The shares were up 4.5 percent to $33.29 on Friday but were still off from the $38 initial public offering price.

Darden Restaurants Inc fell 0.5 percent to $50.16 after the operator of Olive Garden and Red Lobster restaurant chains reported sales that missed estimates and forecast weaker-than-expected profits.

Ryder Systems Inc slumped 13.2 percent to $35.37 after the transportation and logistics company cut its quarterly earnings forecast, citing lower demand at its commercial rental business.

Shares of Arena Pharmaceuticals Inc fell about 13.4 percent to $10.05 on Friday, ahead of a key meeting in which U.S. regulators are expected to rule on whether to approve its experimental weight-loss drug.