Stocks End Off Lows After Merkel Report
Stocks finished slightly lower Thursday but staged an impressive comeback in the last half-hour of trading following reports that Germany's Angela Merkel canceled the EU summit's press conference tonight, giving hope to traders that the European leaders are working to form a solution to tackle the region’s ongoing debt crisis.
Stocks had been sharply under pressure all day after the Supreme Court upheld a key part of President Obama's health care overhaul and amid skepticism over this week's two-day EU summit.
“Cancel the press conference—That means they’re still working on things," said Art Cashin, director of floor operations at UBS Financial Services.
The Dow Jones Industrial Average slipped 24.75 points, or 0.20 percent, to close at 12,602.26. The Dow was down as many as 176 points at its lowest.
The S&P 500 erased 2.81 points, or 0.21 percent, to end at 1,329.04. The Nasdaq declined 25.83 points, or 0.90 percent, to finish at 2,849.49. The Nasdaq earlier briefly turned negative for the month of June. The CBOE Volatility Index, widely considered the best gauge of fear in the market, closed above 19.
In the last week, Merkel had refused to discuss the issue of debt burden sharing unless national budget controls across the euro zone are introduced first. (Read More: From Nazi to Terminator, Europe's Media Target Merkel) Meanwhile, a spokesman for German Finance Minister Wolfgang Schaeuble said that a report that Germany could be willing to move sooner than expected to accept shared liability of euro zone debt was not true.
Italian bond yields spiked to their highest level since December 2011 following 5- and 10-year bond auctions ahead of the summit.
The Supreme Court upheld the individual health insurance requirementin President Obama's health-care law, a victory for Democrats and Obama. (Read More: What Is the Health Insurance Mandate?)
Obama called the Supreme Court's decision "a victory for people across the country," while Mitt Romney said he will work "on my first day as president" to repeal the law if he's elected in November.
Medicaid-related stocks such as Amerigroup and Molina jumped following the announcement. And hospital stocks including Universal Health, Community Health and Tenet Healthcare rallied.
But most managed care companies such as Cigna , Wellpoint and Aetna dragged.
- Track Key Health Care Stocks Here
Experts were mixed on the announcement.
“The follow-through from this in the next few days and weeks is that more money will come into health care now that the cloud of uncertainty has been lifted,” said Credit Suisse's Charles Boorady. “And as a country, we’re going to spend about $2 trillion more on health care with this law and that’s all money coming into health care, which will ultimately be good for the managed health care stocks.”
Meanwhile, Barry Knapp of Barclays said public policy uncertainty will continue to rise, putting further damper on business confidence.
“It’s a pretty clear negative,” said Knapp. “Markets were going down anyway and this is just going to be a pretty clear negative catalyst over the next or two as opposed to something to stop the bleeding.”
Losses from JPMorgan’s derivatives trades may reach as high as $9 billion, compared to previously reported estimates for $2 billion according to a report in the New York Times.
Separately, Citi analysts have cut second quarter earnings estimates and price targets for JPMorgan, Bank of America, Goldman Sachs, and Morgan Stanley.
Barclays tumbled a day after an investigation found the bank had manipulated key market interest ratesover several years. British authorities warned that criminal proceedings could follow.
Wells Fargo resumed its "outperform" rating on Apple and "market perform" rating on Dell , Hewlett-Packard , IBM and NetApp .
And News Corp formally announced plans to splitits entertainment and publishing businesses.
Among earnings, Family Dollar slumped after the retailer posted a smaller-than-expected gain in earnings. Research In Motion , Nike and Accenture are slated to report after the closing bell.
On the economic front, GDP increased at a 1.9 percent annual rate, according to the Commerce Department in its final reading, which was unchanged from its estimate last month and in line with expectations.
And weekly jobless claims fell 6,000 to a seasonally adjusted 386,000, according to the Labor Department. The four-week moving average for new claims slipped 750 to 386,750.
“The reports confirm a weak economy,” said Rex Macey, CIO of Wilmington Trust Investment Advisors. “People are also watching what’s going on in Europe with the summit and expectations have been low. The problems there are big and you’re not going to solve this in a day or two.”
Treasury prices pared some gainsafter the government auctioned $29 billion in 7-year notes at a high yield of 1.075 percent and bid-to-cover of 2.64.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
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