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Last updated: July 1, 2013 10:35 pm
US stocks began the second half of 2013 with a broad rally led by a rise in Apple, which struggled in the first six months of the year.
The iPhone maker rose 3.2 per cent to $409.22 as reports emerged that the company was working on a new product to add to its repertoire: the “iWatch”.
The news comes at an important time for the company. Apple shares are off 23 per cent on the year to date as patent fights and increased competition have damped outlook for the consumer giant.
Apple’s gains helped the Nasdaq Composite Index, on which it is the most heavily weighted stock, to lead all major indices with a gain of 0.9 per cent to 3,434.49
The S&P 500 added 0.5 per cent to 1,614.96. US stocks continued to recover from the sell-off that followed the Federal Reserve’s most recent announcement that it would begin winding down quantitative easing later in the year if the current economic conditions persisted.
The benchmark index is now down only about 1 per cent since June 1.
Onyx Pharmaceuticals was the top performer on the day, jumping 51.3 per cent to $131.33 on news that it had rejected an unsolicited $10bn buyout bid from Amgen priced at $120 per share.
Shares in healthcare company Covidien were among the worst performers, falling 8.6 per cent to $57.41. The company said it had finalised the spin-off of its pharmaceutical business.
Financials opened broadly higher but finished the day up fractionally. Wells Fargo gained 0.2 per cent to $41.36, Bank of America was 0.5 per cent higher to $12.93, and Goldman Sachs rose 0.3 per cent to $151.75.
The Dow Jones Industrial Average was gained 0.4 per cent to 14,974.96.
The Materials sector was among the strongest areas, rising 0.8 per cent as data from Europe and the US indicated strength in the manufacturing market. Dow Chemical was up 1 per cent to $32.50, Praxair added 1.4 per cent to $116.73, and Freeport-McMoRan advanced 2.4 per cent to $28.27.
The information technology index was also higher, up 0.7 per cent with help from Apple.
Defensives were among the laggards, with utilities the lone major sector in negative territory. Wisconsin Energy was off 1.7 per cent to $40.29, Northeast Utilities System dropped 1.8 per cent to $41.25, and Public Service Enterprise Group was down 2.5 per cent to $31.85.
The sell-off at the end of June took the shine off an otherwise strong first half of the year, in which the S&P 500 rose 12.6 per cent. Bears had argued that the rally was based primarily on support from the Fed, and that equity prices were set for a fall.
They were proven briefly right, but a return to positive territory in four of the past six trading sessions may indicate that the market is moving on from its reliance on Fed support.
Furthermore, there is some historical precedent that the second half of the year will bolster the bulls. Since 1945, in the years in which the S&P 500 rose more than 10 per cent in the first half, the market added an average of 7.5 per cent in the next six months and rose 76 per cent of the time, according to a report from S&P Capital IQ.
“I think that the market is realising that the correction is over,” said Sam Stovall, chief equity analyst at S&P Capital IQ. “The market will morph itself from a liquidity driven rally to a fundamental driven rally.”
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