Wall Street ends best week of year as aid for Spain's banks seen near

 
1 of 2. Floor governor Patrick King (L) announces the start of trading of Healthcare Trust of America, Inc. on the floor of the New York Stock Exchange June 6, 2012.
Credit: Reuters/Brendan McDermid  NEW YORK (Reuters) - Spain blinked. And Wall Street jumped. The U.S. stock market ended Friday's session with its best weekly gains of the year in a rally late in the day after sources told Reuters that Spain was expected to ask the euro zone on Saturday for money to bail out its troubled banks.
If the scenario unfolds as expected this weekend, Spain would become the fourth country to seek aid since Europe's debt crisis began. That could go a long way toward ending the uncertainty and worry that Spain's banking woes could prolong a downturn in the euro zone into recession and hurt the U.S. economy for the foreseeable future.
Five senior European Union and German officials said euro-zone deputy finance ministers would hold a conference call on Saturday morning to discuss Spain's request for help to recapitalize its banks. This was seen as an effort to stem the tide of worsening market turmoil.
"They're asking for the banks to be allowed to tap" the European Financial Stability Facility, said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, whose firm manages about $13 billion in assets.
"So I think that gives folks some hope, but most of these measures tend to be temporary boosts to investor psychology."
U.S. President Barack Obama said on Friday that European leaders face an "urgent need to act" to resolve the region's financial crisis as the threat of a renewed recession there spells dangers for an anemic U.S. recovery.
On Friday, the S&P financial index .GSPF rose 1.2 percent while the KBW bank index .BKX climbed 1.7 percent and shares of JPMorgan Chase & Co (JPM.N) advanced 2.7 percent to $33.68 - all adding to gains just ahead of the close.
The Dow Jones industrial average .DJI rose 93.24 points, or 0.75 percent, to end at 12,554.20. The Standard & Poor's 500 Index .SPX gained 10.67 points, or 0.81 percent, to 1,325.66. The Nasdaq Composite Index .IXIC climbed 27.40 points, or 0.97 percent, to close at 2,858.42.
For the week, the Dow advanced 3.6 percent, the S&P 500 rose 3.7 percent and the Nasdaq jumped about 4 percent - the best percentage weekly gains for all three indexes since December.
As the euro zone's fiscal troubles grew worse in recent weeks, even Ronald McDonald felt the pinch.
Underscoring the impact of Europe's debt crisis, McDonald's Corp (MCD.N), the world's largest hamburger chain, reported a lower-than-expected rise in global same-store sales in May and warned that austerity measures in Europe were taking a toll. McDonald's stock fell 0.7 percent to $87.75, causing the biggest drag on the Dow.
Stocks' strong gains came about a week after the benchmark S&P 500 index fell more than 6 percent in May and dropped just below its 200-day moving average, signaling a technical bounce for equities.
But the rally took place on light volume of 6.2 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, compared with the year-to-date daily average of 6.85 billion shares.
Shares of Facebook (FB.O) added 3 percent to $27.10.
CNBC reported that Swiss bank UBS (UBSN.VX) may have lost as much as $350 million from trading Facebook's stock amid the confusion of the social network's glitch-ridden debut on May 18. UBS was not immediately available for comment.
Though financials gained steam late in the session, telecommunications was the day's best-performing S&P 500 sector. Verizon Communications Inc (VZ.N) gained 1.9 percent to $42.44 and the S&P telecom sector index .GSPL rose 1.5 percent.
Among other names in the news, Chesapeake Energy Corp (CHK.N) plans to sell its pipeline and related assets to Global Infrastructure Partners in three separate transactions worth more than $4 billion, as the company scrambles to plug an estimated $10 billion funding shortfall.
In addition, Chesapeake shareholders delivered a broad rebuke of the company's board, withholding support for two members up for re-election in the wake of a governance crisis and poor financial performance. Chesapeake's stock gained 2.9 percent to $18.36.
Best Buy Co Inc (BBY.N) founder and Chairman Richard Schulze resigned from the retailer's board on Thursday and said he was exploring options for his 20.1 percent ownership stake, a move seen as a possible precursor of a Schulze-led private takeover.

Room for Debate: Are Banks Making Too Much Money From Fees?

AppId is over the quota
AppId is over the quota
Kevork Djansezian/Getty Images

Some banks have begun offering lucrative services that were once left to check cashing storefronts and payday loan outfits. The banking industry as a whole earned nearly $30 billion last year from overdraft fees on debit cards and checking accounts. Two years ago almost all banks offered free checking, now about a third do. Since the collapse of the housing bubble, and the recession, banks have been making more money from consumer fees. Do these charges need to be more closely regulated or limited, or are they necessary for the health of the banks, and the economy.

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Japanese banks project better than expected year

Three of Japan "megabanks"-Mitsubishi UFJ financial group, Mizuho Financial Group and Sumitomo Mitsui Financial Group, is already expected to see heavy Bond trading gains and low levels of write-offs of bad loans, which have raised profits in recent years.
Since Japan's long battle against deflation persists, loan demand in the home is likely to remain slow, adding to pressure banks to move to expand abroad and compensate their prospects for lack of internal growth.
"We want to see if they can generate solid gains on loans under the current situation of low interest rates," says Chikako Horiuchi, Director of financial institutions of Fitch Ratings. "The driver will be overseas loans, so we must see how the banks to increase the volume in overseas loans. This will be key to determining the profit Outlook for the banks, "it added.
On Tuesday the second largest lender of Mizuho, Japan by assets, forecast net profit of ¥ 500 billion, or $ 6.26 billion, for the financial year ending in March 2013, this is well above the expected profit of 374.2 billion ¥, but to only 3.1 per cent of the year casts. The improvement is mainly due to expectations that its investment banking arm, Mizuho Securities, will swing to profit in the current year, after the loss of booking last year.
Sumitomo Mitsui expects net profit for the year, beginning on 1 April of ¥ 480 billion, down 7.4 percent last financial year, but the consensus estimates of analysts for the remuneration of 441.2 billion ¥. Mitsubishi UFJ, the largest creditor of Japan, forecast net profit of 670 billion ¥. This would represent a reduction of the rate of 31.7 of the year casts – when profit is removed from a hefty one-time accounting gain on the value of its investment in Morgan Stanley 22%-and is in line with analysts forecasts.
With limited exposure to the troubled debt of Europe Japanese banks enjoy solid income a year, which throws. Their results have been removed from trading profits of the bird Government bonds, while their large equity portfolios I have these adjustments during the January-March quarter, since the criterion high stock market index rose 19.3 percent.
Exploiting the retreat by European rivals in Asia and other markets, the Japanese banks have benefited from the sharp growth in overseas lending and an active search is based on a series of recent acquisitions. In January Sumitomo Mitsui agrees to purchase the lease of the aircraft business of the Royal Bank of Scotland, in a transaction value 7.3 billion. Mitsubishi UFTJ, whose unit is UnionBanCal says, will buy based on California Pacific, Capital Bancorp for about 1.5 billion dollars, said it may spend more than 1 trillion ¥ over the next three years, foreign acquisitions.
But forecasts for the growth of entries in the books of overseas borrowing of the largest banks in Japan is not sufficient to compensate for a fall in their home market, which still accounts for 70% to 80% of the profits. The outstanding loans of large Japanese banks fell to 30-straight month in April, down 1.3% from a year earlier, according to data from the Central Bank.

Room for Debate: Are Banks Making Too Much Money From Fees?

AppId is over the quota AppId is over the quota Kevork Djansezian/Getty Images
Some banks have begun offering lucrative services that were once left to check cashing storefronts and payday loan outfits. The banking industry as a whole earned nearly $30 billion last year from overdraft fees on debit cards and checking accounts. Two years ago almost all banks offered free checking, now about a third do. Since the collapse of the housing bubble, and the recession, banks have been making more money from consumer fees. Do these charges need to be more closely regulated or limited, or are they necessary for the health of the banks, and the economy.
Read the Discussion »