a-12-year-low

`Bullish’ Biggs Sees U.S. Stocks Advancing 10% to 15% in Next Few Months

by on March 9, 2010

By Rita Nazareth and Carol Massar March 9 (Bloomberg) — Barton Biggs , who recommended buying U.S. stocks in March of last year when the Standard & Poor’s 500 Index sank to a 12-year low, said American equities may rise 10 percent to 15 percent over the next couple of months. “I’m bullish,” Biggs, who runs New York-based hedge fund Traxis Partners LP, said in an interview with Bloomberg Television today. “Earnings are coming in very, very strong. The surprise is going to be how good economic growth is.” The S&P 500 is up 69 percent since hitting a 12-year low of 676.53 one year ago today , the biggest rally for the index since the 1930s. The U.S. government spent trillions of dollars to stimulate the economy out of the worst contraction since the Great Depression. Biggs also said the world’s most attractive equities are in emerging markets. “I like the Asian emerging markets, and particularly at this point China and India.” To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; Carol Massar in New York at cmassar@bloomberg.net ;

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`Bullish’ Biggs Sees U.S. Stocks Advancing 10% to 15% in Next Few Months

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U.S. Stocks Advance on Anniversary of S&P 500 Index’s 2009 Bear-Market Low

by on March 9, 2010

By Rita Nazareth and Elizabeth Stanton March 9 (Bloomberg) — U.S. stocks rose on the anniversary of the 2009 bear-market low for the Standard & Poor’s 500 Index amid speculation the economy will continue to recover from the worst contraction since the Great Depression. American International Group Inc. surged 13 percent on speculation the insurer will sell more assets. United Technologies Corp., General Electric Co. and AT&T Inc. led gains in the Dow Jones Industrial Average . Boeing Co. advanced after Northrop Grumman Co. withdrew as a bidder for a U.S. Air Force contract. Benchmark indexes briefly erased gains in the final hour as the S&P 500 climbed within 0.5 percent of its 2010 high. The S&P 500 rose 0.2 percent to 1,140.45 at 4:10 p.m. in New York. The Dow Jones Industrial Average advanced 11.86 points, or 0.1 percent, to 10,564.38. Six stocks advanced for every five that fell on the New York Stock Exchange and Nasdaq Stock Market. “It’s happy anniversary day,” said Philip Orlando , New York-based chief equity market strategist at Federated Investors Inc., which oversees $400 billion. “The economy is out of recession, the improvement is sustainable and stocks will continue grinding higher. Investors are waiting for the next catalyst.” The S&P 500 is up 69 percent since hitting a 12-year low of 676.53 one year ago today, the biggest rally for the index since the 1930s. The main benchmark for U.S. stocks has recovered losses after sliding as much as 8.1 percent from this year’s high amid concern that some European countries’ will fail to pay back debt and speculation the Federal Reserve will need to rein in emergency stimulus measures as the economy improves. ‘Still Cheap’ Improving profits have reduced the S&P 500’s valuation to 18.3 times its companies reported operating earnings, compared with a multiple of 22.9 in December. “Stocks are still cheap,” said billionaire Kenneth Fisher , who oversees $37 billion as chairman of Fisher Investments Inc. in Woodside, California. “The nature of the beginning of the second year of a bull market is one where people are still climbing the wall of worry and they have ‘acrophobia,’” he said, referring to the fear of heights. The S&P 500 climbed as high as 1,145.37 today, near the 15- month closing high of 1,150.23 reached on Jan. 19. The rally that day extended the index’s advance from March 9, 2009, to 70 percent. “I believe we’ll play around that 1,150 level until we decide to go one way or the other,” said James Paulsen , who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “We might break through this, but we need catalysts.” AIG Rallies AIG led gains by financial companies bailed out by the U.S. government on speculation the insurer will sell more assets after raising $51 billion through deals. “We’re hearing some rumors AIG might sell more assets,” said Michael Nasto , the senior trader at U.S. Global Investors Inc., which manages about $2.5 billion in San Antonio. “Their ability to raise capital is a positive thing. Back on the days when they were having all those problems, there was talk of whether or not the company could even be salvaged. Not only they are still around, the companies under their umbrella have value.” AIG jumped 13 percent to $32.77 for the biggest gain in the S&P 500. Citigroup Inc. advanced 7.3 percent to $3.82 for the second-biggest gain in the index as Fox Business Network said the U.S. may sell its stake in the bank within three months, without saying where it got the information. Fannie Mae climbed 5.9 percent to $1.07, and Freddie Mac increased 7.6 percent to $1.28. Risk Assets “We’re poised for risk assets to do well for a few quarters,” said David Darst , the New-York based chief investment strategist at Morgan Stanley Smith Barney, which has $1.6 trillion in client assets. “The interest rate is low, inflation is low and liquidity is enormous. The final positive is global growth.” United Technologies had the biggest gain in the Dow average, rising 1.4 percent to $71.78. The maker of Pratt & Whitney jet engines and Otis elevators was raised to “outperform” from “neutral” at Cowen & Co. UAL Corp. rose 3.7 percent to $18.16. The parent of United Airlines said February revenue for each passenger flown a mile increased by between 17 percent and 19 percent. Boeing, Sprint Boeing gained 0.8 percent to $67.79. The world’s second- largest commercial-plane maker is the only bidder for the U.S. Air Force’s $35 billion tanker program after Northrop Grumman withdrew because the government refused to alter some of its requirements. Sprint Nextel Corp. had the third-biggest gain in the S&P 500, jumping 6.5 percent to $3.62. The third-largest U.S. wireless company advanced for a second day after saying it expects revenue growth in the next several quarters and saying it will pay down debt and control expenses. Sprint, the third-largest U.S. wireless carriers, led a 1.2 percent rally in telephone companies, the biggest advance among 10 groups. Industrial shares climbed 0.8 percent as a group, the second biggest gain of the 10. Yum! Brands Inc. climbed 3.4 percent to $36.60. UBS AG upgraded the shares to “buy” from “neutral” and raised its price estimate on the shares by 16 percent to $44, saying the stock has underperformed its global consumer peers. Comerica Inc. retreated 1.6 percent to $35.70. The bank, with a market value of about $5.5 billion, is raising about $800 million by selling shares. BMO Capital Markets cut its rating on the shares to “market perform” from “outperform.” First Solar Inc. fell 2.2 percent to $106.22. The world’s largest maker of thin-film solar modules was downgraded to “underweight” from “neutral” at JPMorgan. Energy Conversion Devices Inc. , also lowered to “underweight” from “neutral” at JPMorgan, fell 8.1 percent to $7.87. To contact the reporters on this story: Elizabeth Stanton in New York at estanton@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloomberg.net .

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U.S. Stocks Advance on Anniversary of S&P 500 Index’s 2009 Bear-Market Low

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Stocks in U.S. Advance on Anniversary of 2009 Bear-Market Low for S&P 500

March 9, 2010

By Rita Nazareth and Elizabeth Stanton March 9 (Bloomberg) — U.S. stocks rose on the anniversary of the 2009 bear-market low for the Standard & Poor’s 500 Index amid speculation the economy will continue to recover from the worst contraction since the Great Depression. United Technologies Corp., Microsoft Corp. and General Electric Co. led gains in the Dow Jones Industrial Average . Boeing Co. advanced after Northrop Grumman Co. withdrew as a bidder for a U.S. Air Force contract. UAL Corp. rallied 8.5 percent after reporting an increase in a measure of revenue. The S&P 500 rose 0.6 percent to 1,144.82 at 1:20 p.m. in New York. The benchmark gauge for U.S. equities ended a six-day rally and closed little changed yesterday. The Dow Jones Industrial Average advanced 53.81 points, or 0.5 percent, to 10,606.33. “It’s happy anniversary day,” said Philip Orlando , New York-based chief equity market strategist at Federated Investors Inc., which oversees $400 billion. “The economy is out of recession, the improvement is sustainable and stocks will continue grinding higher. Investors are waiting for the next catalyst.” The S&P 500 is up 69 percent since hitting a 12-year low of 676.53 one year ago today, the biggest rally for the index since the Great Depression. The main benchmark for American equities is still down more than 1 percent from this year’s high amid concern about some European countries’ ability to pay back debt and as investors speculated the Federal Reserve will need to rein in emergency stimulus measures as the economy improves. ‘Acrophobia’ “Stocks are still cheap,” said billionaire Kenneth Fisher , who oversees $37 billion as chairman of Fisher Investments Inc. in Woodside, California. “The nature of the beginning of the second year of a bull market is one where people are still climbing the wall of worry and they have ‘acrophobia’ because they didn’t expect we’d go up so much and that gives them fear of heights. We’ll see the year nicely higher.” “We’re poised for risk assets to do well for a few quarters,” said David Darst , the New-York based chief investment strategist at Morgan Stanley Smith Barney, which has $1.6 trillion in client assets. “The interest rate is low, inflation is low and liquidity is enormous. The final positive is global growth. At the end of this year, we’ll be looking at 2011 earnings, when the market can earn $85. If you put a 14 times multiple on that, it gives you a 1,233 price for the S&P 500.” United Technologies United Technologies increased 1.9 percent to $72.09. The maker of Pratt & Whitney jet engines and Otis elevators was raised to “outperform” from “neutral” at Cowen & Co. UAL rose 8.5 percent to $19. The parent of United Airlines said February revenue for each passenger flown a mile increased by between 17 percent and 19 percent. Boeing gained 1.1 percent to $68. The world’s second- largest commercial-plane maker is the only bidder for the U.S. Air Force’s $35 billion tanker program after Northrop Grumman withdrew because the government refused to alter some of its requirements. Sprint Nextel Corp. rose the most in the S&P 500, jumping 7.4 percent to $3.65. The third-largest U.S. wireless company advanced for a second day after saying it expects revenue growth in the next several quarters and saying it will pay down debt and control expenses. Sprint Rallies Sprint, the third-largest U.S. wireless carriers, led a 1.6 percent rally in telephone companies, the biggest advance among 10 groups. Industrial shares climbed 1 percent as a group, the second biggest gain of the 10. Yum! Brands Inc. climbed 3.7 percent to $36.72. UBS AG upgraded the shares to “buy” from “neutral” and raised its price estimate on the shares 16 percent to $44, saying the stock has underperformed its global consumer peers. Comerica Inc. retreated 1.6 percent to $35.72. The bank, with a market value of about $5.5 billion, is raising about $800 million by selling shares. BMO Capital Markets cut its rating on the shares to “market perform” from “outperform.” First Solar Inc. fell 1.7 percent to $106.75. The world’s largest maker of thin-film solar modules was downgraded to “underweight” from “neutral” at JPMorgan. Energy Conversion Devices Inc. , also lowered to “underweight” from “neutral” at JPMorgan, fell 2.9 percent to $8.31. To contact the reporters on this story: Elizabeth Stanton in New York at estanton@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloomberg.net .

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Abby Cohen Sees S&P 500 Fair Value at 1,250 to 1,300 on Economic Recovery

February 17, 2010

By Rita Nazareth and Thomas R. Keene Feb. 17 (Bloomberg) — The Standard & Poor’s 500 Index may rise to between 1,250 and 1,300, said Abby Joseph Cohen , the Goldman Sachs Group Inc. strategist known for calling the bull market in the 1990s. The S&P 500 , which closed at 1,094.87 yesterday, would need to rise as much as 19 percent to reach the high end of Cohen’s prediction. The benchmark gauge for U.S. stocks has risen 62 percent from a 12-year low in March after governments around the world spent trillions of dollars to stimulate the economy. The index has retreated 4.8 percent from a 15-month high on Jan. 19 as widening fiscal gaps in Greece, Portugal and Spain spurred concern Europe faces another recession. “We do think the market overall is likely undervalued,” Cohen, 57, said on Bloomberg Radio. “The recession is over and has been over for several months. Not every sector recovers at the same pace. We’d be looking in some of those areas focusing on economic improvement.” Cohen said technology shares and commodities producers are attractive because of the prospects for revenue growth and improved demand. The industries have both gained 77 percent since the S&P 500 dropped to a 12-year low on March 9, 2009. The top-ranked strategist in Institutional Investor’s surveys in 1998 and 1999, Cohen stayed bullish on computer- related stocks for too long as the S&P 500 suffered a bear market from March 2000 to October 2002. She said in October 2000 that technology stocks would be a good investment in 2001. The S&P 500 Information Technology Index then tumbled 26 percent. Cohen, a senior investment strategist, was replaced by David Kostin as Goldman Sachs’s chief forecaster for the U.S. stock market in March 2008. She had been the second most-bullish Wall Street strategist at the start of that year, when the S&P 500 tumbled 38 percent, its worst annual loss in seven decades. Cohen told Bloomberg Radio on Aug. 17 that the U.S. economy was “on the mend” and predicted that profit growth would be more “substantial.” To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net ; Thomas R. Keene in New York tkeene@bloomberg.net .

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Stocks in U.S. Rise on Earnings, Economic Data; Whole Foods Market Climbs

February 17, 2010

By Nikolaj Gammeltoft Feb. 17 (Bloomberg) — U.S. stocks advanced, a day after the biggest rally since November for the Standard & Poor’s 500 Index , as better-than-estimated earnings, industrial production and housing data bolstered confidence in the economy. Deere & Co., the largest maker of farm equipment, surged 5.2 percent after profit was boosted by lower raw-material costs. Whole Foods Market Inc. , the biggest U.S. natural-goods grocer, jumped 11 percent after raising its earnings forecast. Equities pared gains as the dollar rallied, dragging down commodities, after a ratings downgrade of securities issued by Greek banks spurred concern credit losses will continue to weigh on financial markets. The Standard & Poor’s 500 Index climbed 0.2 percent to 1,097.2 at 11:53 a.m. in New York after rising as much as 0.6 percent earlier. The Dow Jones Industrial Average increased 26.75 points, or 0.3 percent, to 10,295.56. Stocks in Europe climbed after results from BNP Paribas SA and Deutsche Boerse AG beat analysts’ estimates. Asian shares also advanced. “We’ve seen reasonably good earnings numbers with some companies showing strong performance like John Deere today,” said Jason Cooper , who manages $2.5 billion at 1st Source Investment Advisors in South Bend, Indiana. “The economic data are showing improvement and we’re going in the right direction, but we’ve still got a long way to go.” U.S. stocks rallied yesterday as New York manufacturing grew at the fastest pace in four months. The S&P 500 has fallen 4.5 percent from a 15-month high on Jan. 19 as widening fiscal gaps in Greece , Portugal and Spain spurred concern Europe faces another recession. The index is still up more than 62 percent from a 12-year low in March. Housing, Industrial Production Housing starts in the U.S. topped the median economist estimate of 580,000, a sign that government support is helping to stabilize the real estate market. Industrial production rose 0.9 percent in January, more than the median forecast of 0.7 percent, indicating factories were leading the recovery entering the new year. Hovnanian Enterprises, New Jersey’s largest homebuilder, increased 3 percent to $4.08. Hovnanian was rated new “buy” at Bank of America Corp. ‘Good Shape’ “The market is in good shape and the economy is coming around,” said Neil Hennessy , who oversees $900 million as president of Hennessy Advisors Inc. in Novato, California. “Companies are pulling us out, business is leading the economy.” A record nine-quarter earnings slump is projected by analysts to have ended in the fourth quarter with an 80 percent increase in S&P 500 profits. Forty-five companies in the index are scheduled to release results this week, including Hewlett- Packard Co. today. More than 350 companies in the S&P 500 have reported fourth-quarter earnings since Jan. 11, and about 76 percent have beaten analysts’ estimates on a per-share basis, according to data compiled by Bloomberg. Deere surged 5.2 percent to $56.57. The company raised its full-year net income forecast to about $1.3 billion, from $900 million. The company also reported first-quarter profit of 57 cents a share, nearly tripling the average estimate in a Bloomberg survey. Whole Foods climbed 11 percent to $33.78 in New York. Full- year earnings may total $1.20 to $1.25 a share, up from a previous forecast of $1.05 to $1.10. Analysts predicted $1.09, the average of 16 estimates in a Bloomberg survey. Separately, the shares were raised to “overweight” from “neutral” at JPMorgan Chase & Co. Home Depot Upgrade Home Depot gained 1.5 percent to $29.89. The world’s largest home-improvement retailer was raised to “outperform” from “market perform” at Oppenheimer. Walgreen Co. rose 0.4 percent to $34.20. The U.S. operator of more than 7,100 drugstores agreed to buy Duane Reade Holdings Inc. from affiliates of Oak Hill Capital Partners for $1.08 billion, including debt, to expand in metropolitan New York. SanDisk Corp. rose 5.9 percent to $28.96. The biggest maker of flash-memory cards for digital cameras and mobile phones was raised to “overweight” from “equal weight” at Morgan Stanley by equity analyst Atif Malik . To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

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El-Erian Says Retreat in Stocks Will Worsen on U.S. Joblessness, Economy

February 2, 2010

By Lynn Thomasson Feb. 3 (Bloomberg) — Mohamed A. El-Erian , whose firm runs the world’s biggest mutual fund, said the largest stock market decline in 11 months may worsen amid persistent U.S. joblessness and economic growth that trails analysts’ forecasts. Investors have wrongly priced in an “orderly” withdrawal of stimulus measures, a rebound in bank lending and coordinated government policy to restore growth, the chief executive officer of Pacific Investment Management Co. wrote in a Bloomberg News column. That means Wall Street projections for gains in 2010 may prove incorrect and prices will slump, he said. “Investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes,” El-Erian, 51, wrote. “The global financial crisis has undermined growth and job creation; it has clogged many of the pipes that allocate funds to productive uses; and it has rapidly taken public debt and the budget deficit to worrisome levels.” The Standard & Poor’s 500 Index fell 3.7 percent in January, more than any month since February 2009, after China set higher reserves for lenders and U.S. President Barack Obama proposed curbs on risk taking at banks. The retreat pared the S&P 500’s gain since sinking to a 12-year low in March to 59 percent. The MSCI Emerging Markets Index lost 5.7 percent last month, also the biggest decrease since February. ‘Sugar High’ The benchmark index for U.S. equities traded for more than 24 times annual income at the end of 2009, the most since 2002, according to data compiled by Bloomberg. The ratio slipped to 19 times profits as 77 percent of S&P 500 companies earned more in the fourth quarter than analysts predicted. “Judging from market valuations, I sense quite a gap between consensus market expectations and key political and economic realities, especially in the U.S.,” he wrote. El-Erian, whose firm manages $1 trillion from Newport Beach, California, said in a July 29 interview on CNBC that the rally in U.S. equities was a “sugar high” that wouldn’t be sustained by economic growth. The S&P 500 has climbed 13 percent since then. On Oct. 10, 2008, he said the “point of exhaustion” for the credit crisis was “far away.” The S&P 500 decreased 25 percent through March 9, falling in four of five months . The 13 Wall Street strategists tracked by Bloomberg News project that the S&P 500 will rise 10 percent in 2010, according to the average estimate. The average year-end forecast of 1,232 represents an advance of 12 percent from yesterday’s close of 1,103.32. New Normal Pimco’s Bill Gross and El-Erian say investors should expect returns that trail the historical average because of more government regulation, lower consumption and a smaller role for the U.S. in the global economy. American gross domestic product may expand 2.7 percent in 2010 and 2.9 percent in 2011 as demand recovers from the first global recession since World War II, based on the median economist forecast from a Bloomberg survey. U.S. equities returned 6 percent a year on average since 1900, according to inflation-adjusted data compiled by the London Business School and Zurich-based Credit Suisse Group AG in a February 2009 report. The U.S. government’s budget deficit in the fiscal year that ended Sept. 30 was a record $1.42 trillion. El-Erian wrote that too many market participants assume the U.S. will pass “pro-growth medium-term fiscal adjustment programs” and that the integrity of public institutions will be maintained. “A more realistic assessment of these factors would caution against an excessive focus on changes in growth rates at a time when absolute levels are horribly out of whack,” he wrote. “The longer this is delayed, the greater the scope for policy mishaps and market disappointments.” To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .

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U.S. Stocks Fall Most Since October on Limits on Bank Speculation, China

January 24, 2010

By Elizabeth Stanton Jan. 23 (Bloomberg) — U.S. stocks declined for a second week , sending the Standard & Poor’s 500 Index to the biggest drop since October, as banks plunged on a White House proposal to limit financial risk and China moved to cool economic growth . JPMorgan Chase & Co. and Morgan Stanley slumped more than 8 percent as President Barack Obama called for limiting speculation to prevent another financial crisis. Exxon Mobil Corp. lost 4.4 percent and Alcoa Inc. tumbled 14 percent on concern Chinese demand for commodities will slow. The S&P 500 erased its 2010 gain, retreating 3.9 percent to 1,091.76 for the week after closing at a 15-month high on Jan. 19. The Dow Jones Industrial Average fell 436.67 points, or 4.1 percent, to 10,172.98. The Nasdaq Composite Index decreased 3.6 percent to 2,205.29. “It’s a one-two punch,” Ralph Fogel , head of investment strategy at Fogel Neale Partners in New York, said of the curbs on Chinese growth and Wall Street firms. “In the end it’s going to have the same impact — less flow of money into the marketplace.” The three-day, 5.1 percent tumble to end the week was the biggest decline for the S&P 500 since it sank to a 12-year low in March. The VIX, an index of volatility known as Wall Street’s “fear gauge,” jumped 55 percent to 27.31 over the period, its largest gain since 2007. Uncertainty over whether Federal Reserve Chairman Ben S. Bernanke will win Senate confirmation for a second term beginning Feb. 1 even with Obama’s backing undermined investor confidence, traders said. Barbara Boxer of California and Russ Feingold of Wisconsin said they will oppose Bernanke. Positive Surprises Stocks fell even as most companies releasing fourth-quarter results beat analyst estimates. Of 62 companies in the S&P 500 that reported earnings, 46 were better than the average analyst estimate, according to data compiled by Bloomberg. A record nine-quarter earnings slump is projected to have ended in the fourth quarter with a 73 percent increase in S&P 500 profits. More than 130 companies in the index are scheduled to release results next week, including Apple Inc., 3M Co. and Microsoft Corp. Treasuries rose, sending yields lower. The benchmark 10- year note’s yield dropped to 3.61 percent from 3.67 percent. The S&P 500 still is up more than 60 percent from a 12-year low in March, with a valuation of about 14.2 times the combined operating earnings forecast for its companies this year. Bank Retreat JPMorgan, the second-largest U.S. bank, and Morgan Stanley, the world’s biggest brokerage, led financial companies in the S&P 500 to a 5.2 percent drop. Obama asked Congress on Jan. 21 to bar banks from proprietary trading solely for their own profit and sponsoring private-equity and hedge funds. Obama in June proposed an overhaul of U.S. financial regulations to fix lapses in oversight and risk-taking that helped push the economy into a recession in 2008. The economy grew in the third quarter for the first time in more than a year, and may have expanded at a 4.6 percent rate in the fourth quarter, the fastest pace in four years. That’s the median estimate of economists surveyed by Bloomberg for the Commerce Department’s first estimate of the fourth-quarter growth, to be released Jan. 29. Exxon Mobil , the largest U.S. energy company, fell 4.4 percent to $66.10. Crude oil slumped 4.9 percent to a one-month low amid speculation China, poised to overtake Japan as the world’s second-largest economy after the U.S., will raise interest rates to keep economic growth from igniting inflation. Commodity Prices Alcoa, the biggest U.S. aluminum producer, tumbled 14 percent to $13.40, the biggest drop in the Dow average. Aluminum, copper, lead, nickel and zinc declined after China guided three-month bill yields higher for the second time in two weeks. Also scheduled for next week are reports on new and existing home sales in December and January consumer confidence, and the Fed’s Jan. 27 meeting on interest rates. Regional banks in the S&P 500 advanced after Fifth Third Bancorp and KeyCorp, Ohio’s biggest lenders, reported fourth- quarter losses that were smaller than analysts estimated . Fifth Third climbed 6.5 percent. Keycorp rose 5.4 percent. IBM fell 4.8 percent to $125.50, its biggest weekly drop since March. The world’s largest computer services company said sales of business services fell 2.8 percent in the fourth quarter as its customers reined in costs. Kraft Food Inc. fell 5.8 percent to $27.87 after Cadbury Plc of the U.K. accepted its $19.2 billion takeover bid. Health-care stocks fell 1.9 percent as a group, the smallest drop among the 10 industries in the S&P 500, after Republican Scott Brown won a special election to the Senate. Brown’s victory cost Democrats their 60-vote supermajority, imperiling legislation to overhaul health care. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

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U.S. Stocks Fall Most Since October Amid Curbs on Bank Speculation, China

January 23, 2010

By Elizabeth Stanton Jan. 23 (Bloomberg) — U.S. stocks declined for a second week , sending the Standard & Poor’s 500 Index to the biggest drop since October, as banks plunged on a White House proposal to limit financial risk and China moved to cool economic growth . JPMorgan Chase & Co. and Morgan Stanley slumped more than 8 percent as President Barack Obama called for limiting speculation to prevent another financial crisis. Exxon Mobil Corp. lost 4.4 percent and Alcoa Inc. tumbled 14 percent on concern Chinese demand for commodities will slow. The S&P 500 erased its 2010 gain, retreating 3.9 percent to 1,091.76 for the week after closing at a 15-month high on Jan. 19. The Dow Jones Industrial Average fell 436.67 points, or 4.1 percent, to 10,172.98. The Nasdaq Composite Index decreased 3.6 percent to 2,205.29. “It’s a one-two punch,” Ralph Fogel , head of investment strategy at Fogel Neale Partners in New York, said of the curbs on Chinese growth and Wall Street firms. “In the end it’s going to have the same impact — less flow of money into the marketplace.” The three-day, 5.1 percent tumble to end the week was the biggest decline for the S&P 500 since it sank to a 12-year low in March. The VIX, an index of volatility known as Wall Street’s “fear gauge,” jumped 55 percent to 27.31 over the period, its largest gain since 2007. Uncertainty over whether Federal Reserve Chairman Ben S. Bernanke will win Senate confirmation for a second term beginning Feb. 1 even with Obama’s backing undermined investor confidence, traders said. Barbara Boxer of California and Russ Feingold of Wisconsin said they will oppose Bernanke. Positive Surprises Stocks fell even as most companies releasing fourth-quarter results beat analyst estimates. Of 62 companies in the S&P 500 that reported earnings, 46 were better than the average analyst estimate, according to data compiled by Bloomberg. A record nine-quarter earnings slump is projected to have ended in the fourth quarter with a 73 percent increase in S&P 500 profits. More than 130 companies in the index are scheduled to release results next week, including Apple Inc., 3M Co. and Microsoft Corp. Treasuries rose, sending yields lower. The benchmark 10- year note’s yield dropped to 3.61 percent from 3.67 percent. The S&P 500 still is up more than 60 percent from a 12-year low in March, with a valuation of about 14.2 times the combined operating earnings forecast for its companies this year. Bank Retreat JPMorgan, the second-largest U.S. bank, and Morgan Stanley, the world’s biggest brokerage, led financial companies in the S&P 500 to a 5.2 percent drop. Obama asked Congress on Jan. 21 to bar banks from proprietary trading solely for their own profit and sponsoring private-equity and hedge funds. Obama in June proposed an overhaul of U.S. financial regulations to fix lapses in oversight and risk-taking that helped push the economy into a recession in 2008. The economy grew in the third quarter for the first time in more than a year, and may have expanded at a 4.6 percent rate in the fourth quarter, the fastest pace in four years. That’s the median estimate of economists surveyed by Bloomberg for the Commerce Department’s first estimate of the fourth-quarter growth, to be released Jan. 29. Exxon Mobil , the largest U.S. energy company, fell 4.4 percent to $66.10. Crude oil slumped 4.9 percent to a one-month low amid speculation China, poised to overtake Japan as the world’s second-largest economy after the U.S., will raise interest rates to keep economic growth from igniting inflation. Commodity Prices Alcoa, the biggest U.S. aluminum producer, tumbled 14 percent to $13.40, the biggest drop in the Dow average. Aluminum, copper, lead, nickel and zinc declined after China guided three-month bill yields higher for the second time in two weeks. Also scheduled for next week are reports on new and existing home sales in December and January consumer confidence, and the Fed’s Jan. 27 meeting on interest rates. Regional banks in the S&P 500 advanced after Fifth Third Bancorp and KeyCorp, Ohio’s biggest lenders, reported fourth- quarter losses that were smaller than analysts estimated . Fifth Third climbed 6.5 percent. Keycorp rose 5.4 percent. IBM fell 4.8 percent to $125.50, its biggest weekly drop since March. The world’s largest computer services company said sales of business services fell 2.8 percent in the fourth quarter as its customers reined in costs. Kraft Food Inc. fell 5.8 percent to $27.87 after Cadbury Plc of the U.K. accepted its $19.2 billion takeover bid. Health-care stocks fell 1.9 percent as a group, the smallest drop among the 10 industries in the S&P 500, after Republican Scott Brown won a special election to the Senate. Brown’s victory cost Democrats their 60-vote supermajority, imperiling legislation to overhaul health care. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

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France’s Top Fund Manager Lalevee Bets on Growth, Emerging Markets in 2010

January 22, 2010

By Adria Cimino Jan. 22 (Bloomberg) — Sebastien Lalevee , manager of France’s two best-performing domestic equity funds in 2009, says he will continue his success this year by investing in faster- growing companies and those that get sales in emerging markets. The Financiere Arbevel Pluvalca France fund returned 66 percent last year, beating the benchmark SBF 120 Index’s 24 percent advance and all comparable funds, according to data compiled by Bloomberg. The Pluvalca France Small Caps fund, also managed by Lalevee, jumped 63 percent. Lalevee, 38, benefited in 2009 from companies most tied to economic growth, including Paris-based chemical company Rhodia SA and Bull SA, France’s largest computer maker. For this year, the Pluvalca France fund, which can invest as much as 25 percent of assets outside France, has been buying shares of Copenhagen- based brewer Carlsberg A/S to profit from its expansion in emerging markets and Neubiberg, Germany-based Infineon Technologies AG, Europe’s second-largest semiconductor maker. “In periods of economic instability, such as today, we favor growth shares,” Lalevee, who left his analyst position at Citigroup Inc. in 2008, said in an interview. “Last year, it was about industry picking. Today it’s about choosing high- quality growth stocks in each industry.” Lalevee bought fund-management company Arbevel in February 2009 with Jean-Baptiste Delabare , the former head of European research at Citigroup, and started running the 22 million-euro ($31 million) Pluvalca France fund in March. Missed the Worst The timing meant they missed the worst two months of the year for European shares. The Dow Jones Stoxx 600 Index slid 13 percent over the first two months of 2009, before rallying 61 percent from a 12-year low on March 9 through year end. “I arrived at the right time, with the right idea,” said Lalevee, whose company oversees a total of 60 million euros. “If I had arrived two months earlier, I would have invested the same way and would have had two months of underperformance behind me.” Shares of Rhodia, Bull, Paris-based property developer Nexity SA and computer-services company Groupe Steria SCA all more than doubled in 2009 as the Stoxx 600 rebounded from the previous year’s record decline. The gauge surged 28 percent last year, the biggest jump in a decade, boosted by record-low interest rates in the U.S. and Europe and about $12 trillion of commitments from governments worldwide to revive credit markets. This year, the Pluvalca France fund added to holdings of Paris-based Audika SA , Europe’s second-largest hearing-aid distributor, and at the end of last year bought shares in Ecully, France-based Groupe SEB SA, the world’s biggest maker of countertop kitchen appliances. ‘Surprise Positively’ “I’m looking for companies that have the potential to surprise positively with their earnings per share growth,” Lalevee said. Lalevee’s returns came without the aid of a single bank, the second-best performing industry in Europe in 2009 after basic-resources shares, and he is still avoiding the stocks. European banks plunged 49 percent after the collapse of Lehman Brothers Holdings Inc. in September 2008 through year end, before rallying 47 percent in 2009. “Off balance sheet, it’s a black box,” Lalevee said. “If there was a rug, there would be a lot still under there.” He said valuations for banks won’t return to the levels prior to the credit crisis as it’s now “a different world.” While Lalevee says he’s confident for 2010, he has a “Plan B” portfolio of stocks that he will buy if the current earnings reporting season disappoints. The backup list includes companies that pay higher dividends, pharmaceutical shares and telecommunication stocks. “We can’t have 50 Alcoas ,” he said, referring to the U.S. aluminum producer that kicked off the fourth-quarter earnings season on Jan. 11 with profit that trailed analyst estimates. “There’s a real risk to earnings, that expectations are too high. If the trend isn’t satisfactory, we’ll be more cautious.” To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net .

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Dollar Falls, Treasuries Climb After U.S. Employers Unexpectedly Cut Jobs

January 8, 2010

By Michael P. Regan Jan. 8 (Bloomberg) — U.S. stocks slipped and Treasury two- year notes gained the most in three weeks after American employers unexpectedly eliminated jobs last month, spurring concern the economic recovery will falter. The Standard & Poor’s 500 Index fell 0.1 percent to 1,140.79 at 2:47 p.m. in New York, retreating from a 15-month high. Two-year Treasury yields dropped below 1 percent. The Dollar Index , which gauges the U.S. currency against those of six major trading partners, declined 0.6 percent to 77.474. The Labor Department said the U.S. lost 85,000 jobs in December, compared with the median economist estimate in a Bloomberg survey that called for no change in payrolls. The decrease in employment wiped out November’s gain. Global equities rose before the report on speculation the labor market improved in the world’s largest economy. “People are still losing some jobs here, even in the fourth quarter,” said Jason Cooper , who manages $2.5 billion at 1st Source Investment Advisors in South Bend, Indiana. “The economy, it’s not as good as what people were anticipating. And I think that’s reflected in what the markets are doing.” Benchmark U.S. equity indexes trimmed losses after inventories at wholesalers unexpectedly jumped in November by the most in five years. That signaled companies are picking up the pace of orders as sales climbed 3.3 percent, the biggest gain since January 2008. Equities also recovered from their lows of the session amid diminishing bets on an interest rate increase by the Federal Reserve. Fed funds futures trading showed a 33 percent chance the central bank will lift its benchmark rate by its June meeting, down from 60 percent odds a week ago. Yield Curve The yield difference between 2- and 10-year notes widened to 2.87 percentage points, near the record 2.88 percentage points reached on Dec. 22, as the U.S. prepared to sell $21 billion of 10-year securities on Jan. 13 and $13 billion of debt maturing in 30 years on Jan. 14. The government will also sell $10 billion in 10-year Treasury Inflation Protected Securities on Jan. 11 and $40 billion of 3-year notes on Jan. 12. The cost to protect against defaults on corporate bonds in North America and Europe rose following the jobs report. Credit- default swaps on the Markit CDX North America Investment-Grade Index Series 13, which is linked to 125 companies and used to speculate on creditworthiness or to hedge against losses, rose 0.25 basis point to a mid-price of 77.875 basis points, according to Barclays Capital. The dollar weakened against 15 of 16 major counterparts, losing at least 1 percent versus the South African rand, Brazilian real and Swiss franc. Copper futures for March delivery dropped 0.3 percent to $3.4165 a pound on the Comex division of the New York Mercantile Exchange. Before today, the most-active contract rose 2.4 percent this week. Global Stocks The MSCI World Index of 23 developed nations added 0.5 percent. Europe’s Dow Jones Stoxx 600 Index added 0.4 percent, extending its fourth straight weekly gain, as UBS AG recommended banks and German exports topped forecasts. The MSCI Asia Pacific Index climbed 0.7 percent. Li & Fung Ltd., which supplies clothes to Wal-Mart Stores Inc., rose 1.8 percent after December sales topped estimates at U.S. retailers yesterday. The S&P 500 rallied 23 percent last year, including a rebound of 65 percent from a 12-year low in March, after governments around the world enacted stimulus measures and the Federal Reserve left its benchmark interest rate near zero to end the recession. The biggest annual rally in six years left the index trading at almost 25 times its companies’ reported earnings from continuing operations, the highest level since 2002, according to Bloomberg data. Earnings Season Approaches The combined profit of companies in the S&P 500 is expected to increase in the fourth quarter from the year-earlier period for the first time since the second quarter of 2007, ending a record nine straight periods of declines. Alcoa Inc. is slated to release results Jan. 11, the first company in the Dow average to report. The company’s shares climbed 1.9 percent to $16.92. S&P 500 profits increased 62 percent in the fourth quarter, according to analyst projections compiled by Bloomberg. To contact the reporter on this story: Michael P. Regan in New York at mregan12@bloomberg.net .

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Pending Home Sales in U.S. Probably Declined for First Time in 10 Months

January 5, 2010

By Bob Willis Jan. 5 (Bloomberg) — The number of contracts to buy previously owned U.S. homes probably fell in November for the first time in 10 months as Americans waited for a tax credit to be extended, economists said before a report today. The index of signed purchase agreements, or pending home sales, dropped 2 percent after October’s 3.7 percent increase, according to the median estimate in a Bloomberg News survey of 35 economists before today’s release from the National Association of Realtors. Factory orders rose for a third straight month in November, a separate report from the Commerce Department may show. The incentive for first-time homebuyers, originally scheduled to expire at the end of the month and subsequently extended through April and broadened, is stabilizing sales. The credit and cheaper properties are helping sustain the recovery in housing that’s emerged from the worst slump since the 1930s. “Buyers wouldn’t have expected to close in time to take advantage of the credit,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Sales will improve again as we move through the first part of the year, as buyers take advantage of the tax credit and improved affordability. The underlying trend is one of improvement.” The National Association of Realtors is due to report the figures at 10 a.m. in Washington today. Estimates range from a drop of 12 percent to a 3.9 percent increase. The Commerce Department report at the same time may show orders placed with U.S. factories rose 0.5 percent in November after a 0.6 percent rise, according to the median estimate of 58 economists surveyed by Bloomberg. Leading Indicator Pending home sales are considered a leading indicator because they track contract signings. The Realtors’ existing- home sales report tallies closings, which typically occur a month or two later. The Realtors group started publishing the index in March 2005, and data go back to January 2001. Transactions had to close by Nov. 30 for buyers to qualify for the tax credit, which explains why resales continued to rise through November. The extension allows closings to occur by the end of June as long as contracts are signed by the end of April. Sales of existing homes in November rose 7.4 percent to a 6.54 million annual rate, the highest level in almost three years, the National Association of Realtors said on Dec. 22. Foreclosures accounted for 33 percent of all sales, the group said. President Barack Obama on Nov. 6 extended the $8,000 first- time buyer credit and expanded it to include current homeowners in a bid to boost demand. Still, the measure may have pulled sales forward and could result in fewer purchases in coming months. Home Prices The recession has helped make homes more affordable. The S&P/Case-Shiller index of average home prices in 20 U.S. cities was down 29 percent in October from its peak in July 2006. The measure fell 7.3 percent from October 2008. Federal Reserve officials are doing their part to sustain the housing rebound by pledging to keep their benchmark interest rate near zero for an “extended period,” according to their latest policy statement. Even so, mortgage rates have begun rising. The average rate on a 30-year fixed home loans rose to 5.14 percent for the week ended Dec. 31, the fourth consecutive gain after reaching a record low of 4.71 percent in the week ended Dec. 3, according to mortgage finance company Freddie Mac. Builders are still struggling even as many forecast a rebound this year. Hovnanian Enterprises Inc ., New Jersey’s largest homebuilder, said Dec. 16 its fourth-quarter loss narrowed as more buyers signed purchase contracts. ‘Year of Transition’ “2010 will be a year of transition for us,” Chief Executive Officer Ara Hovnanian said on a conference call. “We have started down a path that we believe will eventually return us to profitability.” Stocks of homebuilders surged last year as the economy recovered from the worst recession in seven decades. The Standard & Poor’s Homebuilder Supercomposite Index gained 66 percent from March 9 through the end of 2009. The S&P 500 Index rose 65 percent since reaching a 12-year low that day. An absence of job gains remains a hurdle for housing. The economy has lost 7.2 million jobs since the recession began in December 2007. The unemployment rate may exceed 10 percent through the first half of 2010, a Bloomberg survey showed. To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net .

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Stocks in U.S. Retreat to Trim S&P 500′s Biggest Annual Rally in Six Years

December 31, 2009

By Rita Nazareth Dec. 31 (Bloomberg) — U.S. stocks fell as an unexpected decrease in jobless claims added to evidence the economy is strengthening enough to allow the Federal Reserve to withdraw more stimulus programs. Hewlett-Packard Co. and Caterpillar Inc. lost at least 0.9 percent to lead the Dow Jones Industrial Average lower. The S&P 500 trimmed its 2009 gain to less than 25 percent after this year’s surge left it trading at 25 times its companies reported earnings, the most expensive level since 2002. The S&P 500 lost 0.2 percent to 1,124.2 at 10:47 a.m. in New York. The Dow slipped 31.29 points, or 0.3 percent, to 10,517.22. Asian shares and stocks in the U.K. and France advanced, while most European markets, including Germany and Switzerland, were closed. “There might be some fatigue in the stock market, despite momentum,” said Joseph Saluzzi , co-head of equity trading at Chatam, New Jersey-based Themis Trading LLC. “Jobless claims numbers show we’re heading in the right direction. However, you have to be careful with those weekly figures because they have a lot of seasonality and volatility. It’s also a double-edged sword. The better the economy gets, the more likely the Fed will raise rates.” The S&P 500 has rebounded 66 percent from a 12-year low in March after governments around the world enacted stimulus measures to end the recession. VIX Tumbles This year’s rally has driven down the cost of protection from losses. The VIX, as the Chicago Board Options Exchange Volatility Index is known, has tumbled 75 percent to 20 since soaring to an all-time high of 80.86 in November 2008. It measures the cost of using options as insurance against declines in the S&P 500. The S&P 500 has declined 23 percent since the end of 1999, its first drop for a decade since the 1930s. Including reinvested dividends, investors lost 0.9 percent a year since 1999, the first decade of negative annualized returns in the index’s history stretching back to 1927, according to S&P analyst Howard Silverblatt . “The new year will probably end up being a good year,” Sam Stovall , chief investment strategist at S&P, told Bloomberg Radio. “Earnings are supposed to start picking up this quarter. We’ll probably see about a 10 to 15 percent gain in the S&P 500 in the second year of this bull market.” YRC Worldwide Inc. slumped 11 percent to 89 cents. The largest U.S. trucking company said bondholders agreed to swap their debt for equity in the largest U.S. trucker, enabling the company to avoid a bankruptcy filing that may have resulted in liquidation. To contact the reporter on this story: Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net .

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Options Trading Rises to Record in U.S. Following 66% Advance in S&P 500

December 30, 2009

By Jeff Kearns Dec. 30 (Bloomberg) — Investors locking in gains from the biggest stocks rally in seven decades pushed options trading in the U.S. to a seventh straight annual record. The number of options on stocks, indexes and exchange- traded funds that changed hands in 2009 reached 3.59 billion contracts, topping the previous high of 3.58 billion set in 2008, Chicago-based Options Clearing Corp. said yesterday. OCC settles all transactions involving exchange-listed contracts. Investors bought and sold more equity derivatives to protect their assets and bet on price swings as the Standard & Poor’s 500 Index posted the biggest rally since the 1930s, surging 66 percent since sinking to a 12-year low in March. “We’ve seen a lot of people getting involved with options who weren’t before,” said Eugene Choe , head of Advanced Execution Services options sales at Credit Suisse Group AG in New York. “A lot of fund managers started hiring options traders, mostly the hedge funds.” Options give the right though not the obligation to buy or sell a security at a set price and date. The market expanded after the benchmark for U.S. equity derivatives prices posted a record annual decline. The VIX , as the Chicago Board Options Exchange Volatility Index is known, has tumbled 75 percent to 20.01 since soaring to an all-time high of 80.86 in November 2008. It measures the cost of using options as insurance against declines in the S&P 500 . ‘Scapegoat’ for 1987 While the number of options trades climbed to a record, the rate of annual growth slowed to less than 1 percent following the worst financial crisis since the Great Depression. After options volume peaked in 1987, the market took a decade to surpass that level again after derivatives were blamed in part for the stock market crash on Oct. 19, 1987, that drove the S&P 500 down 20 percent. “Options were the scapegoat for the ‘87 crash,” said Kevin Murphy , head of U.S. option electronic execution at Citigroup Inc. in New York. “Now, not only are options not to blame, they were held up as something that, if you used them properly, you could have spared some of your loss.” The S&P 500 lost 38 percent last year, the most since 1937. Options began trading in the U.S. on an exchange when the CBOE started on April 26, 1973, when 911 calls were listed on 16 stocks, according to the exchange’s Web site. There were 1.1 million contracts traded that year. Put trading was introduced in 1977. Annual options volume first exceeded 100 million contracts in 1981. Since 1997, volume has increased by at least 7.5 percent a year except 2002, when it fell 0.1 percent. Trading topped 1 billion in 2004 and 2 billion in 2006. “The level of acceptance of options as a legitimate, non- speculative vehicle to generate income and hedge has really ramped up,” said Randy Frederick , Austin, Texas-based director of trading and derivatives at Charles Schwab & Co., the largest independent U.S. brokerage by client assets. “What I hear most from customers is, ‘How can I stay in the market when it gets rocky and reduce my risk without closing my positions?’ And there are a lot of options strategies you can use to do that.” To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net .

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Trade Deficit in U.S. Probably Widened as Imports Grew Faster Than Exports

December 10, 2009

By Courtney Schlisserman Dec. 10 (Bloomberg) — The trade deficit in the U.S. probably widened in October as the growing economy caused imports to rise faster than exports, economists said before a report today. The gap grew to $36.8 billion, the widest since January, from $36.5 billion the prior month, according to the median estimate of 75 economists surveyed by Bloomberg News. Other figures may show jobless claims fell to a one-year low. FedEx Corp. and United Parcel Service Inc. are among companies benefiting from growing sales as economies recover from the worst global slump in the post-World War II era. A manufacturing rebound from the U.S. to China may sustain the expansion into 2010 as companies strive to prevent inventories from evaporating. “Global trade has started to grow again,” said James O’Sullivan , chief economist at MF Global Ltd. in New York. “The continuation of these trends, boosting imports as well as exports, is all a positive growth sign.” The Commerce Department’s trade figures are due at 8:30 a.m. in Washington. Economists’ estimates ranged from deficits of $32 billion to $41.3 billion. A report from the Labor Department at the same time may show the number of Americans filing first-time claims for unemployment insurance fell to 455,000 last week, the fewest since September 2008, from 457,000 a week earlier, according to the median estimate of economists surveyed. Projections ranged from 380,000 to 490,000. Surging Imports Imports in September jumped by the most in 16 years as American companies bought more petroleum and automobiles from overseas, causing the trade deficit to widen by the most in a decade. The price of imported oil rose 0.9 percent in October, according to figures from the Labor Department, indicating fuel costs may have again played a role in swelling the gap. A report from the Commerce Department yesterday showed inventories at wholesalers unexpectedly climbed 0.3 percent in October, led by gains in automobiles, computers and petroleum. Auto distributors are often importers, signaling that category may have also increased. The economy expanded for the first time in more than a year in the third quarter, growing at a 2.8 percent annual rate, according to data from the Commerce Department. Even so, the trade gap subtracted 0.8 percentage point from growth as imports overwhelmed the gain in exports. Stocks, Dollar Investors have turned to higher-risk assets such as stocks, spurning the relative safety of the dollar, on mounting evidence that growth will be sustained. The Standard & Poor’s 500 Index is up 30 percent since reaching a 12-year low on March 9. The dollar is down 12 percent since early March against a basket of currencies from the nation’s biggest trading partners. FedEx said Dec. 7 its fiscal second-quarter profit exceeded its forecast as international and ground shipments rose. The world’s largest cargo airline flies goods ranging from industrial parts to electronic equipment to financial documents, making its business a proxy for overseas commerce. “A lot of the packages are going to the U.S. and Europe, which means consumers here are buying things like computers and iPods,” UPS Chief Executive Officer Scott Davis said in an interview on Bloomberg Television last week. UPS, the world’s largest package-delivery company, is considered a bellwether for the economy because it handles goods ranging from auto parts to electronics to clothing. Exports Climb The drop in the dollar’s value is making American goods more attractive to shoppers overseas. Exports climbed 9.4 percent in the five months through September, the biggest such gain since comparable records began in 1992, according to Commerce Department data. “The economy is now growing and growth seems to be gradually strengthening,” Treasury Secretary Timothy Geithner said in a Bloomberg Television interview last week. “You see pockets of real strength now in technology and exports and I think they are hopeful signs of progress.” Manufacturing in the U.S. expanded in November for a fourth months and factories in China churned out goods at the fastest pace in five years, reports earlier this month showed. Trade with China is a source of tension among global leaders as the country refuses to bow to calls to allow its currency, the yuan, to appreciate. The nation has effectively pegged the yuan to the U.S. currency since July last year to shield its exporters from the global recession. To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

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Ireland’s Biggest Fund Manager Defends Returns With Lockheed, BAE Stocks

December 3, 2009

By Ian Guider Dec. 3 (Bloomberg) — Irish Life Investment Managers , Ireland’s biggest fund company, is defending its top-ranked returns by investing in makers of military equipment. Brendan Moran, who oversees 15 billion euros ($22.6 billion) as head of global equities at the Dublin-based company, bought Lockheed Martin Corp. and BAE Systems Plc because he predicts defense budgets will stay high. “Their share prices haven’t gone up; the earnings haven’t come down,” Moran, 42, said in an interview at Bloomberg’s Dublin bureau. “As a consequence, they are more attractive to us on valuation.” The U.S. government in October authorized a further $130 billion for military operations in Iraq and Afghanistan, bringing to more $1 trillion the amount spent since the Sept. 11 terrorist attacks. President Barack Obama said Dec. 1 he will send an extra 30,000 troops to Afghanistan next year. The 12 members of the Standard & Poor’s 500 Aerospace & Defense Index trade at an average ratio of 13 times their earnings compared with an average 22 for companies in the Standard & Poor’s 500 Index. Moran also said he doesn’t expect any lasting damage to stock markets because of concern over Dubai. Stocks rallied worldwide after Dubai said half its debts were “stable,” with the MSCI World Index advancing for a second day yesterday. “The greatest impact is that people will be more cautious again about risks pertaining to emerging markets,” said Moran, whose company overall has 28 billion euros under management. Buy Cheap Moran, who joined the company in 1991 and was appointed to his current post in 2005, said his investment strategy is to seek companies that are cheaper than peers based on earnings. Irish Life’s ILIM Active Global Equity fund rose an annualized 37 percent in the nine months through Sept. 30, placing it first in a ranking of 31 funds by Hewitt Associates Inc. , a consulting company based in Illinois. Its North American stock fund has gained 30 percent this year. It lost 0.2 percent on average over the last five years, making it the best performer of 14 funds tracked by Hewitt. After the collapse of Lehman Brothers Holdings Inc. in September 2008, Moran bought U.S. stocks after share price declines presented the “best opportunity” to buy cheaply of the last six years. The S&P 500 Index has surged 62 percent from a 12-year low on March 6. “There was a huge level of anxiety, uncertainty and stress in equity markets,” Moran said. “We took a very overt decision to dial up the risk.” Whirlpool, Goodyear Moran bought Whirlpool Corp. and Goodyear Tire & Rubber Co. in the first quarter after selling Exxon Mobil Corp. , Procter & Gamble Co. , Altria Group Inc. and Wal-Mart Stores Inc. , the world’s biggest retailer. Benton Harbor, Michigan-based Whirlpool, the world’s largest appliance maker, has gained 86 percent this year, while Akron, Ohio-based Goodyear, the largest U.S. tiremaker, has more than doubled. He sold them in September. The Irish fund also has made its mistakes. Moran said he bought companies in the defense industry too quickly. “We believe it’s a fantastic opportunity, but we moved on too early,” Moran said. While he bought shares in banks including Goldman Sachs Group Inc. and HSBC Holding Plc , he regrets selling Goldman in December 2008 and switching into Morgan Stanley this year. Both stocks have almost doubled in value. Goldman “hit our price target but subsequent to our sale, the earnings were significantly upgraded,” Moran said. “The rationale in buying Morgan Stanley is that they have a better mix of business and are less reliant on trading.” To contact the reporter on this story: Ian Guider in Dublin at iguider@bloomberg.net .

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S&P 500 Facing `Breakdown’ If 1,085 Support Is Broken: Technical Analysis

December 1, 2009

By Adam Haigh Nov. 30 (Bloomberg) — The Standard & Poor’s 500 Index is close to breaching a support level that may cause a short-term “breakdown” in U.S. equities of more than 3 percent, according to technical analysts at Concept Capital. The benchmark index for U.S. equities closed down 1.7 percent at 1,096.23 on Nov. 27 as Dubai’s attempt to delay debt repayments rattled investors. That’s less than 1 percent above 1,085, the support level seen by John Kolovos and Craig Peskin at New York-based Concept Capital. “A violation of that support will increase the odds of a test of the lower boundary of the trend channel” around 1,050, they wrote in a report today. The index reached the upper area of its three-month trend channel more than a week ago, according to the note. The S&P 500 hasn’t closed below 1,050 since Nov. 4. The measure has rallied more than 60 percent from a 12-year low on March 9 amid signs the world economy is improving. “While a test of the lower boundary of the current trend channel is increasingly more likely, the bigger question is whether that potential area of support will hold” around the 1,050 level , Kolovos and Peskin said. Concept Capital, an institutional broker based in New York, hired the two former Lehman Brothers Holdings Inc. analysts earlier this year to run a new technical research unit. Technical analysts look at price charts to forecast resistance levels, or ceilings restricting further price increases, and support levels, or floors limiting declines. To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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VIX Jumps the Most Since October as Dubai Seeks Debt Payment Postponement

November 27, 2009

By Jeff Kearns Nov. 27 (Bloomberg) — The benchmark index for U.S. stock options jumped the most this month after Dubai said it would seek to postpone repayment on much of its debt. The VIX , as the Chicago Board Options Exchange Volatility Index is known, surged 21 percent to 24.88 at 9:42 a.m. in New York. It gained as much as 27 percent, the most since Oct. 30. The index measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index , which lost 2.1 percent. “The market’s still skittish,” Dominic Salvino , a specialist at Group One Trading, the primary market maker for VIX options, said in an interview from the CBOE floor. “There’s a fear that any outside event could cause a run on the market because the confidence level is so low.” Stocks slid around the world yesterday after Dubai World, the government investment company, sought to delay debt repayments. The Persian Gulf emirate may have $80 billion to $90 billion in liabilities, UBS AG analysts said yesterday. Europe’s options benchmark, the VStoxx Index , jumped 28 percent yesterday for the biggest gain since Oct. 18, 2008, while U.S. exchanges were closed for Thanksgiving. Before today the VIX had fallen 75 percent from its record 80.86 close on Nov. 20 last year after equities rallied the most since the 1930s from a 12-year low in March. The volatility gauge has averaged 20.28 during its 19-year history. Options are derivatives that give the right though not the obligation to buy or sell a security at a set price and date. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility , or stock swings, will increase or decrease. To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net .

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Stocks in U.S. Fall as Autodesk, Salesforce.com Outlooks Hurt Tech Shares

November 18, 2009

By Elizabeth Stanton Nov. 18 (Bloomberg) — U.S. stocks retreated, pulling the Standard & Poor’s 500 Index down from a 13-month high, as technology companies slid on profit forecasts at Salesforce.com Inc. and Autodesk Inc. that trailed some analyst estimates. Salesforce.com, the largest seller of Web-based customer- management software, tumbled 5.2 percent for its steepest drop since June. Autodesk, the biggest maker of engineering-design software, tumbled 11 percent after saying job losses in core markets are making the company’s recovery “challenging.” Bank of America Corp. rallied 3.2 percent as John Paulson’s hedge fund said the shares may almost double as writedowns ease. The S&P 500 fell 0.2 percent to 1,108.02 at 10:42 a.m. in New York. The Dow Jones Industrial Average lost 34.46 points, or 0.3 percent, to 10,402.96. The Nasdaq Composite Index declined 0.6 percent to 2,190.48. The S&P 500 has jumped as much as 64 percent from a 12-year low in March as a four-quarter contraction in the world’s largest economy ended. The eight-month rally has pushed the index’s valuation to about 22.3 times its companies’ reported earnings, the highest level since 2002, weekly data compiled by Bloomberg show. U.S. stocks gained for a third session yesterday as a rebound in metal prices boosted commodity producers, overshadowing a smaller-than-forecast increase in industrial production. Autodesk, Salesforce.com Autodesk slid 7.6 percent to $24.94. The biggest maker of engineering-design software projected fourth-quarter profit excluding some items of 24 cents a share at most, trailing the average analyst estimate of 25 cents. Salesforce.com Inc. lost 2.6 percent to $63.94. The largest seller of Internet-based customer-management software forecast fourth-quarter profit of 14 cents to 15 cents a share. Analysts, on average, expected the company to earn 15 cents, according to Bloomberg survey. Bank of America, the largest U.S. lender by assets, jumped 3.2 percent to $16.27. Paulson & Co., the hedge-fund firm run by billionaire John Paulson, said in a quarterly letter to clients that the shares may rise to $29.81 by December 2011. “Banks will have passed the current writedown cycle and have visibility for growth in 2012,” the letter said. Bank of America dropped to $2.53 in February amid concern that the U.S. might seize banks that ran short on capital. While the bank “has risen from when we purchased the stock, we believe considerable upside remains,” the letter said. Pulte Homes Inc. added 4.6 percent to $10.04. The homebuilder that bought competitor Centex Corp. in August was raised to “buy” from “hold” and its share price estimate increased to $12 from $11 at Citigroup Inc., which said the company was “undeservedly out of favor.” Pulte led gains in all 12 shares in a gauge of homebuilders even after Commerce Department figures showed housing starts unexpectedly plunged 11 percent in October as the sales outlook dimmed with the looming expiration of a government tax credit. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net .

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U.S. Stocks Decline as Industrial Output Trails Estimates; Boeing Retreats

November 17, 2009

By Sapna Maheshwari Nov. 17 (Bloomberg) — Most U.S. stocks declined, pulling benchmark indexes down from 13-month highs, after industrial production increased less than forecast and declines in metal prices weighed on commodity producers. The dollar strengthened for the first time in three days. Caterpillar Inc. and Alcoa Inc. helped lead declines in the Dow Jones Industrial Average as the Federal Reserve said industrial output increased 0.1 percent in October, trailing the median economist estimate for 0.4 percent growth. Barrick Gold Corp. fell as the precious metal retreated from a record. The Dow’s decline was limited as Exxon Mobil Corp. advanced after Warren Buffett’s Berkshire Hathaway Inc. purchased a stake. About two stocks retreated for each that rose on the New York Stock Exchange. The Standard & Poor’s 500 Index declined 0.2 percent to 1,107.45 at 9:56 a.m. in New York. The Dow lost less than 0.1 percent to 10,401.82. “This industrial production number is pointing to weak manufacturing in the United States as well as weak demand,” said Chad Morganlander , a money manager in Florham Park, New Jersey, at Stifel Nicolaus & Co., which oversees about $98 billion in client assets. “This could put a wet blanket on the optimists for a day or two.” U.S. stocks rallied yesterday, sending the S&P 500 and Dow to the highest levels since October 2008, and commodities gained as retail sales rebounded and Asian government leaders pledged to maintain economic stimulus spending. The S&P 500 has jumped 63 percent from a 12-year low in March as a four-quarter contraction in the world’s largest economy ended. Gold Slips From Record Barrick Gold fell 1.7 percent to $43.23. Newmont Mining Corp. , the largest U.S. gold producer, dropped 1.5 percent to $51.61. Gold declined as some investors opted to lock in gains after the precious metal rose to a record yesterday. SunPower Corp. lost 18 percent to $22.29. Based on an internal review of its Philippine manufacturing operations, the company found unsubstantiated accounting entries made in the first three quarters of this year, and that results may need to be restated, the second-biggest U.S. supplier of solar modules said. Per-share earnings have topped estimates at 80 percent of S&P 500 companies that have released third quarter earnings, a record in Bloomberg data going back to 1993, even as profits slumped for a record ninth straight quarter. Hess Corp. rose 0.9 percent to $58.14. The fifth-biggest U.S. oil company was raised to “buy” from “neutral” at UBS, which cited the company’s “attractive relative valuation, strong oil price leverage, and large exploration potential.” To contact the reporter on this story: Sapna Maheshwari at smaheshwar11@bloomberg.net .

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Stocks in U.S. Gain on Better-Than-Estimated Profit at Disney, Abercrombie

November 13, 2009

By Mary Childs Nov. 13 (Bloomberg) — U.S. stocks advanced, extending a second straight weekly gain, as better-than-estimated earnings at Walt Disney Co. and Abercrombie & Fitch Co. overshadowed an unexpected slump in consumer confidence. Walt Disney, the world’s largest media company, added 3.9 percent after saying fourth-quarter profit climbed 18 percent. Abercrombie & Fitch rallied 5.3 percent. Benchmark indexes briefly erased gains after the Reuters/University of Michigan consumer sentiment index slumped to 66, trailing the median economist forecast of 71. The Standard & Poor’s 500 Index rose 0.2 percent to 1,089.46 at 10:10 a.m. in New York. The Dow Jones Industrial Average gained 39.6 points, or 0.4 percent, to 10,237.07. Stocks in Europe rose as the euro region’s economy emerged from recession in the third quarter, helped by exports from Germany and France. The S&P 500 has gained 1.9 percent this week and on Nov. 11 closed at its highest level since October 2008. The index has rallied 61 percent from a 12-year low in March, recovering almost half of its plunge from a record in October 2007, amid optimism that government stimulus programs and record-low interest rates are helping to drag the economy out of recession. Global Recovery International Monetary Fund Managing Director Dominique Strauss-Kahn said the global economic recovery will take years and won’t be a one-size-fits-all situation. Asia will lead the recovery, followed by the U.S. and then Europe, he said in Singapore today. Higher joblessness is likely for advanced nations next year, he said. Walt Disney added 3.9 percent to $30.18. Net income increased to $895 million from $760 million a year earlier. Excluding one-time items, profit of 46 cents a share beat the 41-cent average estimate of 21 analysts. Sales gained 4.5 percent to $9.87 billion in the period ended Oct. 3, topping the $9.3 billion average estimate of 18 analysts. Abercrombie & Fitch climbed 5.3 percent to $38.69 as the teen-clothing retailer reported a third-quarter adjusted profit of 30 cents per share, while analysts in a Bloomberg survey estimated 20 cents. Eighty percent of S&P 500 companies that have released results exceeded the average analyst estimate for third-quarter earnings per share, according to data compiled by Bloomberg, marking the highest proportion for a full quarter in data going back to 1993. Nordstrom Slumps Nordstrom Inc. slid 3.5 percent to $33.29 after the department-store chain with more than 100 namesake locations predicted its gross margin would widen at most by 20 basis points for the full year. Bill Dreher , an analyst with Deutsche Bank AG projected a 34 basis-point improvement. A basis point is equivalent to 0.01 percentage point. Liberty Global Inc., the international cable company controlled by billionaire John Malone , agreed to buy Unitymedia GmbH for about 2 billion euros ($2.98 billion). The stock fell 9 percent to $21. Esco Technologies Inc. lost 12 percent to $32.75. The maker of radio frequency shielding and filtration products said it expects to break even in the first quarter. Analysts, on average, estimated profit of 41 cents a share, according to a Bloomberg survey. Valuations for the smallest U.S. companies have climbed to the highest level in 13 years, raising concern they may start trailing returns from bigger stocks. Small-Cap Valuations The S&P SmallCap 600 Index trades for 34 times its companies’ earnings from the past year, or 56 percent more than the S&P 500 . Small-cap equities have gained 69 percent since markets bottomed in March, compared with 61 percent for the S&P 500, according to data compiled by Bloomberg. Investors poured the most money into U.S. stock funds in 11 months, leading global equity inflows amid a recovery in earnings and on expectations the Federal Reserve will keep borrowing costs low, EPFR Global said. Investors funneled $6.97 billion into U.S. equity funds, contributing to total inflows of $10 billion to stock funds during the week ended Nov. 11, EPFR said in a statement dated yesterday. The trade deficit in the U.S. widened in September by the most in a decade, reflecting rising demand for imported oil and automobiles as the economy rebounded from the worst recession since the 1930s. The gap grew a larger-than-anticipated 18 percent to $36.5 billion, the highest level since January, from a revised $30.8 billion in August, the Commerce Department said. To contact the reporters on this story: Mary Childs in New York at mchilds4@bloomberg.net .

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Billionaire Fisher Says S&P 500 Will Exceed 1,300 by February on Economy

November 10, 2009

By Rita Nazareth Nov. 10 (Bloomberg) — The Standard & Poor’s 500 Index will probably exceed 1,300 as early as February because the economy continues to rebound from the worst recession since the 1930s, billionaire Kenneth Fisher said. The benchmark index for U.S. stocks has surged 62 percent to 1,093.08 after sinking to a 12-year low in March. It will add up to 25 percent from last week’s close in the next three months, said Fisher, 58, who oversees $35 billion as chairman of Woodside, California-based Fisher Investments Inc. “It’s just a reversal of excessive pessimism,” Fisher, ranked by Forbes magazine as the 289th-richest person in the U.S., said in an interview yesterday. “We still have a lot more bull market to go because we had such a huge bear market.” Optimism the stock market will continue its surge helped drive the Chicago Board Options Exchange Volatility Index lower, keeping it below 50 since March. The VIX, as the measure is known, never exceeded that level before the credit crisis intensified after Lehman Brothers Holdings Inc. filed the biggest bankruptcy in September 2008. It has retreated 53 percent during the S&P 500’s eight-month rally. The S&P 500 is recovering from a 57 percent plunge from a record high in October 2007 on signs the world’s largest economy is improving. U.S. gross domestic product grew at a 3.5 percent annual rate in the July-through-September period, exceeding the median economist estimate of 3.2 percent in a Bloomberg survey, after shrinking for four straight quarters. ‘Knocked the Socks Off’ “The economy is not recovering at a slow pace,” Fisher said. “America is faster than people think. Third-quarter GDP numbers knocked the socks off of expectations.” Global investors and analysts agree that the world economy is on the mend. Almost 75 percent of respondents in a poll of investors and analysts who are Bloomberg subscribers in the U.S., Europe and Asia described the global economy as stable or improving at the end of last month, up from just over 60 percent in July. Fisher proved too bullish two years ago. He told Bloomberg News at the end of March 2007 that he was “on the wildly optimistic side of things.” The S&P 500 then rose 10 percent in six months before peaking at an all-time high on Oct. 9. On Nov. 7, he said in an interview that stocks were still cheap given the level of interest rates. The equity index retreated 38 percent in 2008 for its worst performance since 1937. His Fisher Global Total Return fund gained 4.9 percent annually during the five years ended Sept. 30, according to Chicago-based Morningstar Inc. That compares with the 5.1 percent annualized advance including dividends by the MSCI All- Country World Index, according to data compiled by Bloomberg. The investor said yesterday that industries that are more sensitive to the economy should lead the market rally over the next three months. He cited raw-materials producers, consumer companies reliant on discretionary spending and industrial companies. Shares of technology companies and energy producers should also rise to a lesser extent, he said. Fisher also reiterated his view from an April 16 interview that investors should be “overweight” stocks in emerging markets. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net .

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U.S. Stock Futures Extend Advance After Jobless Claims, Productivity Data

November 5, 2009

By Sapna Maheshwari Nov. 5 (Bloomberg) — U.S. stock futures rose, signaling the Standard & Poor’s 500 Index may climb for a fourth day, as jobless claims and worker productivity beat forecasts and Cisco Systems Inc. said a global economic recovery spurred a rebound in sales. Cisco, the biggest maker of networking equipment, gained 3.8 percent after earnings topped analysts’ estimates and the company expanded its stock buyback plan by $10 billion. Research In Motion Ltd. rose after saying it will repurchase as much as $1.2 billion in shares. Futures climbed to their highest levels of the day as government data showed initial claims for unemployment benefits dropped to 512,000 last week and worker productivity surged at the fastest pace in six years. Futures on the Standard & Poor’s 500 Index expiring in December added 0.4 percent to 1,050.7 at 8:59 a.m. in New York. Dow Jones Industrial Average Index futures increased 43 points, or 0.4 percent, to 9,828 and Nasdaq-100 Index futures rose 0.6 percent to 1,696.5. “We’ve actually seen more good news than bad across a broad spectrum of economic data,” said Art Hogan , the chief market analyst at New York-based Jefferies & Co. “We look at the initial jobless claims as another piece of economic data we’re pretty happy with. That said, we certainly can’t call this a victory until we start getting into an initial jobless claims that’s half of this.” The S&P 500 has climbed 55 percent from a 12-year low in March after $11.6 trillion in government spending, lending and guarantees returned the economy to growth following four straight quarters of contraction. The index is trading at more than 21 times earnings, according to weekly data compiled by Bloomberg. That’s near the highest level since July 2002. Federal Reserve U.S. stocks yesterday erased most of a 156-point rally in the Dow average after a House bill to curb credit-card rates spurred concern about bank earnings, outweighing the Federal Reserve’s plan to keep interest rates at a record low. European stocks dropped today after profits at Zurich Financial Services AG and Munich Re missed analysts’ estimates. Asian shares declined as South Korea said it’s “unclear” whether the economic rebound will be sustained. The Bank of England slowed the pace of bond purchases as signs of an economic recovery give policy makers scope to wind down their money-printing program next year. The European Central Bank may signal it’s moving closer to withdrawing emergency stimulus measures after leaving its benchmark interest rate at a record low today. Cisco Rallies Cisco added 3.8 percent to $24.17. The company’s net income fell 19 percent to $1.79 billion, or 30 cents a share, in the first quarter, which ended Oct. 24. Excluding stock compensation and some other costs, profit was 36 cents, beating the 31-cent average estimate in a survey of analysts. Cisco Chairman and Chief Executive Officer John Chambers , one of the first technology leaders to herald the recession two years ago, said he now sees a global economic recovery, fueling a rebound in his company’s sales this quarter. “Cisco is talking about a recovery around the world, Chambers is being very optimistic and people listen to him,” said William Dwyer , chief investment officer at Baltimore-based MTB Investment Advisors, which oversees $13 billion. “People are a little cautious, they like what they’re seeing, but there’s an awful lot built into the market.” Earnings have exceeded the average analyst estimate at 81 percent of S&P 500 companies that have reported results, according to data compiled by Bloomberg. That would mark the highest full-quarter proportion in data going back to 1993. Research In Motion, the maker of the BlackBerry phone, added 2.7 percent to $59.19. Whole Foods Market Inc. slid 9.9 percent to $28.90. The natural-food grocer forecast full-year earnings of as little as $1.05 a share, trailing the average estimate of $1.11 from analysts in a Bloomberg survey. Crude oil declined as much as 1 percent to $79.58 a barrel in New York, snapping three days of gains. To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net .

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U.S. Stocks Retreat as Housing Starts Report Overshadows Company Earnings

October 20, 2009

By Elizabeth Stanton Oct. 20 (Bloomberg) — U.S. stock futures rose as earnings at companies from Apple Inc. and Texas Instruments Inc. to Caterpillar Inc. beat analysts’ estimates, offsetting declines in consumer shares after housing starts trailed projections. Apple, Texas Instruments and Caterpillar climbed at least 2.6 percent in pre-market New York trading. DuPont Co. , the third-biggest chemical maker, advanced 1.8 percent and Pfizer Inc. , the world’s largest drugmaker, gained 2.9 percent after third-quarter profit topped analysts’ projections. Home Depot Inc. and Walt Disney Co. fell on the housing starts report. Futures on the Standard & Poor’s 500 Index expiring in December added 0.3 percent to 1,094.1 at 8:59 a.m. in New York. Earlier the contract rose as much as 0.7 percent. Dow Jones Industrial Average futures increased 0.2 percent to 10,035. Nasdaq-100 Index futures climbed 0.8 percent to 1,765. Asian shares also advanced, while European benchmarks erased gains. “We’re beginning to see a trend where profits are actually improving, and this is just the beginning of a recovery, so from the standpoint of the market this is good news,” William Dwyer , chief investment officer at MTB Investment Advisors Inc. in Baltimore, said on Bloomberg Radio. MTB manages $13 billion. “Technology is probably going to be the leader.” Earnings surpassed analysts’ projections at fifty-nine of the 71 companies in the S&P 500 that reported results since Oct. 7, including JPMorgan Chase & Co. and Google Inc. , according to Bloomberg data . Profit topped estimates at all but one of the 12 technology companies that released results. Earnings Watch More than 130 S&P 500 companies are scheduled to report this week, Bloomberg data show. The S&P 500 has rallied 62 percent from a 12-year low in March, closing at a one-year high yesterday, on signs the economy is emerging from the worst slump in seven decades. Crude oil fell from a one-year high above $80 a barrel after OPEC said it wouldn’t be comfortable with oil at $100. Apple advanced 6.3 percent to $201.82 in New York as back- to-school orders for iPhones, iPods and Macintosh computers fueled a 47 percent increase in fourth-quarter net income. Texas Instruments rose 2.6 percent $24.13. The second- largest U.S. chipmaker said earnings will be 42 cents to 50 cents a share this quarter on sales of $2.78 billion to $3.02 billion. Analysts predicted profit of 40 cents a share on revenue of $2.79 billion, according to the median estimate in a Bloomberg survey. Caterpillar, Pfizer Caterpillar climbed 6 percent to $61.30 after reporting a per-share profit of 64 cents. Analysts had estimated 5 cents, according to a Bloomberg survey. Pfizer gained 2.9 percent to $18.50 after posting adjusted third-quarter profit of 51 cents a share, beating the 48-cent average of analysts’ estimates compiled by Bloomberg. DuPont reported a third-quarter profit of 45 cents a share, beating analysts’ estimates of 33 cents, as job cuts and lower raw-material costs more than offset lower sales. The shares climbed 1.8 percent to $35.25. Companies in the S&P 500 will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts’ estimates compiled by Bloomberg show. Disney and Home Depot retreated after the Commerce Department said housing starts rose 0.5 percent to an annual rate of 590,000 from a 587,000 pace in August that was lower than previously estimated. Permits, a sign of future construction, fell for the second time in the past three months. Barclays lost 5 percent in London. Qatar will first exercise warrants at 197.775 pence, the firm said today, after shares of Barclays almost quadrupled in the past eight months. The Doha-based arm of the Qatar Investment Authority would make more than 630 million pounds ($1 billion) on the transaction at today’s market price. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

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Investors Will Sell Financials, Move Into Technology Stocks, Acampora Says

October 17, 2009

By Whitney Kisling Oct. 17 (Bloomberg) — Portfolio managers will sell financial stocks when they rise to start buying technology companies such as Cisco Systems Inc. , according to Ralph Acampora , a partner at Altaira Wealth Management. “They’re going to get out of the financial stuff,” said Acampora, who retired in 2007 from Knight Capital Group Inc. as one of Wall Street’s best-known technical analysts, before returning this year to manage money at Geneva-based Altaira. “What are they going to rotate into? Simple, something they don’t own. What don’t they own? Remember the bubble — technology crashed and burned.” Investors will take advantage of financial stocks’ volatility, using any gains in those companies to sell American International Group Inc. , Bank of America Corp. and General Electric Co., and shift into stocks such as Cisco and Oracle Corp., Acampora said at a Security Traders Association conference today in Scottsdale, Arizona. While the Standard & Poor’s 500 Index of financial companies has almost tripled since the S&P 500 reached a 12-year low on March 9, it’s still down 28 percent since Sept. 12, 2008, the last trading day before Lehman Brothers Holdings Inc. filed for the biggest bankruptcy in history. Acampora’s four-decade career as a technical analyst, making predictions based on price and volume chart patterns, included stints at Prudential Equity Group LLC, Smith Barney and Kidder Peabody & Co. In addition to technology stocks, Acampora said he’s bullish on railroad stocks and oil-drilling companies. He reiterated a call for a correction in the Dow Jones Industrial Average , which he expects to be followed by a surge of 25 percent. To contact the reporter on this story: Whitney Kisling in Scottsdale, Arizona at wkisling@bloomberg.net .

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Stocks in U.S. Rise as JPMorgan’s Profit Helps Dow Average Exceed 10,000

October 17, 2009

By Jeff Kearns and Sapna Maheshwari Oct. 17 (Bloomberg) — U.S. stocks advanced for a second week after profits from JPMorgan Chase & Co. and Intel Corp. surpassed estimates, lifting the Dow Jones Industrial Average above 10,000 for the first time in more than a year . General Electric Co. and Bank of America Corp.’s results pushed the Dow average down 67 points to 9,995.91 yesterday. For the week, JPMorgan increased 0.5 percent after reporting its highest profit since 2007. Intel climbed after its sales forecast beat estimates. Harley-Davidson Inc. advanced 17 percent for the steepest gain in the Standard & Poor’s 500 Index after selling a unit and announcing a plan to cut costs. The S&P 500 rose 1.5 percent to 1,087.68, extending its 2009 gain to 20 percent, as nine of 10 industry groups increased. The Dow average added 1.3 percent after climbing as high as 10,062.94 on Oct. 15. The Nasdaq Composite Index jumped 0.8 percent to 2,156.8. The VIX, as the benchmark for U.S. equity derivatives is known, dropped every day for the last two weeks, the longest streak since May 2005. “No one would have guessed a year ago that we’d be in this position,” said Matthew Kaufler , a portfolio manager at Federated Clover Investment Advisors, which has $407 billion under management. “A lot of the bellwethers have reported and I think that’s what’s injecting some enthusiasm into the market.” Benchmark equity indexes posted the biggest gains of the week on Oct. 14 after minutes from the Fed’s September meeting showed central bankers raised economic projections based on improved housing markets, stabilizing consumer spending and a recovery in growth outside the U.S. Jobless Claims The number of Americans filing first-time claims for unemployment benefits dropped to the lowest level in nine months. Applications fell by 10,000 to 514,000 in the week ended Oct. 10, Labor Department data showed. The Commerce Department said on Oct. 14 that retail sales decreased 1.5 percent in September, less than forecast, while sales excluding automobiles climbed 0.5 percent, more than projected. “This recovery is really taking shape,” said Burt White , chief investment officer at LPL Financial in Boston, which oversees $234 billion. “The recovery is moving faster than analysts can revise their estimates upwards and faster than companies can offer increased guidance.” JPMorgan rose 21 cents to $46.06. The second-largest U.S. bank by assets on Oct. 14 reported third-quarter earnings of $3.59 billion, or 82 cents a share, the highest profit since the subprime mortgage market collapsed in 2007. ‘Outstanding’ “Their numbers were outstanding,” said Philip Orlando , who helps oversee $400 billion as chief equity market strategist at Federated Investors Inc. in New York. A seven-month rally in financial companies led the Dow average to its first close above 10,000 on Oct. 14. Bank of America Corp. has more than quadrupled since U.S. stocks fell to a 12-year low on March 9, posting the best performance of 30 members during the period. American Express Co. has more than tripled during the period for the second best advance, followed by JPMorgan’s near-tripling. Intel, the world’s biggest chipmaker, rose 0.1 percent after its sales forecast beat estimates by as much as $1 billion. The company’s gross margin — a measure of profitability — may reach the highest level this decade, it said . Harley-Davidson Inc. posted its largest gain since March. The biggest U.S. motorcycle maker said it plans to cut about 180 jobs, end its Buell line and sell its MV Agusta unit under a plan to save as much as $140 million in annual costs. Steepest Rally The S&P 500 has climbed 61 percent from its March low, the steepest rally since the 1930s. It fell 38 percent last year for the worst performance since 1937. “We’ve been skeptical about the market,” said Michael Vogelzang , chief investment officer of Boston Advisors LLC, which manages $1.8 billion. “We’ve been anticipating and expecting market pullback, and the market continues to take folks like us and say, gee, we’ve got great news every day.” The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell to 21.43 after reaching 28.68 on Oct. 2. The index, a measure of the cost of using options as insurance against declines in the S&P 500 , is down from a record 80.86 in November and above its average of 20.24. Yields on Treasury securities climbed as government data showed retail sales increased more than economists estimated in September. The 10-year note’s yield rose to 3.42 percent from 3.38 percent. Homebuilders and real-estate agents were probably busier in September, economists said before reports in the coming week. Construction started last month on 610,000 houses at an annual rate, the most since November, according to the median forecast of economists surveyed by Bloomberg News before the Oct. 20 report. Existing home sales rose to a two-year high of 5.35 million, economists said. To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net ; Sapna Maheshwari in New York at smaheshwar11@bloomberg.net .

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Production in U.S. Probably Increased for Third Month, Signaling Recovery

October 15, 2009

By Shobhana Chandra Oct. 16 (Bloomberg) — Industrial production in the U.S. probably rose in September for a third consecutive month, putting manufacturing at the forefront of the emerging economic recovery, economists said before reports today. Output at factories, mines and utilities climbed 0.2 percent following increases of 0.8 percent and 1 percent respectively in August and July, according to the median forecast of 77 economists surveyed by Bloomberg News. Another report may show consumer sentiment this month eased off the highest level in more than a year. The recent burst of activity on factory floors, spurred in part by a rebound at automakers, may give way to more moderate and sustainable gains in coming months as companies rebuild inventories and exports grow. The improvement has yet to lead to an increase in jobs, underscoring why Federal Reserve policy makers say they will keep interest rates low for a long time. Manufacturing has made “a decisive turn” and “output is likely to continue to edge higher, but at a slower pace,” said Michelle Meyer , an economist at Barclays Capital Inc. in New York. The lack of jobs is one reason why further gains in consumer confidence may be limited, she said. The Fed’s industrial production figures are due at 9:15 a.m. in Washington. Economists’ estimates ranged from a drop of 0.5 percent to a gain of 0.5 percent. Manufacturing accounts for about 12 percent of the U.S. economy. Confidence Slips The Reuters/University of Michigan preliminary index of consumer confidence, due at 10 a.m., probably slid to 73.3 this month from a 73.5 reading in September that was the highest since January 2008, according to the survey median. Economists’ estimates ranged from 70 to 77.1. The Standard & Poor’s 500 Index has climbed 62 percent from a 12-year low on March 9 on optimism about the economic rebound. The S&P closed up yesterday as energy shares gained after oil rallied to the highest price in a year. The gain in manufacturing is extended to this month, regional reports showed yesterday. The New York Fed’s Empire State index soared to the highest level since mid-2004, while the Philadelphia Fed’s gauge eased off September’s two-year high. Capacity utilization, or the proportion of plants in use, probably climbed to 69.8 percent, the highest level since February, economists surveyed said today’s Fed report may also show. Economists track operating rates to gauge factories’ ability to produce goods with existing resources. Lower rates reduce the risk of bottlenecks that can force prices higher. Fed Minutes Minutes of the Fed’s September meeting, released this week, showed policy makers believed “overall economic activity was beginning to pick up,” and noted the improvement in factory output, particularly motor-vehicle production. “Cash for clunkers,” which offered incentives of as much as $4,500 for consumers to trade in old cars for more fuel- efficient ones, helped automakers trim stockpiles as sales climbed in July and August. Industry data showed sales plunged in September after the plan expired on Aug. 24. General Motors Co. and Toyota Motor Corp. have predicted sales gains for the fourth quarter. GM on Oct. 7 said it plans to boost output to 655,000 vehicles in North America during this quarter to match increasing demand. Some manufacturers are still waiting for a pickup in demand. W.W. Grainger Inc., a Lake Forest, Illinois-based distributor of building-maintenance supplies, reported that sales fell for the fourth consecutive quarter. “While daily sales remain stable, we are not yet seeing a catalyst for a sustained economic turnaround” in any major market, Grainger Chief Executive Officer James Ryan said in a statement on Oct. 14. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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Stock Rally Is `Way Ahead’ of Economic Recovery, Allianz’s Achleitner Says

October 13, 2009

By Andrew Frye Oct. 13 (Bloomberg) — Allianz SE , Europe’s biggest insurer and the manager of a portfolio of about $600 billion, expects stocks to fall because economic recovery is lagging behind the seven-month jump in the Standard & Poor’s 500 Index. “The market rally right now is — my personal view is — way ahead of real-life developments,” Paul Achleitner , head of finance at Munich-based Allianz, said yesterday in an interview at Bloomberg headquarters in New York. “The expectation level is so high, you’re going to have the risk that there’s going to be a discrepancy in expectation” and economic data, Achleitner said. The S&P 500 has surged 58 percent from a 12-year low on March 9 amid signs the worst U.S. recession since the Great Depression is abating. Still, unemployment in the U.S. climbed in September to 9.8 percent, the highest level since 1983, and economists expect a rebound in consumer spending will wane as joblessness surpasses 10 percent. “You’ve got to make sure that you don’t commit yourself too fast,” Achleitner said of managing assets backing Allianz’s insurance policies. “We are cautious on the equity markets in terms of how much we are actually putting to work there.” Allianz’s equity holdings dropped 47 percent to 27.2 billion euros ($40.3 billion) in the 12 months ended June 30. Achleitner said the company has about 9 percent of the portfolio in stocks amid the rally and is “comfortable” with the allocation. The S&P lost 0.6 percent to 1,069.29 at 10:16 a.m. in New York after rising for the previous six days, its longest streak of gains since June 2007. Allianz shares fell 1.06 euros, or 1.2 percent, to 86.85 euros in Frankfurt electronic trading. ‘Sobering Reminder’ U.S. payrolls dropped by 263,000 in September as losses extended from cash-strapped state and local governments to retailers and builders, according to Labor Department figures this month. President Barack Obama called the jobless report a “sobering reminder that progress comes in fits and starts.” Government stimulus plans such as the “cash for clunkers” used-car trade-in program and first-time homebuyer credits have helped ease the U.S. recession. The world’s largest economy shrank at a 0.7 percent annual rate in the second quarter, its best performance in more than a year, Commerce Department data showed on Sept. 30. To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net .

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Stocks Rally May Fade as Trading Slows, Bartels Says: Technical Analysis

October 13, 2009

By Lu Wang Oct. 12 (Bloomberg) — U.S. stocks may retreat from the Standard & Poor’s 500 Index’s steepest weekly advance since July because too few shares are being traded, according to analysts from Bank of America Corp. and MKM Partners. An average 8.28 billion shares changed hands each day last week as the S&P 500 jumped 4.5 percent, the most since July. That’s the smallest number of shares traded daily since the week ended July 4 and 12 percent less than the 9.37 billion session average in the previous three months, showing that the rally may stall because it lacks buyers, according to Bank of America’s Mary Ann Bartels . “The rally was on very low volume,” Bartels , ranked second among analysts who study price charts in Institutional Investor magazine’s most recent survey, wrote in a note to clients today. “This leaves the sustainability of the rally in question.” The S&P 500 has surged 58 percent from a 12-year low in March on mounting evidence that the global economy is recovering from the worst recession since the 1930s. Katie Stockton, an analyst with MKM Partners, said last week’s advance in U.S. stocks was partly set off by the S&P 500’s dip below its average during the past 50 days for the first time since July 15. The benchmark for U.S. stocks fell below its 50-day average of 1,021.71 on Oct. 2, dropping to as low as 1,019.95 before closing higher at 1,025.21. “The 50-day moving average served as the staging ground for the oversold bounce,” Stockton wrote in a note today. There was “widespread fear of missing upside. However, there appears to have been a lack of conviction.” To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net .

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Stocks in U.S., Europe Gain on Philips Profit; Yen Drops, Crude Oil Rises

October 12, 2009

By Sapna Maheshwari Oct. 12 (Bloomberg) — U.S. and European stocks rose, sending the MSCI World Index to near a one-year high, on speculation improving corporate earnings will extend a seven- month rally in equities. Oil and metal prices advanced. General Electric Co., which will report third-quarter results on Oct. 16, climbed 1.5 percent after Royal Philips Electronics NV unexpectedly posted a profit. Freeport-McMoRan Copper & Gold Inc. added 1.5 percent as copper increased. Advanced Micro Devices Inc. rallied 4.1 percent after UBS AG recommended the shares. The Standard & Poor’s 500 Index rose for a sixth straight day, its longest streak since June 2007. “The market will continue with a positive bias,” said Stanley Nabi , New York-based vice chairman of Silvercrest Asset Management Group, which oversees $8 billion. “The profit reports that will begin to come out this week should be very solid and the economic data that’s coming out is quite encouraging.” The S&P 500 advanced 0.3 percent to 1,075.06 at 9:34 a.m. in New York, above its highest close since Oct. 3, 2008. The Dow Jones Industrial Average rose 32.72 points, or 0.3 percent, to 9,897.66. The MSCI World Index of 23 developed nations climbed 0.6 percent to above its highest close since Oct. 1, 2008. The S&P 500 last week jumped 4.5 percent, its best advance since July, as Alcoa Inc. started the third-quarter earnings season with an unexpected profit and economic data signaled the U.S. recession is ending. ‘Recovery Is Under Way’ “Last week’s earnings showed that analyst expectations can be surpassed and that not everything is priced in yet,” said Gregor Mast , an equity strategist at Clariden Leu AG in Zurich, which oversees about $88 billion. “We believe that the recession is over and the recovery is under way. Equities are fairly valued but require that we see the profit side move up.” Companies from Intel Corp. to Goldman Sachs Group Inc. are scheduled to report earnings this week. Companies on the S&P 500, which has rebounded 59 percent from a 12-year low in March, will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts’ estimates compiled by Bloomberg show. GE gained 1.5 percent to $16.42. Philips, Europe’s biggest consumer-electronics maker, said operating earnings at its consumer unit more than doubled as it reported third-quarter net income of 174 million euros ($256 million). Analysts had predicted a loss of 44.7 million euros, the average of 13 estimates compiled by Bloomberg. Philips helped lead the gains in Europe’s Stoxx 600 , adding 6.4 percent in Amsterdam, while energy companies rose with oil. Total SA , Europe’s biggest refiner, rose 1.6 percent in Paris. Commodity Producers Freeport rose 1.5 percent to $75.46. Copper climbed on speculation demand for raw materials is increasing as the global economy recovers from its worst recession since World War II. Alcoa , the largest U.S. aluminum company, gained 0.8 percent to $14.35. Chevron Corp., the second-largest U.S. oil company, increased 0.7 percent to $73.23 as crude rose above $73 a barrel for the first time in three weeks. Advanced Micro Devices added 4.1 percent to $6.12. The second-largest maker of personal-computer processors was raised to “buy” from “neutral” at UBS. Plum Creek Timber Co. climbed 1.9 percent to $32.45. The forest-products company was raised to “neutral” from “underweight” at JPMorgan Chase & Co. U.S. Discount The S&P 500 is valued at the biggest discount to the MSCI World Index of 23 developed countries since May 2003, according to monthly data compiled by Bloomberg. There is still room for stocks to rise, according to Barclays Capital Inc.’s Larry Kantor , while David Rosenberg says investors should buy bonds or seek dividends because this isn’t a normal recovery. Kantor, head of research at Barclays Capital in New York, was one of the first economists to call the end of the recession, in March. Barclays sees GDP expanding at a 4 percent rate now, 5 percent in the first quarter and 3.6 percent for 2010. Rosenberg, the chief economist and strategist for Toronto- based Gluskin Sheff + Associates Inc., was among the first to warn of impending recession in 2006. Federal Reserve Bank of St. Louis President James Bullard said in a speech yesterday that U.S. jobs growth will return this year or next. To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net

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Equity Market May Extend Gain as ASR Says Companies Will Rebuild Inventory

October 9, 2009

By Alexis Xydias Oct. 9 (Bloomberg) — Rising industrial production and a rebound in U.S. employment will push stocks higher around the world, according to Absolute Strategy Research Ltd., the London- based firm that told clients to buy shares in March. Companies will need to re-stock inventories that were depleted more than necessary as consumer spending increases, boosting prices and helping employment recover in the world’s largest economy, said ASR, founded in 2006 by former Merrill Lynch & Co. and UBS AG strategists. Alcoa Inc. said this week in its earnings report that the replenishment of falling customer stockpiles will boost aluminum production. “The corporate sector was forced into a much more aggressive response” than needed because of speculation that the global recession would extend into next year, David Bowers , strategist at ASR, said in an interview on Oct. 6. “The recovery in 2010 is about corporates repairing their cash flows and building up inventories.” The Standard & Poor’s 500 Index’s seven-month rally paused last week as data showed U.S. manufacturing expanded less than predicted in September and unemployment climbed to a 26-year high. New York University Professor Nouriel Roubini said stocks “have gone up too much, too soon,” in an Oct. 3 interview from Istanbul, while the recovery is losing momentum, according to Nobel Prize-winning economist Joseph Stiglitz . ‘Challenge Investors’ U.S. unemployment will keep rising, while gains in the stock market show investors are “irrationally exuberant” about a recovery, Stiglitz said on Oct. 5 in a Bloomberg Television interview from Istanbul. Billionaire investor George Soros said the same day that any economic improvement will be “very slow” as “basically bankrupt” financial companies impede it. “The assumption being made across the board is that unemployment won’t come down,” said Ian Harnett , ASR’s director of European strategy. “That will challenge investors in the next six months. If that is wrong, it will take the bond market to pieces. What we’ve got is this real possibility for equities to rise another 20 percent.” In a note distributed on March 6, ASR advised buying European shares because investors were ignoring the likelihood that economic growth would resume. Gross domestic product in countries using the euro is estimated to have contracted 4 percent in the third quarter and will shrink 1.9 percent in the last three months of the year before expanding 0.95 percent in 2010, according to the median estimates of economists surveyed by Bloomberg. Global Recession Europe’s Dow Jones Euro Stoxx 50 Index has rallied 60 percent since falling to a 12-year low on March 9. Equities gained as earnings exceeded estimates and $12 trillion committed by the Group of 20 nations spurred optimism the global economy would emerge from its first recession since World War II. Three companies in the S&P 500 announced second-quarter profits that beat analysts’ estimates for each that missed, data compiled by Bloomberg show. The Washington-based International Monetary Fund raised its forecast for 2010 global growth last week, saying the economy will expand 3.1 percent, more than a July forecast of 2.5 percent. Recessions in Germany and France, Europe’s two largest economies, unexpectedly ended in the second quarter. Companies are restarting production amid a pick-up in sales, ASR said. U.S. car inventories fell to the lowest level in at least 24 years at the end of August because of demand during the “cash-for-clunkers” program, according to data from researcher Ward’s AutoInfoBank of Southfield, Michigan. Alcoa, Toyota Manufacturers’ stockpiles shrunk at a slower rate in September as the Inventories Index of the Institute for Supply Management’s report reached 42.5 percent. The index is 8.1 percentage points higher than the 34.4 percent reported in August. A reading of 42.6 is the dividing line between liquidation and replenishing of goods. A Commerce Department report yesterday showed inventories at U.S. wholesalers dropped in August for a 12th consecutive month, clearing the way for a pickup in orders as sales improve. Alcoa, the biggest U.S. aluminum producer and the first Dow Jones Industrial Average company to announce results for the third quarter, said Oct. 7 that global consumption of the metal will climb 11 percent in the second half. Shares of the New York-based company, which cited “low inventories” at distributors for its forecast, gained 1.1 percent yesterday. Toyota Motor Corp. , the world’s largest automaker, is boosting production after demand surged in August, Don Esmond , Toyota’s senior vice president of U.S. sales, said this month. The Toyota City, Japan-based carmaker began the month with an 18-day supply of vehicles, the executive said. The industry standard is 60 days. ‘More Upside’ “There is definitely more upside than downside — perhaps as much as up 50 percent,” the ASR report in March said. Bowers was previously chief global investment strategist for New York- based Merrill Lynch, where he worked for 11 years. Harnett was previously a European strategist at Zurich-based UBS. The S&P 500 slipped as much as 4.3 percent from an almost one-year high of 1,071.66 on Sept. 22, dragged down by a decline in the Tempe, Arizona-based ISM’s factory gauge to 52.6 last month from 52.9 in August. The measure topped 50, the dividing line between expansion and contraction, in August for the first time since January 2008. Demand for U.S. durable goods unexpectedly fell in August and sales of new homes rose less than forecast, reports showed last month. ‘Headwinds’ “The headwinds for economic growth still remain strong,” said Neil Dwane , who helps oversee $80 billion as chief investment officer at Allianz Global Investors’ RCM unit in Frankfurt. “Any recovery we get will be disappointing relative to current market expectations.” Central banks trying to revive growth will probably hold borrowing costs at or near record lows, Harnett said. That will spur inflation, boosting assets such as equities, he said. The European Central Bank left its benchmark lending rate at a record low of 1 percent yesterday. The U.S.’s Federal Reserve has frozen the rate banks charge each other for overnight loans between zero and 0.25 percent since December 2008. “We could end up in a world where growth is much higher than people expect,” Bowers added. “People are desperate for the jobless recovery. If this rally continues, it is career- threatening for a lot of investors.” To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net .

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Stocks in U.S. Rise, Led by Banks; Alcoa Gains as Earnings Beat Estimates

October 7, 2009

By Rita Nazareth Oct. 7 (Bloomberg) — U.S. stocks rose for a third day as banks climbed on an analyst upgrade of Bank of America Corp. and Wells Fargo & Co.’s plan to boost credit card rates, while Alcoa Inc. jumped before beginning the third-quarter earnings season. Bank of America, the largest U.S. lender by assets, and Wells Fargo, the San Francisco-based bank, each added 2.1 percent. Google Inc. rallied 3.8 percent after Oppenheimer & Co. raised its share-price estimate. Alcoa, the largest aluminum producer, climbed 2.2 percent. AT&T Inc. led the Dow Jones Industrial Average lower after saying it will allow iPhone customers to use Internet phone carriers. The Standard & Poor’s 500 Index rose 0.3 percent to 1,057.58 at 4:11 p.m. in New York. The Nasdaq Composite Index added 0.3 percent to 2,110.33. The Dow slipped 5.67 points, or 0.1 percent, to 9,725.58. “It’s all about earnings,” Mark Bronzo , a money manager at Security Global Investors, which oversees $21 billion in Irvington, New York, told Bloomberg Radio. “Financials not only are expected to come out with better numbers, but they may also surprise investors. The upgrades for banks this week are indicating that. And investors are anticipating more positive news.” The S&P 500 fell for most of the day as homebuilders declined on speculation Congress won’t extend a tax credit and AT&T led a slump in telephone shares. The benchmark index erased its declines in the final hour of trading as investors speculated Alcoa, the first Dow company to report earnings, would post better-than-estimated results. The S&P 500 surged 32 percent in the last two quarters and is up 56 percent from a 12-year low in March amid signs the worst of the global recession is over. The U.S. equity benchmark traded for 20.2 times reported operating income of its companies last month, the most since 2004. Using estimated 2011 earnings drives the valuation down to 11.1, or only 10 percent higher than the 24-year low based on trailing results reached in March. The S&P 500 completed its first two-week decline since July on Oct. 2 after manufacturing expanded less than anticipated and unemployment climbed to the highest level since 1983, spurring concern the economy is rebounding slower than forecast. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net .

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Roubini Says Stocks, Commodities Have Risen `Too Much, Too Soon, Too Fast’

October 4, 2009

By Shamim Adam and Francine Lacqua Oct. 4 (Bloomberg) — New York University Professor Nouriel Roubini , who accurately predicted the financial crisis, said stock and commodity markets may drop in coming months as the gradual pace of the economic recovery disappoints investors. “Markets have gone up too much, too soon, too fast,” Roubini said in an interview in Istanbul yesterday. “I see the risk of a correction, especially when the markets now realize that the recovery is not rapid and V-shaped, but more like U- shaped. That might be in the fourth quarter or the first quarter of next year.” Stocks have surged around the world in the past six months as evidence mounts that the economy is emerging from its deepest recession since the 1930s. The Standard & Poor’s 500 Index has soared 51 percent from a 12-year low in March while Europe’s Dow Jones Stoxx 600 is up 48 percent. The euphoria contrasts with the cautious tone of Group of Seven policy makers, who said after their meeting in Istanbul yesterday that prospects for growth “remain fragile.” “The real economy is barely recovering while markets are going this way,” Roubini said. If growth doesn’t rebound rapidly, “eventually markets are going to flatten out and correct to valuations that are justified. I see a growing gap between what markets are doing and the weaker real economic activities.” ‘Anemic’ Recovery The International Monetary Fund predicts the global economy will expand 3.1 percent in 2010, led by growth in Asia, after a 1.1 percent contraction this year. That is still “anemic” and “very weak,” Roubini said. U.S. stocks fell last week after manufacturing expanded less than anticipated and unemployment climbed to a 26-year high, fueling concern the economy is rebounding more slowly than forecast. Gains in the S&P 500 have pushed valuations in the index to more than 19 times reported operating profits from the past year, data compiled by Bloomberg show. That’s near the most expensive level since 2004. The performance of the U.S. economy is probably more sluggish than reflected in stock markets, risking a correction in equities, Nobel Prize-winning economist Michael Spence said last month. U.S. stock-market investors have “over processed” the stabilization of growth in the world’s largest economy, Spence said. Creating Bubbles The global equity rally has added about $20.1 trillion to the value of stocks worldwide since this year’s low on March 9. Governments have poured about $2 trillion of stimulus into the global economy while central banks have cut interest rates to close to zero in efforts to revive growth. “In the short run we need monetary and fiscal stimulus to avoid another tipping point and to avoid deflation, but now this easy money has already started to create asset bubbles in equities, commodities, credit and emerging markets,” Roubini said. “For the sake of achieving growth stability again and avoiding deflation, we may be planting the seeds of the next cycle of financial instability.” To contact the reporters on this story: Shamim Adam in Istanbul at sadam2@bloomberg.net ; Francine Lacqua in Istanbul at flacqua@bloomberg.net

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Unemployment in U.S. Probably Rose, Payrolls Fell, Signaling Slow Recovery

October 2, 2009

By Bob Willis Oct. 2 (Bloomberg) — The U.S. jobless rate probably rose to a 26-year high in September as employers kept cutting staff, signaling consumers will not lead the recovery, economist said before a report today. Unemployment likely climbed to 9.8 percent, the highest since 1983, from 9.7 percent in August, according to the median estimate of 81 economists surveyed by Bloomberg News. Payrolls probably fell by 175,000 workers, the smallest drop in 13 months, they survey also showed. Federal Reserve Chairman Ben S. Bernanke yesterday said the expansion may not be strong enough to “substantially” bring down unemployment, indicating the central bank will be slow to drain the trillions of dollars it’s pumped into the economy. UAL Corp. is among companies still cutting jobs on concern spending will fade as government stimulus wanes. “The magnitudes of the job losses are going to continue to get smaller, but unfortunately we don’t see very much hiring going on,” said David Resler , chief economist at Nomura Securities International Inc. in New York. “Until that changes, doubts about the sustainability of this rebound in economic activity are going to linger.” The Labor Department’s report is due at 8:30 a.m. in Washington. Economists’ payroll forecasts ranged from declines of 100,000 to 260,000. Employment Slump The September projection would bring total jobs lost since the recession began in December 2007 to 7.2 million, the biggest decline since the Great Depression. Monthly losses reached a six-decade peak of 741,000 in January. Economists surveyed by Bloomberg last month projected the jobless rate will reach 10 percent by late 2009 and average 9.7 percent for all of next year even as the economy expands at an average 2.6 percent pace in the second half of this year and 2.4 percent in 2010. Bernanke told lawmakers in Washington yesterday that he anticipated the jobless rate will hold above 9 percent though 2010. The Standard & Poor’s 500 Index is down 3.9 percent since Sept. 22 as figures on home sales, manufacturing and business spending were weaker than analysts anticipated. The index is still up 52 percent from a 12-year low in March as the economy showed signs of recovering. While acknowledging that “economic activity has picked up,” Fed policy makers on Sept. 23 said household spending “remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.” Less Income Declining pay is one reason economists project consumer spending, which accounts for 70 percent of the economy, will be slow to gain speed. Personal income was down 2.6 percent in August from a year earlier, a Commerce Department report yesterday showed. General Motors Co. this week said it would close the Saturn brand after Penske Automotive Group Inc. broke off discussions to buy the unit. Saturn dealers will have until October 2010 to wind down operations. The Detroit-based automaker said in June a Saturn sale would have saved 13,000 jobs and 350 dealerships. GM had called back some workers after the government’s “cash-for-clunkers” plan cut further into inventories that were already diminished during the bankruptcy shutdown. Sales of cars and light trucks plunged last month after the $3 billion incentive plan expired in late August. Vehicles sold at a 9.2 million annual pace in September, down from a 14.1 million annual pace in August. Job Cuts Tenneco Inc. , the largest North American maker of shock absorbers, said Sept. 22 it will shut a factory in Cozad, Nebraska, by the end of next year and shift production of the parts to plants in Georgia, Arkansas and Celaya, Mexico. Airlines are also cutting staff. UAL’s United Airlines, the third-biggest U.S. carrier, last month furloughed 290 more pilots under a plan to trim jobs and limit labor costs, while American Airlines said it would furlough 228 flight attendants. The Labor Department today will also publish its preliminary estimate for the annual benchmark revisions to payrolls that will be issued in February. Employers cut 4.8 million jobs in the 12 months through March 2009, the period covered by the revisions. Economists at UBS Securities LLC in Stamford, Connecticut, said income tax records indicate about another 200,000 jobs were lost from March 2008 through December 2008. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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U.S. Stocks Fluctuate on Quarter’s Final Trading Day as Commodities Gain

September 30, 2009

By Elizabeth Stanton Sept. 30 (Bloomberg) — U.S. stocks fluctuated as a falling dollar boosted commodities and investors bought equities on the last day of the market’s biggest quarterly rally in a decade, offsetting an unexpected drop in a gauge of business activity. Cisco Systems Inc. and Freeport-McMoRan Copper & Gold Inc. helped lead technology and commodity shares higher. CIT Group Inc., the 101-year-old commercial lender, tumbled 36 percent on growing concern it will be forced into bankruptcy. The dollar dropped against most major currencies, helping push oil and metal prices higher. “You’re seeing buyers putting money to work into the end of the quarter,” said Michael James , a managing director at Wedbush Morgan Securities in Los Angeles. “The third quarter has been extremely strong and I don’t think you’re going to see bulls completely walk away from the market knowing the quarter ends today.” The S&P 500 slipped added 0.1 percent to 1,059.51 at 1:46 p.m. in New York. The Dow Jones Industrial Average lost 3.25 points, less than 0.1 percent, to 9,738.95. The S&P 500 has jumped 15.3 percent in the third quarter, building on a 15.2 percent rally in the April-to-June period. The rally has sent price-earnings valuations in the index this month to the highest levels since 2004. The measure has rebounded 57 percent from a 12-year low in March. Stocks slumped earlier after the Institute for Supply Management-Chicago Inc. said its business barometer decreased to 46.1, lower than the most pessimistic forecast, from 50 in August. Readings below 50 signal a contraction. Companies cut payrolls by 254,000 jobs in September, according to ADP Employer Services. ‘Flatten Out’ Former Federal Reserve Chairman Alan Greenspan said he sees the U.S. economy slowing next year as the surge in stocks comes to an end. “The odds are we flatten out,” Greenspan said today in a Bloomberg Television interview, referring to the equity market. “That flattening out will put some sort of dull face on 2010.” Greenspan said he expects the economy to grow at a 3 percent to 4 percent annual pace in the next sixth months before slowing down. As a result, unemployment isn’t likely to decline much from last month’s 9.7 percent rate, he said. Even so, he doesn’t expect the economy to relapse into recession next year. Ameriprise Financial Inc. gained 14 percent to $36.98. The Minneapolis-based wealth management and insurance firm agreed to buy the Columbia stock and bond funds from Bank of America for as much as $1.2 billion in cash. Nike, Jabil Nike Inc. jumped 7.8 percent to $64.77. The world’s largest athletic-shoe maker posted first-quarter profit that exceeded analysts’ estimates as it cut marketing and personnel costs and prices improved. Jabil Circuit Inc. climbed 8.9 percent to $13.37. The electronic-parts maker forecast first-quarter earnings excluding some items of at least 24 cents a share, topping the average estimate of 16 cents from analysts in a Bloomberg survey. CIT Group Inc. slumped 36 percent to $1.40 on concern it will be forced into bankruptcy. The 101-year-old commercial lender is considering an offer of financing from Citigroup Inc. and Barclays Capital, people familiar with the situation said. Bondholders are also seeking to provide about $2 billion in loans as a restructuring deadline approaches tomorrow, said the people, who declined to be identified because the negotiations are private. CIT may choose other options, the people said. Darden Restaurants Inc. fell the most in the S&P 500, declining 6.6 percent to $33.78. The owner of the Olive Garden and Red Lobster chains said first-quarter sales dropped 2.3 percent, missing analysts’ estimates. Quarterly Rally All 10 of the main industry groups in the S&P 500 advanced in the third quarter, led by a 26 percent rally in financial shares, 22 percent gains in industrial and commodity companies, a 20 percent advance by consumer discretionary stocks and a 17 percent increase from technology companies. Gannett Co., the nation’s largest newspaper publisher, posted the steepest advance in the index, more than tripling in the quarter. Hartford Financial Services Group Inc., Wynn Resorts Ltd. and Tenet Healthcare Corp. more than doubled. Recovering Economy The gains came amid speculation the economy was returning to growth following the worst recession in seven decades. Home prices stabilized, consumer confidence strengthened as job losses abated and the ISM said manufacturing activity ended an 18-month contraction in August. The performance of the U.S. economy is probably more sluggish than reflected in stock markets, risking a correction in equities, Nobel Prize-winning economist Michael Spence said. U.S. stock-market investors have “over processed” the stabilization of growth in the world’s largest economy, Spence said in an interview in Kuala Lumpur yesterday. The U.S. economy isn’t likely to experience a “double-dip” slowdown even as that remains a risk, said the professor emeritus of management in the Graduate School of Business at Stanford University. Alcoa will be the first company in the Dow average to release third-quarter earnings next week, set for Oct. 7. Analysts expect profits in the S&P 500 to drop 22 percent on average in the third quarter before rebounding 63 percent in the final three months of the year, according to estimates compiled by Bloomberg. “Third quarter data is going to show for many companies enough indications that indeed the economy bottomed in July,” said William Greiner , chief investment officer at Scout Investment Advisors in Kansas City, Missouri, which manages $8.5 billion. “It’s hard not to be bullish in the face of what I see as 20 to 25 percent earnings growth rates over the next few quarters.” The International Monetary Fund today cut its projection for global writedowns on loans and investments by 15 percent to $3.4 trillion, citing improvements in credit markets and initial signs of economic growth. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net .

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U.S. Stocks Fluctuate as Housing Data Offset Drop in Consumer Confidence

September 29, 2009

By Elizabeth Stanton Sept. 29 (Bloomberg) — U.S. stocks fluctuated after an unexpected slump in consumer confidence offset a smaller-than- forecast drop in home prices. Treasuries declined, while oil retreated as the dollar strengthened. Lennar Corp. and KB Home climbed at least 2.1 percent as the S&P/Case-Shiller home-price index fell 13.3 percent in July from a year earlier, the smallest drop in 17 months. Walgreen Co. surged 11 percent on earnings that topped analysts’ estimates. Benchmark indexes erased most of an early advance as the Conference Board’s confidence index trailed estimates. “We’ve had a good rally,” said Randy Bateman , who oversees $13 billion as chief investment officer at Huntington Asset Advisors in Columbus, Ohio. “Some people are going to say valuations have recovered sufficiently given the uncertainties and pull money off the table.” The Standard & Poor’s 500 Index rose 0.2 percent to 1,064.81 at 10:13 a.m. in New York. The Dow Jones Industrial Average increased 5.14 points, or 0.1 percent, to 9,794.5. The S&P 500 has rallied 57 percent from a 12-year low in March, pushing valuations in the index to about 20 times the reported profits from continuing operations, data compiled by Bloomberg show. That’s near the most expensive level since 2004. U.S. stocks rose yesterday as takeovers in the drug and technology industries added to evidence that mergers are rebounding from the slowest pace in six years. Mergers and acquisitions involving U.S. companies have totaled $49.3 billion in September, compared with $26.6 billion in August and $36.8 billion in July, based on Bloomberg data. Earnings Season Alcoa Inc. will be the first Dow company to release third- quarter earnings, scheduled for Oct. 7. Micron Technology Inc. and Constellation Brands Inc. are among the S&P 500 companies set to release results this week. The steepest rally in the S&P 500 Index since the 1930s is restoring Byron Wien’s reputation as a stock picker. Wien, hired by Blackstone Group LP last month, said he’s keeping his January forecast for a 33 percent annual gain in the benchmark index, implying a 13 percent advance from yesterday’s close. More than six months ago, the S&P 500 needed to rise 77 percent to reach Wien’s year-end prediction of 1,200. Wien’s year-end forecast for the S&P 500 is higher than the average estimate of strategists surveyed by Bloomberg of 1,037. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net .

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U.S. Stock Futures Fluctuate Before Economic Data; MBIA Falls, Polo Gains

September 29, 2009

By Adria Cimino Sept. 29 (Bloomberg) — U.S. stock futures retreated as the highest valuations in five years overshadowed speculation that economic reports will show improvements in home prices and consumer confidence. MBIA Inc. sank 6.8 percent after Standard & Poor’s cut its credit ratings for the world’s biggest bond insurer by total guarantees. Exxon Mobil Corp. and Newmont Mining Corp. declined with oil and metals prices. Coca-Cola Co., the largest soft- drinks maker, rose as Citigroup Inc. advised buying the shares. Futures on the Standard & Poor’s 500 Index expiring in December lost 0.2 percent to 1,057.2 at 8:11 a.m. in New York. Dow Jones Industrial Average futures slipped 0.1 percent to 9,715, and Nasdaq-100 Index futures decreased 0.4 percent to 1,716.75. Stocks in Europe fluctuated, while Asian shares rose. “All will depend on economic data,” said Clemence Bounaix , who helps oversee about $4.5 billion at KBL Richelieu Gestion in Paris. “There are industries that have strongly rebounded so we have to be cautious. We’re in a phase of recovery, but we’re not immune to a rough patch if there is any bad news.” The S&P 500 has rallied 57 percent from a 12-year low in March, pushing valuations in the index to about 20 times the reported profits from continuing operations, data compiled by Bloomberg show. That’s near the most expensive level since 2004. Home values in 20 U.S. metropolitan areas probably declined at a slower pace and consumer confidence improved, signs the recession is abating as the real-estate crisis eases, economists said before reports today. Economy Watch The S&P/Case-Shiller home-price index fell 14.2 percent in July from a year earlier, the least in 17 months, according to the median forecast of 35 economists surveyed by Bloomberg News. The Conference Board may say its gauge of consumer sentiment rose this month to the highest level in a year. The home-price figures are due at 9 a.m. Washington time, while consumer confidence data is set for 10 a.m. U.S. stocks rose yesterday, sending benchmark indexes up the most in five weeks, as takeovers in the drug and technology industries added to evidence that mergers and takeovers are rebounding from the slowest pace in six years. Alcoa Inc. will be the first Dow company next week to release third-quarter earnings, scheduled for Oct. 7. Walgreen Co., Micron Technology Inc. and Constellation Brands Inc. are among the S&P 500 companies set to release results this week. Credit Rating MBIA lost 6.8 percent to $7.66 in early New York trading. The bond insurer had its credit ratings lowered to BB-, or three steps below investment grade, from BB by S&P, citing continued losses related to the company’s structured finance products. Exxon lost 0.6 percent to $69.20 in Germany, while Newmont Mining slipped 0.6 percent to $42.40. Crude oil fell before a report forecast to show that U.S. supplies of crude and refined oils accumulated because of a sluggish economic recovery. Prices of copper, lead, nickel and tin retreated in London. Coca-Cola was rated “buy” in new coverage at Citigroup, citing “markedly better” per-share earnings growth in 2010. The stock added 0.4 percent to $53.34 in Germany. Dr Pepper Snapple Group Inc. rose 1.1 percent to $28.06 in early trading after the third-largest U.S. soda maker was also rated “buy” at Citigroup, saying “carbonated soft drinks are a good place to be right now.” Stock Picker Sequenom Inc. plunged 44 percent to $3.19 in early New York trading. The company dismissed its chief executive officer and a senior research executive after finding it mishandled development of a prenatal test for Down syndrome. The steepest rally in the S&P 500 Index since the 1930s is restoring Byron Wien’s reputation as a stock picker. Wien, hired by Blackstone Group LP last month, said he’s keeping his January forecast for a 33 percent annual gain in the benchmark index, implying a 13 percent advance from yesterday’s close. More than six months ago, the S&P 500 needed to rise 77 percent to reach Wien’s year-end prediction of 1,200. Wien’s year-end forecast for the S&P 500 is higher than the average estimate of strategists surveyed by Bloomberg of 1,037. To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net .

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U.S. Leading Economic Indicators Index Rises 0.6% as Recovery Gains Ground

September 21, 2009

By Shobhana Chandra Sept. 21 (Bloomberg) — The index of U.S. leading economic indicators in August rose for the fifth straight time, capping the longest stretch of gains since 2004 and signaling a recovery is under way. The Conference Board’s gauge of the economic outlook for the next three to six months rose 0.6 percent, in line with forecasts, after a revised 0.9 percent rise in July, according to data that the New York-based group released today. The gains in stock prices, consumer confidence and homebuilding that are buoying the leading index bolster Federal Reserve Chairman Ben S. Bernanke’s view that the worst recession since the Great Depression has probably ended. At the same time, rising unemployment and tight credit are a reminder that a rebound will be slow and gradual. “The recession has ended and the economy is turning up,” Joseph Brusuelas , a director at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “The sustainability of the expansion into 2010 requires a recovery in job growth.” The index was projected to rise 0.7 percent, according to the median forecast of 58 economists in a Bloomberg News survey, after an originally reported increase of 0.6 percent in July. Estimates ranged from unchanged to a gain of 1 percent. Seven of the 10 indicators for the leading index are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times. Coincident Indicators The Conference Board estimates new orders for consumer goods, bookings for capital goods, and the money supply adjusted for inflation. The Conference Board’s index of coincident indicators, a gauge of current economic activity, was unchanged in August after increasing 0.1 percent the prior month. The index tracks payrolls, incomes, sales and production. The gauge of lagging indicators fell 0.1 percent following a 0.5 percent drop in the prior month. The index measures business lending, length of unemployment, service prices and ratios of labor costs, inventories and consumer credit. Five of the 10 indicators in today’s report added to the leading indicators index, led by a gauge of supplier deliveries, interest-rate spreads and the stock market. The Standard & Poor’s 500 Index has soared 57 percent since March 9, when it hit a 12-year low, as optimism grew that the U.S. was pulling out of the downturn. A jump during August in the S&P 500 average from July’s average added 0.3 point to the leading indicators gauge. Permits, Consumers Building permits , a sign of future construction, and a gauge of consumer expectations also contributed. Permits rose 2.7 percent to a 579,000 annual rate in August, the Commerce Department said on Sept. 17. The Reuters/University of Michigan index of consumer expectations six months from now, considered a proxy for future spending, rose to 65 in August and this month climbed to 69.2, according to a preliminary reading. Officials at some companies are already seeing a pickup in demand. Best Buy Co., the world’s largest electronics retailer, raised its full- year earnings forecast last week even while reporting a drop in second-quarter profit, citing “improving trends” for sales. “Customer traffic patterns have started to indicate signs of stability,” Jim Muehlbauer , chief financial officer for Richfield, Minnesota-based Best Buy, said in a Sept. 15 statement. Money Supply Money supply adjusted for inflation, which has the biggest weighting in the leading index and subtracted the most of any measure in the August report, took away 0.3 point. The average number of weekly applications for unemployment benefits rose in August from the prior month, subtracting 0.09 point from the leading index and a reminder that consumer spending is unlikely to lead the recovery. Economists predict claims will subside gradually. Claims dropped by 12,000 to 545,000 in the week ended Sept. 12, according to Labor Department data, while the total number of people collecting benefits rose. The economic expansion projected to start this quarter won’t be enough to keep the unemployment rate from reaching 10 percent by the end of the year for the first time since 1983, according to a Bloomberg survey of economists this month. The rate rose to 9.7 percent in August, from 9.4 percent in July. Unemployment rose in 27 U.S. states in August, with California, Nevada and Rhode Island reaching record levels of joblessness, the Labor Department reported Sept. 18 in Washington. California’s unemployment rate reached 12.2 percent and Nevada’s climbed to 13.2 percent. “There’s still a fair amount of weakness in some of the larger states,” said Steven Cochrane , director of regional economics at Moody’s Economy.com in West Chester, Pennsylvania. “State finances are probably going to be among the last of all the various components of the broad economy to turn around.” To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

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U.S. Stocks Advance on Higher Oil Prices, Decrease in Unemployment Claims

September 10, 2009

By Jeff Kearns Sept. 10 (Bloomberg) — U.S. stocks rose for a fifth day, the longest streak for the Standard & Poor’s 500 Index since November, as higher oil prices lifted energy producers and jobless claims slid to the lowest level since July. Chevron Corp. and Exxon Mobil Corp. advanced following an increased estimate for global oil demand from the International Energy Agency. Consumer and technology shares rose as Procter & Gamble Co. forecast earnings that topped estimates and analysts recommended Yahoo! Inc. The S&P 500 advanced above its highest close since Oct. 6 after weekly jobless claims decreased by 26,000 to 550,000, lower than economists forecast. “The jobs number was another confirmation that the economy may have reached the bottom,” said Wasif Latif , who helps oversee $90 billion at USAA Investment Management Co. in San Antonio. The S&P 500 added 0.4 percent to 1,037.7 at 11:10 a.m. in New York. The Dow Jones Industrial Average increased 34.77 points, or 0.4 percent, to 9,581.99. European shares fluctuated while Asia’s benchmark index rallied 1.3 percent. The S&P 500 jumped to an 11-month high yesterday as Goldman Sachs Group Inc. recommended industrial companies and investor Michael Price said he’s finding value in American equities. The benchmark index for U.S. equities has rebounded 53 percent from a 12-year low on March 9 amid signs the recession is easing and better-than-estimated earnings at companies from Johnson & Johnson to Goldman Sachs . Valuation Watch The rally has pushed valuations in the S&P 500 to about 19 times the reported earnings of its companies, the highest level since June 2004, according to weekly data compiled by Bloomberg . Chevron added 1.6 percent to $71.44, while Exxon Mobil increased 0.5 percent to $70.87. Crude oil rose 1 percent to $72 a barrel. Yahoo climbed 4.6 percent to $15.46 after Bank of America recommended buying shares of the second-most popular U.S. Internet search engine. Goldman Sachs advanced 2.1 percent to $173.83. Analyst Meredith Whitney said Goldman, the only bank stock she recommends investors buy, “still has a lot of gas in its tank.” Whitney, the founder of Meredith Whitney Advisory Group LLC, told CNBC that banks’ third-quarter earnings will be “similar” to the second quarter. The “crisis situation” is over, but fundamentals haven’t improved, Whitney said. Time Warner Inc. rose 2.1 percent to $29.06. Goldman Sachs raised the owner of the Warner Bros. film studio to “conviction buy” from “neutral,” saying a rebound in corporate profits “is likely to fuel a rally in national ads” by next year’s second quarter “at the latest.” Airlines Rally UAL Corp. and US Airways Group Inc. jumped after JPMorgan Chase & Co. removed its recommendation to sell the shares. UAL, parent of United Airlines, the third-largest U.S. carrier, climbed 20 percent to $7.74 after being boosted to “overweight.” US Airways, the smallest full-fare U.S. carrier, added 13 percent to $4.06 as it was lifted to “neutral.” Monsanto Co. slid 5.3 percent to $79.06. The seed maker said earnings per share will fall to a range of $3.10 to $3.30 this fiscal year as the company spends as much as $600 million to cut jobs and reduce costs. Health insurers advanced even after President Obama, in a speech last night to Congress and the public, said he won’t “back down on the basic principle that we will provide you with a choice” if private insurance is unaffordable. Insurance companies will benefit from his proposals to extend insurance to tens of millions of people lacking coverage, so taxing the providers on their most-expensive policies is fair, he said. ‘Stopped Short’ Obama “stopped short of addressing health-care reform,” said Kristin Binns , a spokeswoman for WellPoint Inc., the second-largest U.S. health insurer by sales. Las Vegas Sands Corp. fell 3.9 percent to $16.18. The casino company controlled by billionaire Sheldon Adelson was rated a new “sell” at Citigroup Inc., which said the company will be selling its “crown jewels” when it spins off the Macau assets later this year. The S&P 500 has gained 1.7 percent so far in September, historically the worst month for U.S. equities. The index retreated 1.3 percent on average since 1928 in that month before this year, data compiled by Bloomberg show. The S&P 500 plunged 9.1 percent last September after Lehman Brothers Holdings Inc. collapsed. The biggest drop occurred in September 1931 during the Great Depression, when the S&P 500 tumbled 30 percent. “September will probably end relatively flat but we could see markets gain another 10 percent by the end of the year,” said Urs Eilinger , Zurich-based chief investment officer at Infidar Investment Advisory Ltd., which manages about $3.2 billion. “It’s become clear that the worst is over and we won’t get back to the scenario in spring.” To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net .

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S&P 500 Is at Risk for 20% Drop, Bank of America Says: Technical Analysis

September 8, 2009

By Lu Wang Sept. 8 (Bloomberg) — The U.S. stocks rally is “maturing” and the risk of a 20 percent retreat in the Standard & Poor’s 500 Index increased after sellers became more aggressive than buyers, Bank of America said. Mary Ann Bartels , an analyst at Bank of America, said her volume intensity model, used to capture the market’s money flows, showed investor buying peaked last week and selling gained strength. That’s signaling the 50 percent rally in the S&P 500 from a 12-year low on March 9 may be near an end, she said. Technical analysts study chart patterns to predict prices. Selling pressure was the third of five indicators watched by Bartels to signal increased probability of a 15 percent to 20 percent “correction” in the benchmark for American equity, she said. Two others were triggered last month when China’s Shanghai Composite Index began a 16 percent slump and Investors Intelligence said bearish sentiment among newsletter writers shrank to less than 20 percent. “These are all signs of a maturing rally,” Bartels, who ranked second among analysts who study price charts in Institutional Investor magazine’s most recent survey, wrote in a note published today. “The risk of a deeper correction is increasing.” The two indicators that continue to support the equities rally are technology share outperformance and an increasing number of stocks trading above their 200-day average price, Bartels wrote. A measure of technology shares in the S&P 500 has jumped 39 percent this year, more than the 13 percent gain for the broader index. The percentage of companies listed on the New York Stock Exchange trading above their 200-day moving average rose to 91 percent in August, the highest in five years. “The S&P 500 remains in an uptrend, but the data challenges how long this can be maintained,” Bartels said. To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net .

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S&P 500 Is at Risk for 20% Drop, Bank of America Says: Technical Analysis

September 8, 2009

By Lu Wang Sept. 8 (Bloomberg) — The U.S. stocks rally is “maturing” and the risk of a 20 percent retreat in the Standard & Poor’s 500 Index increased after sellers became more aggressive than buyers, Bank of America said. Mary Ann Bartels , an analyst at Bank of America, said her volume intensity model, used to capture the market’s money flows, showed investor buying peaked last week and selling gained strength. That’s signaling the 50 percent rally in the S&P 500 from a 12-year low on March 9 may be near an end, she said. Technical analysts study chart patterns to predict prices. Selling pressure was the third of five indicators watched by Bartels to signal increased probability of a 15 percent to 20 percent “correction” in the benchmark for American equity, she said. Two others were triggered last month when China’s Shanghai Composite Index began a 16 percent slump and Investors Intelligence said bearish sentiment among newsletter writers shrank to less than 20 percent. “These are all signs of a maturing rally,” Bartels, who ranked second among analysts who study price charts in Institutional Investor magazine’s most recent survey, wrote in a note published today. “The risk of a deeper correction is increasing.” The two indicators that continue to support the equities rally are technology share outperformance and an increasing number of stocks trading above their 200-day average price, Bartels wrote. A measure of technology shares in the S&P 500 has jumped 39 percent this year, more than the 13 percent gain for the broader index. The percentage of companies listed on the New York Stock Exchange trading above their 200-day moving average rose to 91 percent in August, the highest in five years. “The S&P 500 remains in an uptrend, but the data challenges how long this can be maintained,” Bartels said. To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net .

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U.S. Stocks Advance for Second Day in Biggest Pre-Holiday Gain Since 1999

September 4, 2009

By Lynn Thomasson Sept. 4 (Bloomberg) — U.S. stocks gained for a second day, paring a weekly decline for the Standard & Poor’s 500 Index, as the pace of job losses slowed and the earnings outlook for technology companies improved. General Electric Co., Microsoft Corp. and Caterpillar Inc. climbed at least 2.1 percent as the government said the nation lost 216,000 jobs in August, less than economists forecast. Ciena Corp., which makes computer-networking equipment, rose 5 percent after Avondale Partners LLC upgraded the stock. Novellus Systems Inc. advanced as the maker of semiconductor equipment boosted its forecast for orders amid improving demand for chips. The S&P 500 added 1.3 percent to 1,016.4 at 4:11 p.m. in New York, its best advance on the session before Labor Day since 1999. The Dow Jones Industrial Average increased 96.66 points, or 1 percent, to 9,441.27. About 7.3 billion shares changed hands on U.S. exchanges, 22 percent less than the three-month daily average as trading slowed before the holiday weekend. “There’s been a tremendous string of data points that have consistently beat expectations,” said Liam Dalton , who oversees about $1.1 billion as the New York-based chief executive officer of Axiom Capital Management. “It’s holding up the market.” The S&P 500 lost 1.2 percent this week, its steepest drop in almost two months, amid speculation the rally in equities has outpaced prospects for an economic recovery. The measure, now valued at about 19 times earnings from its companies during the past year, has soared 50 percent since reaching a 12-year low in March. The Dow retreated 1.1 percent for the week. ‘Too Early’ Today’s report eased concern that the economy is weakening after ADP Employer Services said private employers cut 298,000 jobs in August, more than economists’ forecasts, and growth in factory orders trailed projections. Equities rallied today even after the jobs report also said the unemployment rate climbed to a 26-year high of 9.7 percent last month, a steeper increase than economists projected. Rising joblessness underscores Treasury Secretary Timothy Geithner ’s judgment that it’s “too early” to start exiting from the unprecedented stimulus measures helping stabilize the economy. Policy makers are signaling they plan to leave emergency stimulus in place even as the global recession ends, delivering what Credit Suisse Group AG and Bank of America call a “sweet spot” for financial markets. Canada recorded a surprise job gain in August, the first in four months, suggesting the country is emerging from its first recession since 1992. General Electric added 3.1 percent to $13.12 for the top gain in the Dow, followed by Caterpillar , which climbed 2.4 percent to $46.11, and Microsoft, which rose 2.1 percent to $24.62. Tech Leads Rally All 10 of the main industries in the S&P 500 advanced at least 0.3 percent. Technology stocks contributed the most to the S&P 500’s gain, collectively adding 1.7 percent. The industry, which has surged 39 percent this year, is the best-performing group in the equity benchmark in 2009. Ciena jumped 5 percent to $13.65. The company was raised to “market outperform” from “market perform” at Avondale, which set an 18-month target price of $18.00 a share. Novellus gained 2.9 percent to $19.63. The company , which produces equipment that helps turn silicon wafers into computer chips, said it expects third-quarter orders to rise as much as 55 percent, compared with a July forecast for a gain of as much as 50 percent. Freddie Mac increased 5.4 percent to $1.97 and Fannie Mae added 7.9 percent to $1.77. The mortgage-finance companies under U.S. government control said they were notified by the New York Stock Exchange that they had returned to compliance with the NYSE’s minimum share-price listing requirement. Abercrombie & Fitch Co. lost 2.6 percent to $30.17. The teen clothing retailer was cut to “ sell ” from “hold” at Citigroup Inc., which said same-store sales will probably continue falling. G-20 Meets Finance chiefs from the Group of 20 vowed to sustain efforts to end the worst global recession since the Great Depression to nurture an emerging economic recovery. Russia’s economy will return to growth in the third quarter, Finance Minister Alexei Kudrin said at the London meeting. Canadian Finance Minister Jim Flaherty said the world’s largest economies should maintain planned stimulus measures because the economic recovery remains “fragile.” Federal Reserve Bank of Dallas President Richard Fisher said the U.S. economy will probably undergo an extended period of slow growth while facing “financial headwinds” that will take years to wane. Separately, Nobel Prize-winning economist Joseph Stiglitz said the economy faces a “significant chance” of contracting again. To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .

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Stocks in U.S. Advance After Job Losses Fall Short of Analysts’ Estimates

September 4, 2009

By Lynn Thomasson Sept. 4 (Bloomberg) — U.S. stocks gained for a second day, paring a weekly decline for the Standard & Poor’s 500 Index, as the pace of job losses slowed and the earnings outlook for technology companies improved. Bank of America Corp., Walt Disney Co. and Caterpillar Inc. climbed at least 1 percent as the government said the nation lost 216,000 jobs in August, less than economists forecast. Ciena Corp., which makes computer-networking equipment, jumped after Avondale Partners LLC upgraded the stock. Novellus Systems Inc. added 1.6 percent as the maker of semiconductor equipment boosted its forecast for orders amid improving demand for chips. The S&P 500 added 1.2 percent to 1,015.67 at 1:28 p.m. in New York. The Dow Jones Industrial Average increased 98.47 points, or 1.1 percent, to 9,443.08. About 4.5 billion shares changed hands on U.S. exchanges, 29 percent less than at the same time last week as trading slowed before the holiday weekend. “There’s been a tremendous string of data points that have consistently beat expectations,” said Liam Dalton , who oversees about $1.1 billion as the New York-based chief executive officer of Axiom Capital Management. “It’s holding up the market.” The S&P 500 is poised for its biggest weekly decline in two months with a 2.2 percent loss amid speculation the rally in equities has outpaced prospects for an economic recovery. The measure, now valued at about 19 times earnings from its companies during the past year, has soared 50 percent since reaching a 12-year low in March. ‘Too Early’ Today’s report eased concern that the economy is weakening after ADP Employer Services said employers cut 298,000 jobs in August, more than economists’ forecasts, and growth in factory orders trailed projections. Gains were limited today as the jobs report also said the unemployment rate climbed to a 26-year high of 9.7 percent last month, a steeper increase than economists projected. Rising joblessness underscores Treasury Secretary Timothy Geithner ’s judgment that it’s “too early” to start exiting from the unprecedented stimulus measures helping stabilize the economy. Policy makers are signaling they plan to leave emergency stimulus in place even as the global recession ends, delivering what Credit Suisse Group AG and Bank of America call a “sweet spot” for financial markets. Canada recorded a surprise job gain in August, the first in four months, suggesting the country is emerging from its first recession since 1992. Bank of America, the largest U.S. bank by assets, added 1.7 percent to $17.12. Disney rose 1.8 percent to $25.90, while Caterpillar climbed 2.5 percent to $46.15. Tech Gains Ciena jumped 4.3 percent to $13.56. The company was raised to “market outperform” from “market perform” at Avondale, which set an 18-month target price of $18.00 a share. Novellus gained 1.6 percent to $19.38. The company , which produces equipment that helps turn silicon wafers into computer chips, said it expects third-quarter orders to rise as much as 55 percent, compared with a July forecast for a gain of as much as 50 percent. Freddie Mac increased 5.4 percent to $1.97 and Fannie Mae added 7.9 percent to $1.77. The mortgage-finance companies under U.S. government control said they were notified by the New York Stock Exchange that they had returned to compliance with the NYSE’s minimum share-price listing requirement. Abercrombie & Fitch Co. had the S&P 500’s steepest decline , losing 4 percent to $29.75. The teen clothing retailer was cut to “ sell ” from “hold” at Citigroup Inc., which said same- store sales will probably continue falling. G-20 Meets Russia’s economy will return to growth in the third quarter, Finance Minister Alexei Kudrin said while attending the Group of 20 meeting of finance officials in London today. Canadian Finance Minister Jim Flaherty said the world’s largest economies should maintain planned stimulus measures because the economic recovery remains “fragile.” Federal Reserve Bank of Dallas President Richard Fisher said the U.S. economy will probably undergo an extended period of slow growth while facing “financial headwinds” that will take years to wane. Separately, Nobel Prize-winning economist Joseph Stiglitz said the economy faces a “significant chance” of contracting again. To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .

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U.S. Payrolls Probably Fell Further in August, Posing Threat to Spending

September 4, 2009

By Timothy R. Homan Sept. 4 (Bloomberg) — Employers in the U.S. probably cut another 230,000 jobs in August, and the jobless rate increased, underscoring threats to consumer spending, economists said before a report today. The unemployment rate rose to 9.5 percent from 9.4 percent, according to the median of 77 estimates in a Bloomberg News survey. The projected drop in payrolls would be the smallest since August 2008, and follow a 247,000 July decline. Rising joblessness underscores Treasury Secretary Timothy Geithner’s judgment that it’s “too early” to start exiting from the unprecedented stimulus measures helping stabilize the economy. AMR Corp. and Whirlpool Corp. are among the companies continuing to cut staff to lower costs and revive profits in the aftermath of the deepest recession since the 1930s. “Given that we expect only modest economic growth in the initial phase of the recovery, it might not be until the second half of next year until payroll growth really begins to ramp up,” said Joseph Brusuelas , a director at Moody’s Economy.com in West Chester, Pennsylvania. “Job cuts will need to slow further if spending is to avoid steep declines.” Today’s report, scheduled for 8:30 a.m. in Washington, comes hours before Geithner meets in London with finance ministers and central bankers from the Group of 20 emerging and developed nations. ‘Long Way’ While the G-20 gathering will discuss how policy makers plan to exit from their fiscal and monetary stimulus efforts, now isn’t the time to start pulling back, Geithner told reporters in Washington this week. “We’ve come a very long way but I think we have to be realistic, we’ve got a long way to go still.” Federal Reserve policy makers waited at least a year after unemployment peaked before raising interest rates in the aftermath of the previous two recessions. Economists’ payroll forecasts ranged from declines of 100,000 to 365,000. Job losses peaked at 741,000 in January, the most since 1949. The August projection would bring total jobs lost since the recession began in December 2007 to 6.9 million, the biggest decline in any post-World War II economic slump. Economists surveyed by Bloomberg last month projected the jobless rate will reach 10 percent by early 2010 and average 9.8 percent for all of next year. Job Cuts Announcements of staff reductions continued last month. Whirlpool, the world’s largest appliance maker, said Aug. 28 that it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs, or 1.6 percent of the company’s workforce. Fort Worth, Texas-based American Airlines, a unit of AMR, said this week it will furlough 228 flight attendants and put 244 more on involuntary leave as part of the 1,600 job cuts it announced in June. “If you have workers that aren’t taking home paychecks or taking home small paychecks, that means consumption’s going to be seriously constrained and that’s going to be a real damper on overall growth,” said Dean Baker , co-director of the Center for Economic and Policy Research in Washington. “We are talking about a very weak recovery because at the end of the day, consumption is going to be central.” Meanwhile, other companies are starting to increase staff as sales stabilize. General Motors Co. last month called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosted second-half production in part because of the government’s “cash for clunkers” program. The administration’s plan, which ended Aug. 24, offered auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. More Sales Cars and light trucks sold at a 14.1 million annual pace last month, up 25 percent from July, industry figures this week showed. It was the biggest gain since October 2001, when automakers including GM introduced zero-percent financing to boost sales following the terrorist attacks on New York and Washington. The U.S. recession “is bottoming out” and the economy is poised for “a slow return,” Alcoa Inc. Chief Executive Officer Klaus Kleinfeld said in a Sept. 2 interview. The head of the largest U.S. aluminum producer said government stimulus in the U.S. and China will affect the New York-based company’s earnings “positively” this year. The Standard & Poor’s 500 Index yesterday snapped a four- day losing streak as sales at chain stores from Costco Wholesale Corp. to Gap Inc. last month topped analysts’ estimates. The S&P 500 has climbed almost 50 percent since reaching a 12-year low on March 9 as evidence mounted the economic slump was nearing an end. To contact the reporter on this story: Timothy R. Homan in Washington at Thoman1@bloomberg.net

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U.S. Stocks Drop as Jobs, Factory Orders Data Spur Concern About Recovery

September 2, 2009

By Lynn Thomasson Sept. 2 (Bloomberg) — U.S. stocks fell for a fourth day, the longest losing streak for the Standard & Poor’s 500 Index since May, as reports on job losses and factory orders spurred concern that the economy is struggling to recover. Bank of America Corp., General Electric Co. and McDonald’s Corp. dropped as ADP Employer Services said employers cut payrolls by 298,000 last month. D.R. Horton Inc. , the largest U.S. homebuilder by sales, retreated 4.1 percent after UBS AG recommended selling the shares. Asia’s regional benchmark tumbled the most in two weeks and European shares extended declines after the employment report. “Everything is not rosy right now,” said Jason Cooper , who manages $2.5 billion at 1st Source Investment Advisors in South Bend, Indiana. “It’s causing more pressure on the market. Given the gains we’ve had in the past few months, people are skittish about whether it’s sustainable.” The Standard & Poor’s 500 Index decreased 0.2 percent to 996.3 at 10:25 a.m. in New York. The Dow Jones Industrial Average slipped 9.75, or 0.1 percent, to 9,300.85. The MSCI World Index of 23 developed countries slid 0.9 percent. Speculation that banks have risen too far, too fast and will likely post more losses given the weakening commercial real estate market pushed U.S. stocks lower yesterday. The S&P 500’s 48 percent rebound from a 12-year low on March 9 has left the index valued at about 19 times the profits of its companies, the highest ratio since June 2004, according to weekly data compiled by Bloomberg. ‘Time for a Breather’ “After the strong rally it’s time for a breather,” said Sandro Rosa , an equity strategist at Clariden Leu AG in Zurich, which manages about $88 billion. “People are nervous and want to feather their nests. The earnings season is over and a new driver is missing. Valuations are no longer a screaming buy and earnings will have to rise to justify the prices.” The decline in payrolls exceeded the median economist estimate of losses of 250,000, according to a Bloomberg survey. The U.S. government will release its monthly jobs report at the end of the week. Economists surveyed by Bloomberg project the unemployment rate to rise to 9.5 percent, the highest level since 1983. Masco Corp., Rockwell Automation Inc. and Deere & Co. helped lead a measure of industrial companies in the S&P 500 to a 0.4 percent drop. The Commerce Department said orders placed with U.S. factories rose 1.3 percent in July, trailing the 2.2 percent forecast compiled from a Bloomberg survey. D.R. Horton lost 4.1 percent to $12.38. UBS analysts said the valuation of the shares is “well ahead” of fundamentals. They cut the stock to “sell” from “neutral.” Other economic reports today showed that the productivity of U.S. workers rose in the second quarter at the fastest pace in almost six years as companies squeezed more out of remaining staff to boost profits. Labor costs fell by the most in nine years. To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .

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U.S. Stocks Decline as Dollar, Crude Oil Advance; Merck, McDonald’s Fall

August 28, 2009

By Matt Townsend Aug. 28 (Bloomberg) — The Standard & Poor’s 500 Index fell for the first time in four days as drugmakers and sellers of consumer goods dropped. The dollar rose against the euro, and oil advanced. Treasuries were little changed. Merck & Co., McDonald’s Corp. and AT&T Inc. declined as the S&P 500 Index pared earlier gains. Intel Corp . said third- quarter sales will be more than it previously forecast. The dollar gained against the euro on increased demand for safety after stocks dropped. Crude rose as much as 1.4 percent. “We are at somewhat of a crossroads in the market,” said William Cunningham, head of fixed-income and credit research at State Street Corp. in Boston. “The picture is pretty clear that this won’t be a strong recovery this year; the real question is whether the economy will slip back into the abyss, and the market is reflecting that uncertainty.” The S&P 500 lost 0.2 percent to 1,028.93 at 4 p.m. in New York, trimming its second straight weekly gain to 0.3 percent. The Dow Jones Industrial Average fell 0.4 percent to 9,544.20 in its first drop since Aug. 17. The dollar gained 0.3 percent to $1.4303 per euro. Crude rose 0.3 percent to $72.74 a barrel. The yield on the 10-year note decreased less than one basis point to 3.45 percent. ‘Playing Offense’ Makers of telephone equipment and drugs and suppliers of household goods failed to keep pace with the S&P 500 as it rebounded from a 12-year low on March 9, according to data compiled by Bloomberg. They also trailed the benchmark gauge for U.S. equities as it doubled between 2002 and 2007, with so- called consumer-staples providers climbing 40 percent and drugmakers increasing by 41 percent. “People are perhaps considering shifting from playing defense to playing offense,” said Lawrence Creatura , a money manager at Federated Clover Investment Advisors, which oversees $2 billion in Rochester, New York. “The offensive playbook says sell staples, sell safety, sell large-caps generically.” The dollar gained against the euro for the fourth time this week as stocks declined. The greenback also strengthened against the Canadian dollar, yen and pound. “Stops again!” said Alan Ruskin , head of international foreign-exchange strategy in North America at RBS Securities Inc. in Stamford, Conn. “This time short-term players playing short on the dollar are getting stopped out.” Dollar Versus Euro Traders typically place so-called stop losses at key levels to protect themselves when a bet moves in the opposite direction. The U.S. currency rose from near the lowest level this year against the Swiss franc and strengthened versus the Brazilian real and Canadian dollar. Today saw a reverse of the greenback’s drop against the euro at 2:05 p.m. yesterday, also triggered by stop losses. The dollar’s advance versus the 16-nation currency accelerated at 2:19 p.m. in New York today as trading volume fell after investors in London began a three-day holiday weekend, according to Scott Ainsbury , who helps manage about $9 billion in assets in New York at FX Concepts Inc., a hedge fund. Crude oil gained for a second day after U.S. consumer confidence beat forecasts, a sign that the economy is recovering from the worst recession since World War II. The Reuters/University of Michigan final index of consumer sentiment this month dipped to 65.7, better than forecast, from 66 in July. A preliminary reading for August was 63.2. Raw Materials Gain The Reuters/Jeffries CRB Index , a gauge of 19 raw materials and commodities, also advanced for a second day, rising 0.5 percent, as copper, silver, aluminum and gold all gained at least 1 percent. Treasuries gained this week after investors snapped up a record-tying $109 billion of government notes amid skepticism about the sustainability of the economic recovery and the rising value of higher-yielding assets. Yields on benchmark 10-year notes declined for a third consecutive week. Prices on U.S. debt were little changed today. “Auctions this week went fairly well even with yields toward the lower end of their ranges,” said Christopher Sullivan, who oversees $1.5 billion as chief investment officer at United Nations Federal Credit Union in New York. “We are unlikely to get much movement in the market until we see significant information about the underlying economy and know more about the Fed’s response.” Federal Reserve policy makers next meet on Sept. 23. To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net .

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U.S. Stocks Decline, Led by Energy Producers; Toll Brothers Falls on Loss

August 27, 2009

By Adam Haigh and Elizabeth Stanton Aug. 27 (Bloomberg) — U.S. stocks dropped, led by energy producers , as crude oil fell for a third day and higher-than- forecast jobless claims spurred speculation that the Standard & Poor’s 500 Index ’s 52 percent rally since March isn’t justified. Exxon Mobil Corp. and Chevron Corp., the biggest U.S. fuel suppliers, declined more than 1 percent. Toll Brothers Inc. slid after the largest U.S. builder of luxury homes posted a wider quarterly loss. Boeing Co. , the second-biggest maker of commercial aircraft, gained 8.2 percent after predicting its 787 Dreamliner will make its first flight this year. The Standard & Poor’s 500 Index slipped 7.14 points, or 0.7 percent, to 1,020.98 as of 9:58 a.m. in New York. The Dow Jones Industrial Average lost 42.47, or 0.5 percent, to 9,501.05. The Nasdaq Composite Index decreased 20.52, or 1 percent, to 2,003.91. The S&P 500’s 52 percent rally since March 9 has pushed gauge’s price to about 19 times annual earnings of its companies, the most expensive level since 2004. About 76 percent of companies in the index that have reported results since June 17 beat the average analyst estimate for second-quarter profits, according to Bloomberg data. Jobless claims totaled 570,000, more than forecast, in the week ended Aug. 22, compared with a revised 580,000 the week before, according to the Labor Department. The data offset a Commerce Department report showing the U.S. economy contracted less than anticipated in the second quarter as a jump in government spending and smaller cutbacks by consumers helped mitigate a record plunge in inventories. 200 Days A decline in the S&P 500 below its 200-month average would probably signal an additional slump of as much as 6.5 percent, according to Chicago-based Technical Analytics Inc. The index, which closed at 1,028.12 yesterday, has traded higher than its 200-day moving average since July 13 and rose 17 percent above it yesterday, the most since April 1999. All 10 industries in the S&P 500 fell today, led by a 1.2 percent decline in energy shares. Crude oil slid after a report showed that inventories unexpectedly rose last week in the U.S., the world’s largest energy user. Exxon dropped 97 cents to $70.40 and Chevron lost $1.02 to $70.07. Crude for October delivery retreated 86 cents, or 1.2 percent, to $70.57 a barrel on the New York Mercantile Exchange. Toll Brothers dropped 44 cents, or 1.9 percent, to $22.70. The net loss for the three months ended July 31 swelled to $472.3 million, more than analysts projected. Boeing added $3.81 to $51.63. The first 787 will now fly for the first time by the end of this year and be delivered to customers in the fourth quarter of 2010, the Chicago-based company said in a statement today. The delivery target is about 2 1/2 years behind the original goal of May 2008. Citigroup increased 11 cents to $4.74. Hedge fund manager John Paulson has acquired about a 2 percent stake in the New- York based bank, the New York Post reported today, citing unidentified people. Financial stocks in the S&P 500 have climbed 134 percent since the benchmark for U.S. equity began rallying from a 12-year low on March 9. To contact the reporters on this story: Adam Haigh in London at ahaigh1@bloomberg.net . Elizabeth Stanton in New York at estanton@bloomberg.net

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U.S. Stock-Index Futures Gain Before Housing, Confidence Data; GE Climbs

August 25, 2009

By Daniela Silberstein Aug. 25 (Bloomberg) — U.S. stock-index futures rose before reports that may show the pace of decline in house prices slowed and consumer confidence rose. Lowe’s Cos. climbed 1.3 percent in pre-market trading in New York after Morgan Stanley recommended the shares. General Electric Co. advanced in Germany after signing a service accord with Dubai Aluminium Co. Reports today may show house prices fell at a slower pace and consumer confidence climbed, signs that that the recession is easing as the real-estate crisis dissipates, economists forecast. Futures on the Standard & Poor’s 500 Index expiring in September added 0.1 percent to 1,026 at 12:12 p.m. in London. Dow Jones Industrial Average futures gained 0.2 percent to 9,508, while Nasdaq-100 Index futures rose 0.1 percent to 1,635.75. Stocks in Europe and Asia retreated. “The question is what the recovery will look like, whether it’s a ‘V’ or a ‘W’ and that’s what the market is trying to find out,” said Andreas Nigg , a fund manager at Vontobel Asset Management in Zurich, which oversees about $30.5 billion. Economic indicators suggest “we have left the low points behind us but we are already quite far into the rally and it makes sense to be more cautious.” Most stocks yesterday fell, led by financial companies, after SunTrust Banks Inc. said lenders face more credit losses and commercial real estate may falter through 2010. A 52 percent rebound from a 12-year low on March 9 left the measure valued at 18.9 times the profits of its companies, the highest ratio since 2004, weekly data compiled by Bloomberg show. Home Prices A measure of home prices is projected to fall at a slower pace. The S&P/Case-Shiller index of property values in 20 U.S. metropolitan areas was probably down 16.4 percent in June from a year earlier, the smallest decline in almost a year, the survey showed. The Conference Board’s confidence index is forecast to rise to 47.9 in August from 46.6 in July, according to the Bloomberg survey median. Federal Reserve Chairman Ben S. Bernanke , who led the biggest expansion of the central bank’s power in its 95-year history to battle the worst economic slump since the Great Depression, will be nominated to a second term by President Barack Obama . “Bernanke has managed the crisis well,” said Vontobel’s Nigg. “It’s a sensible decision.” Lowe’s Lowe’s rose 1.3 percent to $20.98 in New York. The second- largest U.S. home-improvement chain was upgraded to “overweight” from “equal weight” at Morgan Stanley. Separately, the company will team with Woolworths Ltd. to enter Australia’s A$24 billion ($20 billion) hardware market, betting on an economy where home-building approvals rose by the most in four years. GE added 0.5 percent to $14.27 in Germany. Dubai Aluminium Co., the largest smelter in the Middle East, signed a multiyear service contract with the world’s biggest maker of power-plant turbines for more than $45 million to reduce the cost of aluminum production. GE Energy will maximize the use of 19 GE turbines that power Dubai Aluminium’s production, cutting the cost of generating electricity. Big Lots Inc. added 1.7 percent to $24.44. The closeout retailer said second-quarter profit from continuing operations was 35 cents a share, beating the 30 cents analysts estimate. Burger King Holdings Inc. gained 2.2 percent to $18.05 in New York. The world’s second-largest hamburger chain said fourth-quarter profit was 43 cents a share. Analysts surveyed by Bloomberg had estimated profit of 33 cents. Central European Distribution Central European Distribution Corp. slid 1.3 percent to $32.73 in early New York trading. The vodka maker was downgraded to “underweight” from “equal weight” at Morgan Stanley, which said the shares “look expensive.” U.S. companies with the worst finances are beating the S&P 500 even as their funding deteriorates, a sign their rally may falter should the economic recovery stall, Armstrong Investment Managers said. The weakest non-financial companies in the S&P 500 surged 90 percent since March 9 through last week. After the S&P 500 sank to a 12-year low five months ago, companies with the best finances gained 49 percent, data from Armstrong Investment show. To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net .

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Stocks in U.S. Erase Advance as SunTrust Chief Wells Predicts Bank Losses

August 24, 2009

By Jeff Kearns Aug. 24 (Bloomberg) — U.S. stocks swung between gains and declines as financial institutions slumped after SunTrust Banks Inc. said lenders face more credit losses and commercial real estate may falter through 2010. Rallies in commodity prices had sent equities higher earlier. Banks in the Standard & Poor’s 500 Index fell 1.7 percent as SunTrust Chairman and Chief Executive Officer James Wells III said “the industry is a long way from declaring any sort of victory.” Ford Motor Co. declined 4.3 percent before the “cash for clunkers” program for cars expires today. Commodities and equities rallied globally as leaders of the biggest central banks buttressed confidence in the economic recovery. The S&P 500 rose 0.1 percent to 1,026.99 at 1:59 p.m. in New York after earlier climbing as much as 0.9 percent. The Dow Jones Industrial Average added 11.79 points, or 0.1 percent, to 9,517.75. The MSCI World Index of 23 developed nations advanced 0.7 percent. The UBS Bloomberg Constant Maturity Commodity Index increased 1 percent. “Maybe we’re not completely out of the financial crisis,” said E. William Stone , who oversees $101 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “We’ve had almost no economic data, plus light trading and a good week last week, so that may give people an itchy trigger finger to take profits if they sniff trouble.” Most Expensive Since 2004 The S&P 500 added 2.2 percent last week, sending the S&P 500 to the highest level since October, as rising commodity prices and a surge in home sales signaled an economic recovery. The index’s 52 percent rebound from a 12-year low in March left it valued at 18.9 times the profits of its companies, the most expensive since 2004, according to data compiled by Bloomberg. Copper prices rose to a one-week high in New York, with futures for December delivery gaining 0.6 percent to $2.912 a pound. December-delivery copper on the Shanghai Futures Exchange jumped 5 percent, the daily limit. Crude oil gained 0.7 percent to a 10-month high of $74.43 a barrel. Central bankers spurred a rally in global equities and commodities earlier. Federal Reserve Chairman Ben S. Bernanke and European Central Bank President Jean-Claude Trichet , speaking at the annual central bankers’ symposium in Jackson Hole, Wyoming, said the world economy is pulling out of recession. “You’ve moved to a stage where investors accept that it’s a bull market and are worried that they’re missing it,” said Hugh Johnson , who manages more than $1.6 billion as chairman of Albany, New York-based Johnson Illington. “The underlying economic numbers confirm that it’s a bull market.” To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net .

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Stocks in U.S. Advance After AIG Says It Will Pay Back U.S. Bailout Funds

August 20, 2009

By Kayla Carrick Aug. 20 (Bloomberg) — U.S. stocks rose for a third day as American International Group Inc. led a rally in financial shares after saying it expects to pay back the government, overshadowing an unexpected increase in jobless claims. AIG rallied 12 percent for the top gain in the Standard & Poor’s 500 Index after Chief Executive Officer Robert Benmosche said the company also hopes it will be able to “do something for our shareholders as well.” Google Inc. added 2.9 percent after being added to Goldman Sachs Group Inc.’s “conviction buy” list. Investors will also watch data on leading economic indicators and manufacturing in the Philadelphia region. The S&P 500 added 0.5 percent to 1,001.64 at 9:55 a.m. in New York. The Dow Jones Industrial Average rose 27.58 points, or 0.3 percent, to 9,306.74. The Nasdaq Composite Index increased 0.6 percent to 1,981.26. Stock-index futures erased earlier gains before the open of exchanges as the Labor Department said applications for jobless benefits rose to 576,000 in the week ended Aug. 15 from a revised 561,000 the week before. The number of people collecting benefits the week earlier was little changed at 6.24 million. The S&P 500 has climbed 47 percent from a 12-year low in March amid speculation the worst of the recession has passed. Edward McKelvey , a senior economist at Goldman Sachs Group Inc., said yesterday the contraction may already be over. He cited the gain in industrial production in July, helped by the government’s cash-for-clunkers program, along with the likelihood that output will continue to grow because of depleted inventories. Leading Indicators The Conference Board’s gauge of the economic outlook for the next three to six months rose 0.7 percent for a second month, according to the median forecast of 52 economists surveyed by Bloomberg News. The report is due at 10 a.m. Washington time. Other data may show manufacturing in the Philadelphia region contracted at a slower pace. Google, the owner of the world’s most popular search engine, climbed 2.9 percent to $456.83. Per-share profits topped analysts’ estimates by an average of 9.9 percent for the companies in the S&P 500 that have reported results since June 17, data compiled by Bloomberg shows. Earnings slid 29 percent on average, a record eighth straight quarter of falling profits. To contact the reporter on this story: Kayla Carrick in New York at kcarrick1@bloomberg.net

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Stocks in U.S. Fall as Confidence Drop Adds to Speculation Rally Overdone

August 14, 2009

By Whitney Kisling Aug. 14 (Bloomberg) — U.S. stocks slid, erasing this week’s gain in the Standard & Poor’s 500 Index , as lower-than- estimated consumer confidence added to concern a five-month rally has outpaced prospects for the economy. Boeing Co. , the world’s second-largest commercial airplane manufacturer, led declines in the Dow Jones Industrial Average after saying it found flaws in 23 of its 787 Dreamliners. Alcoa Inc., 3M Co. and Caterpillar Inc. also slumped as all 10 industries in the S&P 500 posted declines . J.C. Penney Co. retreated after its forecast trailed estimates. “A lot of people think the market has come up more than enough and it needs to rest,” said Charles Knott , chief investment officer at Knott Capital Management in Exton, Pennsylvania, who oversees about $550 million. “We’ve got a pretty sobering outlook and are concerned about the economy on a long-term basis. We think there’s neither the willpower nor the means to fully finance that type of V-shape recovery.” The S&P 500 tumbled 1.5 percent to 997.28 at 2:21 p.m. in New York, heading for its first weekly drop in five and its biggest daily decline since July 7. The Dow industrials lost 140.87 points, or 1.5 percent, to 9,257.32. U.S. stocks are “dramatically overpriced” because the fallout from the financial crisis will continue to hurt consumer spending, said David Tice , Federated Investors Inc.’s chief portfolio strategist for bear markets. Tice, who predicts that the S&P 500 will eventually slump to 400, said he would add to short positions if the market goes much higher. ‘Need to Be Realistic’ “I’d love for prosperity to return, unfortunately I think you need to be realistic and it takes time to work off these excesses” from a bubble in credit markets, Tice said in an interview with Bloomberg Television. Equities declined even after industrial production in the U.S. rose for the first time in nine months after mid-year retooling at automakers and as a federal “cash-for-clunkers” program fueled demand for cars. The 0.5 percent increase in output at manufacturers, mines and utilities was more than economists forecast, Federal Reserve figures showed. A 50 percent rebound from a 12-year low on March 9 left the S&P 500 trading at 18.6 times the profits of its companies on Aug. 7, the highest valuation since 2004, according to weekly Bloomberg data. Stocks gained yesterday after investor John Paulson ’s hedge fund bought stakes in banks, helping offset an unexpected slump in retail sales. Earnings Season Per-share earnings topped analysts’ estimates by 10 percent on average for the companies in the S&P 500 that have released results since June 17, according to data compiled by Bloomberg. Profits slumped about 30 percent in the period, a record eighth straight quarter of falling earnings. Instead of a so-called New Normal of subdued growth, the U.S. may be heading for a robust recovery. The worst recession since the 1930s has created a reservoir of demand that will buoy the economy, say a growing number of economists led by James Glassman at JPMorgan Chase & Co., former Fed Governor Laurence Meyer and Stephen Stanley at RBS Securities Inc. Boeing said it stopped work more than a month ago on two sections for the 787 Dreamliner after flaws were found. The 787 was almost two years behind its initial May 2008 first-delivery target before the latest delay. Shares of the second-biggest defense contractor fell 4.2 percent to $44.65, the biggest decline in more than a month. J.C. Penney slid the most since February, losing 6.3 percent to $31.23, after the third-largest U.S. department-store chain gave a third-quarter forecast trailing analysts’ estimates. Sales continue to decline, the company said. Financials Slump Financial shares , which have more than doubled since the S&P 500 hit a 12-year low of 676.53 on March 9, declined 1.6 percent as a group today. Genworth Financial Inc. slid the most in the S&P 500 after Citigroup cut the company to “sell” from “hold.” The shares , which have almost tripled this year, declined 8.1 percent to $8.04. Alcoa, the largest U.S. aluminum producer, dropped 3.8 percent to $13.19. 3M, the maker of 55,000 products, slid 2.4 percent. The Reuters/Jefferies CRB Index of 19 commodities declined 1.6 percent, bringing its weekly loss to about 1.4 percent. Crude oil fell as much as 4.6 percent to $67.29 a barrel. National Oilwell Varco Inc., the world’s largest maker of oilfield equipment, dropped 4.5 percent to $36.57, the biggest slide in more than a month. All 40 members of the S&P 500 energy group declined. Equity Residential and Barnes & Noble Inc. dropped after analysts downgraded the shares. UBS AG cut Equity Residential, the largest publicly traded owner of apartment complexes, to “sell” from “neutral,” sending the shares down 3.6 percent to $26.84. Credit Suisse Group AG lowered Barnes & Noble to “underperform,” citing the company’s decision to buy back a unit as an increased risk. The shares fell 9.7 percent to $20.75, their worst loss this year. To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net .

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