health-group

By Elizabeth Stanton Feb. 26 (Bloomberg) — U.S. stocks advanced, trimming the weekly drop in the Standard & Poor’s 500 Index, as reports showing business activity expanded and gross domestic product topped estimates overshadowed American International Group Inc. ’s plunge and home sales that missed projections. JPMorgan Chase & Co. led bank stocks to the biggest advance among 10 industries groups in the S&P 500 after Barclays Plc recommended buying the shares. Merck & Co. and UnitedHealth Group Inc. rose at least 0.8 percent, leading gains in health- care companies. AIG, the insurer bailed out by the U.S. government, slumped 10 percent after reporting an $8.87 billion fourth-quarter loss. The S&P 500 rose 0.1 percent to 1,104.49 at 4 p.m. in New York. It dropped 0.4 percent this week and gained 2.9 percent in February. The Dow Jones Industrial Average gained 4.23 points today, or less than 0.1 percent, to 10,325.26. Trading volume on U.S. exchanges was 7.89 billion shares, 11 percent less than the 2010 average, amid a storm that dumped about 21 inches (53 centimeters) of snow in New York City. “It’s a very brittle recovery,” said Matthew Kaufler , a money manager at Federated Clover Investment Advisors in Rochester, New York, which manages $2.8 billion. “Any sort of sustained growth in consumer spending is a ways off.” A decline in the Conference Board’s consumer confidence index to a 10-month low on Feb. 23 sent the S&P 500 to its biggest drop in more than two weeks. The University of Michigan today revised its gauge of consumer sentiment to 73.6 for February, from a preliminary reading of 73.9. Business Barometer The U.S. economy expanded at a 5.9 percent annual rate in the fourth quarter, more than the government reported last month, reflecting stronger business investment and a greater contribution from inventories. The Institute for Supply Management-Chicago Inc. said its business barometer climbed to 62.6 from 61.5 last month, a bigger increase than economists forecast and the highest since 2005. Sales of previously owned U.S. homes unexpectedly declined in January for a second month, eroding investor confidence in the sustainability of the recovery. Purchases fell 7.2 percent, the second-largest decline ever, to an annual pace of 5.05 million, the National Association of Realtors said. “At some point we have to turn consumer confidence around, and for that we need fundamental improvement in jobs and real estate, which are central to the problem,” said Eric Teal , who oversees $4.5 billion as chief investment officer at First Citizens BancShares Inc. in Raleigh, North Carolina. There is a “disconnect between the psychology of the market and the fundamentals of the market.” ‘Buying Opportunity’ JPMorgan rose 3.3 percent to $41.97 for the biggest gain in the Dow average. The second-largest U.S. bank by assets offers an “attractive buying opportunity” as the stock traded at about 6 to 7 times normalized earnings, compared with a multiple of 9 for its peers, Barclays said. Merck , the second-largest U.S. drugmaker, rose 0.9 percent to $36.88. UnitedHealth Group , the biggest U.S. health insurer by revenue, gained 1.2 percent to $33.86. President Barack Obama is seeking the biggest U.S. health-care overhaul in 45 years. Congressional Republicans oppose the plan, which would require Americans to get insurance, with new purchasing exchanges and government aid to help. Obama and Democratic leaders said a bipartisan agreement was unlikely yesterday in Washington. “Health care is doing well based upon the growing realization that what ultimately gets passed isn’t going to be nearly as onerous as had been feared,” Kaufler said. Biggest Loss Ever AIG fell 10 percent to $24.77 for the biggest loss in the S&P 500. The fourth-quarter net loss of $8.87 billion, or $65.51 a share, narrowed from $61.7 billion, or $458.99, a year earlier when AIG recorded the biggest loss in U.S. corporate history. The loss was wider than expected as the company set aside more reserves for insurance claims and paying down bailout debts. Fluor Corp., the largest publicly traded U.S. construction company, dropped 5 percent to $42.80. The company lowered its 2010 earnings forecast to $2.80 to $3.20, from an earlier forecast of $3.20 to $3.60. Gap Inc., the operator of the Old Navy and Banana Republic clothing chains, rose 5.4 percent to $21.50. Gap forecast full- year profit of $1.70 to $1.75 a share. Analysts surveyed by Bloomberg estimated $1.69 on average. Gap also said it plans to increase its annual dividend to 40 cents a share from 34 cents and will buy back an additional $1 billion in stock. Profit Data The combined per-share earnings for the S&P 500 are $17.53 based on fourth-quarter reports by 453 companies, according to Bloomberg data, compared with a loss of 9 cents a share in the year-earlier period, according to S&P. Per-share profit declined in each of the past nine quarters, a record slump. Earnings topped analysts’ average estimates at three-quarters of the 456 companies in the S&P 500 that have posted quarterly results since Jan. 11, according to Bloomberg data. Interpublic Group of Cos. had the biggest gain in the S&P 500, surging 11 percent to $7.50. The owner of advertising firms reported fourth-quarter revenue of $1.8 billion, beating the average analyst estimate in a Bloomberg survey by 3.5 percent. BancorpSouth Inc. slumped 14 percent, the most since December 2008, to $19.47. The holding company for BancorpSouth Bank said it will delay filing its 2009 financial results because it’s reviewing its asset quality. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net .