Tuesday, September 11, 2007

U.S. Stocks Advance; McDonald's, General Motors Shares Climb

By Eric Martin

Sept. 11 (Bloomberg) -- U.S. stocks rose for the first time in three days on speculation consumer demand will weather an economic slowdown and spur profit growth.

McDonald's Corp., the world's biggest restaurant chain, rallied for a second day after August sales were better than some analysts expected. General Motors Corp. advanced for the first time in a week after the largest U.S. automaker said it needs fewer incentives to win buyers. Western Digital Corp. climbed the most in two weeks after the world's second-biggest maker of hard- disk drives boosted its profit and sales forecasts.

The Standard & Poor's 500 Index gained 13.62, or 0.9 percent, to 1,465.32 at 10:41 a.m. in New York. The Dow Jones Industrial Average added 132.83, or 1 percent, to 13,260.68. The Nasdaq Composite Index increased 28.21, or 1.1 percent, to 2,587.32.

``At this point the market is mainly looking for any sort of indicator of people's willingness to spend,'' said Peter Jankovskis, who helps manage $1.25 billion, including about 425,000 McDonald's shares, at Lisle, Illinois-based Oakbrook Investments LLC. ``When we get a good report in that regard, we're going to see the market go up.''

Stocks in Europe and Asia also gained and Treasuries fell for the first time in three days. Financial shares rose for the first time in five days after the rate that banks charge each other for loans declined to the lowest since Aug. 24.

McDonald's Corp. increased 85 cents to $51. August sales advanced 8.1 percent as customers bought chicken snack wraps and iced coffee in the U.S. and McFlurry desserts in Europe. John Glass, a CIBC World Markets Corp. analyst, estimated August global sales would rise 4.6 percent.

GM, Western Digital

General Motors gained 41 cents to $29.62. The company also hopes that the new Malibu model will need less spending to encourage sales, Vice Chairman Bob Lutz said today at the International Motor Show in Frankfurt.

Western Digital added $1.19, or 5.3 percent to $23.60. First-quarter profit will climb to as much as 65 cents a share, excluding some acquisition costs, the Lake Forest, California- based company said yesterday. That topped the 47-cent average of estimates compiled by Bloomberg. Western Digital predicted sales of as much as $1.65 billion in the period, an increase from a previous forecast of up to $1.5 billion.

Investors were also awaiting a speech by Federal Reserve Chairman Ben S. Bernanke for clues about the outlook for interest rates and economic growth. He is scheduled to speak from a prepared text at 11 a.m. New York time today without taking questions.

Rate-Cut Speculation

Recent remarks from Federal Reserve policy makers may reflect debate inside the central bank over whether to lower the benchmark interest rate on Sept. 18 by a quarter-percentage point or a half-point as some investors expect, Fed watchers said. Fed Governor Frederic Mishkin joined San Francisco Fed President Janet Yellen in flagging an increasing threat to consumer spending, differing with officials who still see signs of economic strength.

``There is a virtual certainty of a Fed cut,'' said Jack Ablin, who helps manage $52 billion as chief investment officer at Harris Private Bank in Chicago. ``Lowering interest rates will certainly help, there's no question about it.''

Wm. Wrigley Jr. Co. added 11 cents to $59.71. The world's largest maker of chewing gum may build a second factory in Russia and seek acquisitions as its local sales advance at a ``double- digit'' pace.

Thornburg Mortgage Inc. added 53 cents, or 4.3 percent, to $12.82. The specialist in jumbo home loans has a low risk of bankruptcy and is likely to survive the liquidity squeeze in the mortgage markets, UBS Investment Bank said.

A gauge of financial shares added 1.3 percent as a group and contributed the most to the rise in the S&P 500. Financial companies were also boosted after the overnight London interbank lending rate for dollars, or Libor, dropped to 5.30 percent from 5.34 percent yesterday, according to the British Bankers' Association. The rate was at its lowest since Aug. 24.


Countrywide Financial Corp. fell 46 cents to $16.75. The biggest U.S. mortgage company is trying to find additional investors to increase its capital after a rise in problem mortgages and difficulties obtaining credit, the New York Post reported, citing unidentified people familiar with the plans.

A group that may include JPMorgan Chase & Co., Citigroup Inc. and several hedge funds has expressed interest, according to the newspaper.

In Europe, the Dow Jones Stoxx 600 Index added 1.4 percent. National benchmarks rose in all of the 18 western European markets. The Morgan Stanley Capital International Asia-Pacific Index added 0.3 percent.

Economy Watch

The U.S. trade deficit unexpectedly narrowed in July as exports rose by the most in three years. The gap shrank 0.3 percent to $59.2 billion from $59.4 billion in June that was $1.3 billion larger than first estimated, the Commerce Department said. The shortfall with China was the second biggest ever.

In other economic data, a private report said employers in the U.S. plan to maintain hiring in the fourth quarter at the same pace as in the prior six months. Manpower Inc., the world's second-largest provider of temporary workers, said its employment index for September through December held at 18 for a third consecutive quarter. The report may help ease concern that the unexpected drop in hiring last month signals the start of a sustained slackening in the job market that jeopardizes growth.

Last Updated: September 11, 2007 10:41 EDT

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