U.S. Stocks Rise; Yum Gains on Earnings, Molson Coors on Merger

By Eric Martin

Oct. 9 (Bloomberg) -- U.S. stocks rose for the third time in four days after Yum! Brands Inc. reported better-than-expected profit and Molson Coors Brewing Co. agreed to combine U.S. operations with SABMiller Plc.

Yum, the owner of the Pizza Hut and Taco Bell restaurant chains, climbed to a record after also boosting its full-year forecast. Molson Coors, the third-largest U.S. beer maker, rallied to an all-time high on the merger plan estimated to save $500 million a year. Google Inc. and Apple Inc. advanced to records after analysts raised their price estimates on the shares.

``This gives us fuel to further this bull market a little bit,'' said Jeffrey Kleintop, who helps oversee about $163 billion as chief investment strategist at LPL Financial Group in Boston. ``Earnings are going to be almost flat, but this echoes what we saw in the last business cycle. Profit slowed from 1996 to 1998, and yet stocks did very well because investors looked through that to the resumption of growth on the other side.''

The first third-quarter profit report from a Dow Jones Industrial Average member will come after markets close today when Alcoa Inc., the world's second-largest aluminum company, releases results. Analysts estimate earnings at Standard & Poor's 500 Index companies rose an average 0.7 percent last quarter, according to Bloomberg data, down from a projection of 3.7 percent at the beginning of September.

The S&P 500 Index added 2.39, or 0.2 percent, to 1,554.97 at 10:04 a.m. in New York. The Dow average increased 17.4, or 0.1 percent, to 14,061.13. The Nasdaq Composite Index rose 4.32, or 0.2 percent, to 2,791.69.

Fed Watch

U.S. stocks fell yesterday, led by oil producers and miners, on concern a slowing economy will reduce demand for energy and metals. More clues about the economic outlook may come today when the Federal Reserve releases minutes of its last Open Market Committee meeting, when it cut interest rates by half a percentage point to shore up economic growth.

Yum jumped $1.91 to $38.20. Third-quarter profit climbed 17 percent on higher China sales and Yum said it plans to buy back up to $4 billion of stock over the next two years. Full-year profit will be $1.65 a share, higher than the $1.63 a share Yum previously forecast. Analysts surveyed by Bloomberg had estimated $1.64.

M&A

Mergers and acquisitions contributed to the market's advance. SABMiller Plc, the world's third-largest brewer, agreed to combine its U.S. operations with Molson Coors to catch up with Anheuser-Busch Cos. Molson added $4.67, or 9.2 percent, to $55.50 for the steepest advance in the S&P 500.

AT&T Inc., the largest U.S. phone company, agreed to buy airwaves from Aloha Partners LP for about $2.5 billion so customers can access video and send text messages more quickly. AT&T climbed 6 cents to $41.99.

Kohlberg Kravis Roberts & Co. agreed to buy Turkish freight company U.N. Ro-Ro Isletmeleri AS in a transaction worth $1.3 billion, Turkey's biggest private-equity acquisition.

Google advanced $7.41 to $617.03. The shares may surge 17 percent to $714, according to Lehman, which said the Google phone may be ``simple,'' ``low-priced'' and designed to run software over the Internet

Apple, maker of the iPod digital music players, rose $2.43 to $170.34. Bernstein raised its price projection for Apple shares by 30 percent to $175.

'Least Affected'

``Technology shares will be among those sectors that will probably be the least affected by the subprime crisis,'' said Werner Wittenhagen, who helps oversee the equivalent of $21 billion at LBBW Asset Management in Stuttgart, Germany.

Alcoa shares added 47 cents to $38.77. The company may report adjusted third-quarter profit of 65 cents a share, down from 81 cents in the second quarter, the average estimate of 13 analysts surveyed by Bloomberg showed.

Coca-Cola Co. and PepsiCo Inc. retreated after Deutsche Bank AG cut its recommendations on the world's largest soda makers to ``hold'' from ``buy.'' Coca-Cola lost 32 cents to $57.48 and PepsiCo slipped 39 cents to $73.52.

The rally in the share prices of the two companies already reflects most of the prospects for profit growth, analysts including Marc Greenberg wrote in a note to clients. Coca-Cola shares have increased 20 percent this year while PepsiCo's stock has risen 18 percent in the same period.

Microchip Technology Inc. fell $2.97, or 8.1 percent, to $33.65, the biggest decline in the S&P 500. The maker of microcontrollers and analog chips reported fiscal second-quarter earnings that missed analysts' estimates after demand from consumers in the U.S. and Asia was weaker than expected.

Bull Market Birthday

Today marks the five-year anniversary of the current bull market in U.S. stocks. The S&P 500 has advanced four straight years and almost doubled since its nadir on Oct. 9, 2002. Companies in the index posted 20 straight quarters of operating profit growth of at least 10 percent, making this the only five- year U.S. stock rally since 1945 when price-to-earnings ratios contracted, according to Bespoke Investment Group LLC.

The S&P 500's advance may continue into 2008, if history is any guide. The index has climbed an average of 10.7 percent in the year following a five-year bull market, according to Bespoke.

Last Updated: October 9, 2007 10:06 EDT