U.S. Stocks Rise, Led by Energy Shares; Exxon, Google Rally

By Eric Martin


Nov. 20 (Bloomberg) -- U.S. stocks rose, rebounding from three-month lows, after record oil prices boosted energy companies and Credit Suisse Group said shares of Google Inc. may reach $900 in the coming year.

Exxon Mobil Corp., the biggest U.S. energy producer, climbed the most in five years. Google rallied after Credit Suisse said the most-popular search engine will expand its share of the mobile advertising market. Stocks swung throughout the day, with the Dow Jones Industrial Average falling to a seven- month low after the Federal Reserve lowered its 2008 growth outlook and rebounding when Countrywide Financial Corp. denied speculation it faces a funding shortage.

The Standard & Poor's 500 Index added 6.43, or 0.5 percent, to 1,439.7. The Dow rose 51.7, or 0.4 percent, to 13,010.14. The Nasdaq Composite Index increased 3.43, or 0.1 percent, to 2,596.81. Slightly more than one stock gained for every one that fell on the New York Stock Exchange.

``At the end of the day, the energy stocks won out,'' said Jeff Layman, chief investment officer at BKD Wealth Advisors, which manages about $1.4 billion in Springfield, Missouri. ``We're seeing a realization that these price levels might be more sustainable than we previously thought.''

Financial companies were the only group to finish lower among 10 industries in the S&P 500 after Freddie Mac posted a wider-than-expected loss and said it may cut its dividend. Today's 1.3 percent decline in the S&P 500 Financials Index pushed the 93-stock gauge's loss to 21 percent in 2007.

Energy Rally

Exxon Mobil Corp. climbed $3.71, or 4.4 percent, to $87.82, its biggest gain since October 2002. UBS AG raised its recommendation on shares of the world's biggest oil company to ``buy'' from ``neutral'' and lifted its price estimate to $96 from $92. Chevron Corp., the second-largest U.S. oil company, added $2.87 to $87.90.

Crude oil rose 3.6 percent to $98.03 a barrel in New York after the dollar declined to a record low against the euro, increasing demand for commodities. The dollar's slide this year has made oil, metals and other commodities denominated in the U.S. currency cheaper for foreign investors.

Google surged $22.69, or 3.6 percent, to $648.54. Credit Suisse's $900 share-price forecast is the highest among the 37 brokerages that rate the stock, according to Bloomberg data. ``Tremendous value will be created for Google shareholders,'' analyst Heath Terry wrote, ``as all advertising goes digital, including television, radio, and outdoor, and Google becomes the de facto `operating system' for advertisers.''

Nordstrom, Hewlett-Packard

Nordstrom Inc., the owner of 101 department stores in the U.S., said third-quarter profit excluding some items was 59 cents a share. That exceeded the average of analysts' estimates by 7 cents, according to a Bloomberg survey. Its shares rallied $3.69 to $34.21, for the top gain in the S&P 500.

Medtronic Inc. added $3.17 to $48.42. The largest maker of heart-rhythm devices reported fiscal second-quarter sales of $3.12 billion, topping the $3.09 billion average estimate of 22 analysts compiled by Bloomberg.

Hewlett-Packard Co. gained 12 cents to $49.56. Fourth- quarter profit, excluding some costs, was 86 cents a share, exceeding analysts' estimates for the 11th straight quarter. The company said it plans to buy back as much as $8 billion in shares and forecast sales and profit that beat analysts' estimates.

Dillard's Inc. surged 90 cents, or 5.4 percent, to $17.43. The U.S. department-store chain that operates mostly in southern states said it plans to buy back as much as $200 million of its shares, pushing the stock up the most in a year.

'Looking Past'

``The market seems to be looking past some of the difficulties,'' said Michael Vogelzang, who helps manage $2.2 billion as chief investment officer at Boston Advisors. ``You're getting a very strong, positive rally even while financials are continuing to struggle.''

Fed policy makers lowered their growth forecast in October and expressed concern about credit-market losses, even as they described the decision to cut interest rates then as a ``close call,'' according to minutes of the Federal Open Market Committee's Oct. 30-31 meeting.

Policy makers believe economic growth may slow to as low as 1.8 percent in 2008, according to the middle range of forecasts. The central bankers had forecast growth of 2.5 percent to 2.75 percent in June.

Paul McCulley, a fund manager at Pacific Investment Management Co., said the Fed may reduce its target interest rate to below 3 percent to keep the U.S. economy from lapsing into recession. The Fed's benchmark rate is currently 4.5 percent.

Rate-Cut Bets

Still, traders pared bets of a quarter-percentage point rate cut to 4.25 percent at the Fed's December policy meeting. Odds fell to 84 percent, down from 96 percent yesterday, futures contracts show.

Freddie Mac, the second-largest source of money for U.S. home loans, tumbled $10.76 to $26.74. Its net loss widened to $3.29 a share from $1.17 a share a year earlier. The company said it may cut its dividend in half and has hired Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. to help it raise capital. Fannie Mae, the biggest source of mortgage funding, decreased $9.33, or 25 percent, to $28.25.

Countrywide Financial Corp. dropped as much as 22 percent before recovering to end the day down 29 cents, or 2.7 percent, at $10.28. Speculation the biggest U.S. mortgage lender doesn't have enough cash to pay its debts sent the shares spiraling before the firm said there's no truth to it.

``The rumors are absolutely false,'' said Rick Simon, a spokesman for Countrywide, in an e-mailed statement.

Target Corp. fell $2.21 to $51.69. The second-largest U.S. discount chain said quarterly profit fell, trailing analysts' estimates, after consumers grappling with higher housing and gasoline expenses cut back on spending.

The Russell 2000 Index, a benchmark for companies with a median market value of $588.8 million, dropped 0.1 percent to 749.33. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, rose 0.3 percent to 14,505.37. Based on its advance, the value of stocks increased by $53 billion.

Chevron Corp. (CVX US)
Countrywide Financial Corp. (CFC US)
Chevron Corp. (CVX US)
Exxon Mobil Corp. (XOM US)
Dillard's Inc. (DDS US)
Fannie Mae (FNM US)
Freddie Mac (FRE US)
Google Inc. (GOOG US)
Hewlett-Packard Co. (HPQ US)
Medtronic Inc. (MDT US)
Nordstrom Inc. (JWN US)
Pfizer Inc. (PFE US)
Target Corp. (TGT US)