Friday, December 28, 2007

U.S. Stocks Gain, Led by Energy; Exxon, ConocoPhillips Advance

By Elizabeth Stanton

Dec. 28 (Bloomberg) -- U.S. stocks rose, led by energy shares, after a gain in natural gas prices boosted the earnings outlook for the stock market's best-performing industry of 2007.

Exxon Mobil Corp., the world's biggest energy company, advanced for the seventh time in eight days. ConocoPhillips, the largest U.S. natural gas producer, rose to three-month high. Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., the biggest U.S. banks, erased early gains and led financial shares to the steepest decline in the Standard & Poor's 500 Index after a report showed new-home sales fell to a 12-year low.

The S&P 500 advanced 2.12, or 0.1 percent, to 1,478.49, extending its fifth straight annual advance. The Dow Jones Industrial Average added 6.26, or 0.1 percent, to 13,365.87. The Nasdaq Composite Index decreased 2.33, or 0.1 percent, to 2,674.46. About the same number of stocks rose as fell on the New York Stock Exchange.

``We don't think the prices on the energy stocks are overdone at all,'' said Ted Baszler, who helps manage $3 billion at Heartland Advisors Inc. in Milwaukee. ``They definitely have more room to run here. The long-term story for oil remains very bullish.''

The S&P 500 lost 0.4 percent for the week, while the Dow slipped 0.6 percent and the Nasdaq dropped 0.7 percent.

Energy and mining companies have led the S&P 500 to a 4.2 percent advance this year as speculation the global economy will keep growing overshadowed a worsening U.S. housing slump. Oil drillers, refiners and drilling services companies have rallied 34 percent in 2007, helping the S&P 500 Energy Index more than triple in five years.

Yearly Gains

The Dow average has risen 7.2 percent in 2007, while the Nasdaq Composite has gained 11 percent.

Natural gas for February delivery rose 2.6 percent to $7.386 per million British thermal units, the highest since Dec. 12. Crude oil for February delivery touched $97.92 a barrel, rising within $1 of its record close of $98.18 on Nov. 23, before falling 51 cents to $96.11.

ConocoPhillips added 48 cents to $89.13. Exxon, also a producer of natural gas, increased $1.33 to $95. The rise in energy shares helped erase earlier losses spurred by concern falling home sales will cause a recession.

Energy ``is not the best leader to have because it's typically based on higher energy prices,'' said Richard Sichel, chief investment officer at Philadelphia Trust Co., which manages $1.5 billion in Philadelphia. ``You would rather see consumer and financial stocks leading the way. That would be a healthier environment.''

Financial Shares

Financial shares lost 0.5 percent for their third consecutive retreat. Citigroup fell 27 cents to a five-year low of $29.29. Bank of America slid 36 cents to a three-year low of $41.10. JPMorgan Chase declined 38 cents to $43.26. Fannie Mae dropped $1.27 to $38.34.

Banks and brokerages retreated even as traders increased bets the Federal Reserve will lower interest rates at its next two meetings. The odds of a quarter-point cut to 4 percent at the Jan. 30 meeting increased to 90 percent from 76 percent, and the chances of a reduction to 3.75 percent on March 18 rose to 58 percent from 44 percent, future contracts indicate.

Purchases of new homes slid 9 percent to an annual pace of 647,000 in November and October sales were revised down to a 711,000 rate, the Commerce Department said. Last month's sales were weaker than the lowest forecast in a Bloomberg survey.

``The market has been slow to grasp just how bad things were going to be for housing,'' said Doug Peta, market strategist at J.&W. Seligman & Co. in New York, which manages $20 billion.

Homebuilders Decline

D.R. Horton Inc. and Centex Corp., two of the four largest U.S. builders by revenue, led homebuilders in S&P indexes to a 2.6 percent decline. D.R. Horton, fell 56 cents to $13.10. Centex lost 75 cents to $24.97.

MBIA Inc. and Ambac Financial Group Inc., the largest bond insurers, declined the most in the S&P 500. Billionaire investor Warren Buffett, chairman of Omaha, Nebraska-based Berkshire Hathaway Inc., started a rival company to insure only municipal bonds. MBIA and Ambac, which began as municipal bond insurers, are struggling to maintain the AAA credit ratings that allow them to do business after downgrades of mortgage-related securities they also guarantee.

MBIA, down 74 percent this year, fell $3.53 to $18.74. Ambac, down 72 percent, fell $4.02 to $25.12.

Gold producers gained as bullion rose 1.3 percent to $842.70 an ounce, extending its the biggest annual gain since 1979. Barrick Gold Corp., the world's largest, added $2.60, or 6.5 percent, to $42.88.

Best-Performing Stocks

Gains by the year's best-performing stocks in its final days are at least partly ``a calendar function,'' said Peter Kenny, managing director in institutional sales at Knight Equity Markets in Jersey City, New Jersey. ``Stocks that have done very well are not being sold. Those that own them want to show that they own them.''

The Russell 2000 Index, a benchmark for companies with a median market value of $591 million, dropped 0.2 percent to 771.76. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, rose 0.1 percent to 14,911.63. Based on its advance, the value of stocks increased by $19.8 billion.

Ambac Financial Group Inc. (ABK US)
Bank of America Corp. (BAC US)
Barrick Gold Corp. (ABX US)
Centex Corp. (CTX US)
Citigroup Inc. (C US)
ConocoPhillips (COP US)
D.R. Horton Inc. (DHI US)
Exxon Mobil Corp. (XOM US)
Fannie Mae (FNM US)

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