Saturday, February 16, 2008

U.S. Stocks Gain as Oil Rally Lifts Energy Shares; Exxon Rises

By Lynn Thomasson and Jeff Kearns

Feb. 16 (Bloomberg) -- U.S. stocks posted the third weekly advance in a month after the biggest jump in oil since November lifted energy producers, and earnings from consumer companies exceeded analysts' estimates.

Exxon Mobil Corp. and ConocoPhillips pushed energy companies in the Standard & Poor's 500 Index to the biggest gain in five months as crude oil rallied to $95.50 a barrel. Earnings reports from Comcast Corp., Molson Coors Brewing Co. and Goodyear Tire & Rubber Co. that topped forecasts also drove equities higher. Most stocks fell yesterday after consumer confidence dropped to a 16- year low and manufacturing in New York contracted for the first time since 2005.

``There were a lot of reasons to despair in terms of uncertainty, but this week is encouraging in that the market seems to have stabilized,'' said Walter ``Bucky'' Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. ``Investors see the possibility of the economy starting to recover.''

The S&P 500 rose 1.4 percent to 1,349.99 this week, trimming its decline this year to 8.1 percent. The Dow Jones Industrial Average added 1.4 percent to 12,348.21. The Nasdaq Composite Index advanced 0.7 percent to 2,321.80.

Rising gasoline demand and an unexpected jump in retail sales and spurred a 4.1 percent rally in oil prices this week. Energy companies, last year's best-performing industry among 10 in the S&P 500, pared their loss for 2008 to 8.8 percent. Crude oil ended the week at the highest price since Jan. 9.

Exxon Gains

Exxon Mobil, the biggest U.S. oil company, gained 4.5 percent to $85.37 for the steepest weekly gain since March. ConocoPhillips, the third-largest, added 4.9 percent to $79.05. The S&P 500 Energy Index rose 4.7 percent.

Comcast jumped the most since August 2002, climbing 18 percent to $20.19. The largest U.S. cable television operator reported quarterly earnings that topped analysts' estimates and said it will repurchase its stock and pay its first dividend in almost a decade.

Molson Coors, the third-biggest U.S. beer maker, gained 13 percent to $50.99 after posting fourth-quarter profit that was 13 percent higher than the average analyst estimate, according to Bloomberg data.

Goodyear exceeded the average earnings estimate by 8.2 percent. The largest American tiremaker jumped 13 percent to $26.86 for the steepest weekly advance in five months.

Cooling Job Market

The Reuters/University of Michigan preliminary index of consumer sentiment fell to 69.6 from 78.4 in January as the job market cooled and concerns about inflation increased. The first negative reading in almost three years for a gauge of manufacturing in New York also signaled slower U.S. business growth. The Federal Reserve Bank of New York's general economic index fell to minus 11.7 from 9 in January. Readings below zero signal contraction.

Financial shares posted the only loss out of 10 industries in the S&P 500. MBIA Inc. and Ambac Financial Group Inc. tumbled on concern a proposal by billionaire Warren Buffett to shore up the municipal bond market will leave the world's largest bond insurers with deeper losses on mortgage securities. Ambac said it rejected the offer.

MBIA dropped 16 percent to $12.24 for the largest decline in the S&P 500. Ambac fell 7 percent to $10.22.

``We're coming out of what was a large credit bubble and the amount of capital being depleted in the financial sector is much bigger than what even the most conservative people in the banks thought could happen,'' said Brian Barish, president of Denver- based Cambiar Investors, which manages $8 billion.

Russell 2000

The Russell 2000 Index gained 0.4 percent to 701.52 and ended its four-week streak of outperforming the S&P 500, whose members have a median market value 22 times larger than the small-cap measure.

The benchmark for U.S. stock option prices fell 11 percent to 25.02. The Chicago Board Options Exchange Volatility Index, or VIX, has fallen 19 percent since reaching a five-year high on Jan. 22. The index, which tends to increase as stock prices fall, has more than doubled over the past year.

Bank of America Corp. and Chevron Corp. gained after they were selected to replace Altria Group Inc. and Honeywell International Inc. in the Dow average on Feb. 19, the first changes in the U.S. stock benchmark since April 2004.

Wal-Mart Stores Inc., Hewlett-Packard Co. and Medtronic Inc. are among at least 27 members of the S&P 500 that are scheduled to report quarterly results next week.

Rate Cuts

Yields on short-term Treasury securities touched the lowest since April 2004, reflecting increased expectations for interest- rate cuts by the Federal Reserve. Long-term yields climbed as investors bet that lower borrowing costs will lead to faster economic growth and inflation.

Two-year Treasury yields declined for a ninth straight week to 1.91 percent, and touched 1.82 percent on Feb. 15. The yield on 10-year notes climbed for a third straight week to 3.77 percent.

Housing starts in the U.S. probably remained near the lowest since 1991 in January, a sign the deepest housing recession in a quarter century will continue to spill over to the broader economy, economists said before reports next week.

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