Thursday, February 7, 2008

U.S. Stocks Rise, Led by Financials; JPMorgan, J.C. Penney Gain

By Elizabeth Stanton

Feb. 7 (Bloomberg) -- U.S. stocks rose for the first time this week as an improved outlook for earnings at retailers and banks overshadowed a bigger-than-forecast drop in home sales and slowing demand for computer equipment.

JPMorgan Chase & Co., the third-largest U.S. bank, led the Dow Jones Industrial Average higher after Chief Executive Officer Jamie Dimon said bank profits will withstand downgrades of bond insurers. J.C. Penney Co. and Gap Inc. helped retailers snap a three-day losing streak by forecasting earnings above analysts' estimates. The Standard & Poor's 500 Index erased a loss of as much as 0.7 percent sparked by a sales projection at Cisco Systems Inc. that disappointed investors.

The S&P 500 added 10.46 points, or 0.8 percent, to 1,336.91. The Dow rose 46.9, or 0.4 percent, to 12,247. The Nasdaq Composite Index increased 14.28, or 0.6 percent, to 2,293.03. About nine stocks gained for every four that declined on the New York Stock Exchange.

``The mood of the market is changing,'' said Rick Campagna, who helps manage $3 billion at Provident Investment Counsel in Pasadena, California. ``It's starting to say `let's look through this slowdown and see what's going to lead us up.'''

The forecasts from J.C. Penney and Gap spurred speculation that the nation's chain stores will rebound from a lower-than- expected 0.5 percent gain in sales last month, the worst January since 1970, according to the International Council of Shopping Centers.

$151 Billion Stimulus

After exchanges closed, the U.S. Senate approved a $151 billion economic stimulus measure that will send tax rebates to more than 100 million U.S. households. Lawmakers agreed to expand legislation approved by the House last week to include rebates for 20 million senior citizens and 250,000 disabled veterans. The bill retains incentives for businesses to invest in new equipment and increases the size of mortgage loans that government- chartered mortgage-finance companies can buy.

JPMorgan Chase added $1.39 to $45.11. Dimon said a default by a bond insurer isn't likely because the guarantors have enough money to pay claims.

``A downgrade for the most part is not going to be that big a deal for the industry or JPMorgan,'' Dimon said at a conference in Naples, Florida.

CME Group Inc., the largest futures market, increased $42.76 to $528.01. Analysts at Bank of America Corp. said yesterday's 18 percent slide was overdone. A Justice Department opinion that the exchange's trade-processing practices may be anti-competitive was a ``non-event,'' according to analysts at JPMorgan Chase & Co.

The S&P 500 Financials Index climbed 1.7 percent, its first gain in four days. Bank of America Corp., the nation's second largest bank, climbed $1.04 to $43.37. Wachovia Corp., the fourth-biggest U.S. bank, added 74 cents to $35.18.

Retail Rally

J.C. Penney rose $3.72 to $47.44. The third-largest U.S. department store chain said fourth-quarter profit may be as much as $1.80, topping the $1.65 average estimate of analysts surveyed by Bloomberg.

Gap added $1.32 to $19.65. Fourth-quarter earnings may be as much as 35 cents a share, excluding a tax adjustment. Analysts forecast 29 cents a share, according to the mean estimate in a Bloomberg survey.

Target, the second-biggest discount chain, added $3.10, or 6.1 percent, to $54.10. Kohl's, the fourth-largest department store operator, climbed $2.93, or 6.8 percent, to $45.85.

Wal-Mart Stores Inc., the world's largest retailer, rose even after January sales climbed just 0.5 percent, less than analysts estimated. Wal-Mart gained $1.01 to $49.84.

`A Good Sign'

An index of 31 retailers in the S&P 500 added 3.7 percent, its first gain this week. The group slumped 18 percent last year, the fifth worst performance among two dozen groups in the benchmark, and slid 5.1 percent this year through yesterday.

Fourth-quarter earnings for the eight retailers that have reported results grew an average 5 percent, according to Bloomberg data. For all nonfinancial companies, growth averaged 18 percent. Including financials, earnings have fallen almost 21 percent on average.

``It's a good sign to see these retailers rebounding out of what looks like a bottom,'' said Rose Grant, who helps manage about $2 billion at Eastern Investment Advisors in Boston.

PepsiCo rose $3.68, or 5.5 percent, to $70.41, its steepest gain since April 2003. The world's second-largest soft-drink maker reported higher sales on increased prices and demand for snacks outside the U.S. Sales jumped 17 percent to $12.3 billion, beating the $11.6 billion estimate of analysts in a Bloomberg survey.

Akamai, Hess

Akamai Technologies Inc. gained $2.68, or 9 percent, to $32.41 in Nasdaq trading. The company said fourth-quarter profit rose 74 percent to $35.9 million as increasing demand for online video spurred sales of the company's Internet services. Sales climbed 46 percent to $183.2 million, beating the $174.9 million average of 17 analysts' estimates compiled by Bloomberg.

Hess Corp. rallied $5.31, or 6.5 percent, to $87.16. The most recent monthly data from Boston-based Fidelity Investments showed that Harry Lange, manager of the $45 billion Fidelity Magellan Fund, bought $202 million shares of the New York-based oil and gas exploration company in December

Moody's Corp. rose $3.49, or 10 percent, to $37. The world's second-largest credit-rating company reported a smaller decline in profit than analysts predicted on demand for international debt rankings. Moody's said fourth-quarter profit before costs to fire workers was 60 cents a share, beating the 47-cent average estimate in a Bloomberg survey.

AAA Credit Ratings

Moody's and larger rival Standard & Poor's are suffering a slump in U.S. demand that lawmakers say was brought on by their willingness to assign AAA credit ratings to subprime mortgage securities that soon tumbled in value as home defaults rose.

McGraw-Hill Cos., owner of S&P, climbed $1.53, or 3.7 percent, to $43.01.

Cisco, the biggest maker of computer-networking equipment, fell as much as 5.7 percent after Chief Executive Officer John Chambers said a sales slump may last months. The shares ended the day up 30 cents at $23.38.

Electronic Data Systems Corp. fell $1.71, or 8.8 percent, to $17.90. The second-biggest computer-services provider said net income declined to $189 million, or 36 cents a share, from $217 million, or 40 cents, a year earlier after sales fell in North America. Revenue increased 2.2 percent to $5.83 billion, less than analysts had estimated.

Prudential Financial Inc. dropped $6.01, or 7.7 percent, to $71.39. The second-largest U.S. life insurer said fourth-quarter profit fell 16 percent. The company also cut its forecast for 2008.

Housing Slump

The number of Americans signing contracts to buy previously owned homes fell more than forecast in December. The National Association of Realtors' index of signed purchase agreements dropped 1.5 percent to 85.9, the second-lowest level since the Chicago-based group began keeping records in 2001.

Initial jobless claims decreased by 22,000 to 356,000 in the week ended Feb. 2, from a two-year high of 378,000 a week earlier, the Labor Department said. The median estimate of economists surveyed by Bloomberg News projected a decline to 342,000. The total number of Americans receiving benefits jumped to the highest since November 2005.

The Russell 2000 Index, a benchmark for companies with a median market value of $533 million, rose 1.5 percent for a gain twice as steep as the S&P 500. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, rose 0.8 percent to 13,528.01. Based on its advance, the value of stocks increased by $137.3 billion.

No comments: