Thursday, May 1, 2008

U.S. Stocks Climb, Led by Shares of Banks, Technology Companies

By Eric Martin

May 1 (Bloomberg) -- U.S. stocks rose to the highest level since January as a rally in the dollar and better-than-estimated technology earnings prompted investors to shun commodities and shift into shares of banks, retailers and computer companies.

Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. led financial stocks to a two-month high as the dollar advanced 1.1 percent against the euro on speculation the Federal Reserve is done cutting interest rates. Symantec Corp. surged the most in six years after the world's biggest maker of security software said fourth-quarter profit tripled, while Comcast Corp. posted its steepest rise since 2002 on new Internet-access subscribers.

The Standard & Poor's 500 Index jumped 23.75 points, or 1.7 percent, to 1,409.34, its first close above 1,400 since Jan. 14. The Dow Jones Industrial Average added 189.87, or 1.5 percent, to 13,010, the first close above 13,000 since Jan. 3. The Nasdaq Composite Index rose 67.91, or 2.8 percent, to 2,480.71. Three stocks rose for each that fell on the New York Stock Exchange.

``There's a lot of money in the short-dollar, long- commodity trade and it doesn't take much to whipsaw back,'' said Jon Fisher, a Minneapolis-based portfolio manager at Fifth Third Asset Management, which oversees about $22 billion. ``That money's got to rotate somewhere else, and today it's rotating into technology and financials, two laggard sectors this year.''

Dollar Rally

The dollar advanced to a five-week high against the euro and increased versus the Japanese, Swiss, British and other currencies a day after the Fed cut its benchmark rate by a quarter point to 2 percent and signaled that if may be finished reducing borrowing costs. All 10 industry groups in the S&P 500 rose today except for energy and commodity producers as a better-than-forecast report on manufacturing also lifted stocks.

The Dow average pared its yearly decline to 1.9 percent and the S&P 500 reduced its 2008 loss to 4 percent. The S&P 500 yesterday completed its biggest monthly gain sine 2003, climbing 4.8 percent in April, as results from Google Inc. to Intel Corp. to Boeing Co. and American Express Co. eased concern profits will deteriorate.

Financial shares climbed 3.9 percent as a group today, contributing the most out of 10 industry groups to the S&P 500's advance.

Bank of America, the second-biggest U.S. bank by assets, rallied $1.85 to $39.39. Citigroup, the largest, climbed $1.04, or 4.2 percent, to $25.99. JPMorgan Chase, the No. 3, added $1.60, or 3.4 percent, to $49.25.

Financials also got a boost after Kuwait's $250 billion sovereign wealth fund said it may increase its stakes in Merrill Lynch & Co. and Citigroup as it pursues investments in U.S. and European companies battered by subprime-mortgage related losses.

`A Lot of Opportunities'

``The valuation in the markets in the U.S. and Europe, we think, has created a lot of opportunities,'' Bader al-Saad, the Kuwait Investment Authority's managing director, said in an interview with Bloomberg Television. ``We have confidence in the management'' of Citigroup and Merrill, he said.

Merrill, the third-largest securities firm, rose $2.56, or 5.1 percent, to $52.39.

Companies in the S&P 500 trade for an average 15.3 times their estimated profit in the next 12 months.

MBIA Inc. posted the steepest advance in the S&P 500 after the world's largest bond insurer, which has lost 83 percent of its value in the past 12 months, said it has enough capital to retain its AAA rating. MBIA gained $1.34, or 13 percent, to $11.74.

Symantec, Comcast

Symantec had the second-steepest rise in the S&P 500, gaining $2.12, or 12 percent, to $19.34. The world's biggest maker of security software said quarterly profit tripled, beating analysts' estimates, after businesses and consumers renewed subscriptions and bought more programs to protect information.

Comcast rose $1.76, or 8.6 percent, to $22.31. The largest U.S. cable-television company said first-quarter sales rose 14 percent, more than analysts estimated, on new Internet-access subscribers. Profit fell 13 percent from a year earlier, when results were bolstered by a one-time gain.

The advance in technology companies was led by Symantec, Intel Corp. and SanDisk Corp.

Intel added $1.03, or 4.6 percent, to $23.29. The world's largest chipmaker is stepping up production to meet higher-than- expected demand for Atom, a new processor for low-cost portable computers. Intel Chief Executive Officer Paul Otellini is using the processors to attract consumers who want stripped-down computers for word processing and surfing the Internet.

SanDisk gained $1.94, or 7.2 percent, to $29.03. The biggest maker of memory for digital cameras expects a sales boost from U.S. consumers spending their federal tax rebate checks, Chief Executive Officer Eli Harari said.

`Pretty Stable'

Chipmakers also climbed after the Semiconductor Industry Association said global semiconductor sales rose 3.8 percent in the first quarter as consumers bought more electronic devices.

``It's reassurance for the market that sales did not fall off dramatically in the last quarter,'' said Michael Shinnick, manager of a $93 million mutual fund with the ability to bet against companies, at 1st Source Bank in South Bend, Indiana. The firm manages $3.5 billion. ``As an industry, things are still pretty stable.''

Profits at the 41 technology companies in the S&P 500 that have reported first-quarter earnings so far have been 6.9 percent higher than analysts estimated, trailing only companies that sell consumer-discretionary products, including clothing and electronics, in beating projections.

`Rising Tide'

``The technology names are one of those areas reporting fairly good earnings, and that's being reflected in the stock prices,'' said Randy Bateman, who oversees $15 billion as chief investment officer of Huntington Bancshares Inc. in Columbus, Ohio. The firm allocates 17 percent of its assets to technology stocks and owns shares of Oracle Corp., Microsoft Corp. and Cisco Systems Inc. ``It looks like it's not just centered in one name, but that the rising tide carries all boats.''

Energy shares fell the most in the S&P 500, dropping 2.2 percent as a group, following a third day of declining oil prices and lower-than-forecast earnings at Exxon Mobil Corp.

Exxon's first quarter net income rose to $10.9 billion, or $2.03 a share, from $9.28 billion, or $1.62, a year earlier, the company said. Per-share profit at the largest U.S. oil producer was 10 cents short of the average analyst estimate in a Bloomberg survey. Exxon tumbled $3.37, or 3.6 percent, to $89.70.

Oil Retreats

Oil retreated as the dollar rose. Crude for June delivery lost 94 cents, or 0.8 percent, to $112.52 a barrel. Chevron Corp., the second-biggest U.S. energy company, slipped $1.21 to $94.94.

Apache Corp., the Houston-based oil and natural-gas producer that operates on five continents, fell after reporting first-quarter profit of $2.99 a share, missing the $3.02 average estimate of analysts surveyed by Bloomberg. Apache lost $8.27, or 6.1 percent, to $126.41.

Raw-materials producers retreated as gold, silver and copper retreated. Freeport-McMoRan Copper & Gold Inc., the world's second-largest producer of copper, lost $5.79, or 5.1 percent, to $107.96. Newmont Mining Corp., the world's third- largest gold producer, dropped 98 cents, or 2.2 percent, to $43.23.

Airlines Gain

An index of airlines advanced for a sixth day, the longest streak of consecutive gains in more than a year, after people familiar with the talks said American Airlines and British Airways Plc are in discussions to broaden their Oneworld alliance to add Continental Airlines Inc. and seek antitrust immunity to set prices and schedules.

AMR Corp., American's parent, gained $1.13, or 13 percent, to $9.90. Continental added $1.27, or 7.1 percent, to $19.25.

Home Depot Inc. gained the most in a month, rising $1.07, or 3.7 percent, to $29.87. The world's biggest home-improvement retailer will eliminate 1,300 jobs, close 15 stores and scrap plans for 50 as the company tries to catch up to Lowe's Cos. in customer service. The company said it will slow its expansion of floor space to 1.5 percent next year from 2.5 percent this year.

An index of retailers in the S&P 500 gained 3 percent on prospects a stronger dollar will boost consumer spending.

Target Corp., the second-largest U.S. discount chain, gained $1.11, or 2.1 percent, to $54.24.

Las Vegas Sands Corp. dropped $4.29, or 5.6 percent, to $71.93. The world's largest casino company by market value posted an unexpected first-quarter loss as revenue rose less than analysts estimated.

Economy Watch

Industrial shares climbed 1.5 percent as a group after the Institute for Supply Management said its manufacturing index was 48.6 in March, higher than the reading of 48 projected by economists. Honeywell International Inc., the world's largest maker of airplane instruments, rose $1.27, or 2.1 percent, to $60.67.

The Labor Department reported that first-time claims for unemployment insurance rose more than forecast last week, to 380,000, and the total number of Americans receiving benefits climbed to 3.019 million, the highest level since April 2004. The inflation measure tracked by the Federal Reserve, which strips out food and fuel prices, increased to 0.2 percent in March, twice the rate predicted by economists in a Bloomberg survey.

JDS Uniphase Corp. lost $2.31, or 16 percent, to $12, the sharpest retreat in the S&P 500. The maker of equipment for testing telecommunications networks forecast sales that missed analysts' estimates.

About 1.39 billion shares traded on the New York Stock Exchange, 7.5 percent less than the three-month daily average.

The Chicago Board Options Exchange Volatility Index, the benchmark for U.S. options prices, decreased 9.2 percent to 18.88. The so-called VIX gauges the cost of insuring against declines in the S&P 500.

The Russell 2000 Index, a benchmark for companies with a median market value 95 percent smaller than the S&P 500's, climbed 1.9 percent to 729.75. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, rose 1.6 percent to 14,220.24. Based on its advance, the value of stocks increased by $286 billion.

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