U.S. Stocks Rally Most in Two Months; Banks, Wal-Mart Advance

By Michael Patterson


Nov. 13 (Bloomberg) -- U.S. stocks rallied the most in two months after Wal-Mart Stores Inc.'s profit beat analysts' estimates and Goldman Sachs Group Inc. said it doesn't plan any significant writedowns on mortgage-related assets.

Wal-Mart, the world's largest retailer, posted its biggest advance since 2002 and helped lead the market's rebound from four straight declines. Goldman, the largest securities firm, climbed the most in six years and pushed financial shares to a fourth straight gain. Apple Inc. led the Nasdaq Composite Index to its biggest gain in four years after China Mobile Ltd. said it's in talks to sell the iPhone in China.

The Standard & Poor's 500 Index climbed 41.87, or 2.9 percent, to 1,481.05, the biggest gain since the Federal Reserve cut interest rates on Sept. 18. The Dow Jones Industrial Average increased 319.54, or 2.5 percent, to 13,307.09. The Nasdaq added 89.52, or 3.5 percent, to 2,673.65. Almost nine stocks gained for every one that fell on the New York Stock Exchange.

``Financials are front and center leading the market,'' said David Sowerby, who helps oversee more than $120 billion as a portfolio manager at Loomis Sayles & Co. in Bloomfield Hills, Michigan. ``You also had respectable earnings out of Wal-Mart. News that we aren't going into an outright profit recession has brought some buyers back.''

Banks and brokerages in the S&P 500 have rallied 6.1 percent from a two-year low on Nov. 7 after trading at the cheapest relative to net assets since at least 1995. Bank of America Corp. climbed 5.2 percent today even after the second-biggest U.S. bank said it may need to write down $3 billion in mortgage-related debt securities this quarter.

Four-Day Slide Halted

The S&P 500 dropped for a fourth straight day yesterday, capping the longest stretch of declines in eight months. The retreat left the benchmark 10 percent undervalued, according to UBS Securities LLC chief equity strategist David Bianco, who said in a note to clients that the index will end the year at 1,600. The S&P 500 still needs to climb 5.7 percent to reach its all- time closing high of 1,565.15 on Oct. 9.

Wal-Mart advanced $2.65, or 6.1 percent, to $45.97 today. The company cut holiday prices earlier than last year and discounted more goods to lure customers facing higher gasoline costs and mortgage payments. Net income increased to 70 cents a share from 63 cents a year earlier. Excluding a 1-cent tax benefit, the profit exceeded the 67-cent average estimate of analysts.

Goldman Gains

Goldman jumped $18.33, or 8.5 percent, to $233.04. Chief Executive Officer Lloyd Blankfein said at a banking conference in New York that the firm has no plans to announce a ``significant writedown'' on mortgage-related assets. Goldman is still betting that mortgage-backed securities and collateralized debt obligations will decline in value, he said.

Blankfein said his firm has ``a pretty good grip'' on the valuation of its so-called Level 3 assets. Such assets, which include private-equity investments, leveraged loans and mortgage- related securities, trade so infrequently that companies use internal models to gauge their value.

Other banks and brokerages also rallied. Lehman Brothers Holdings Inc., the fourth-biggest U.S. securities firm, gained $5.34 to $63.49. Bear Stearns Cos., the fifth biggest, added $5.30 to $100.87. JPMorgan Chase & Co., the third-largest U.S. bank, gained $2.66 to $45.05. Bank of America added $2.29 to $46.27. Citigroup Inc., the biggest U.S. bank by assets, gained $2.33 to $35.90.

Apple Gains

The S&P 500 Diversified Financials Index, which last week traded at the lowest relative to its 30 members' net assets since Bloomberg began tracking the data in 1995, climbed 5.7 percent today for the biggest gain since October 2002.

``The most important thing was Goldman's Blankfein coming out and saying point blank that they weren't going to have any significant writedowns,'' said Doug Peta, a market strategist at J&W Seligman & Co. in New York. ``I felt if we got through this week without hearing anything bad from Goldman and Lehman, it meant that they had come out fine.''

Both Goldman's and Lehman's fiscal fourth-quarters end this month.

Apple rallied $16.20, or 11 percent, to $169.96. A deal with China Mobile will give Apple access to a market with more mobile- phone users than the combined population of the European Union. Separately, AppleInsider reported that the company will unveil a new notebook computer at its annual Macworld Expo in January.

Technology Rebound

The S&P 500 Information Technology Index rebounded 4 percent today, also helped by a 10 percent jump in Corning Inc., the biggest maker of glass for liquid-crystal-display screens. The 71-member gauge had tumbled 11 percent in the previous four days after quarterly reports from Cisco Systems Inc. and Qualcomm Inc. sparked concerns that analysts' earnings estimates for technology companies were too high.

Corning climbed $2.14 to $23.54, the biggest gain since January. The company increased sales and profit forecasts after winning more orders for the panels used in televisions and computers.

Yahoo! Inc., owner of the most-popular U.S. Web site, increased $1.32 to $26.10. CIBC raised its recommendation on the shares to ``sector outperformer'' from ``sector performer,'' citing its 21 percent drop over the previous five days and the rising value of stakes in companies including Alibaba.com Ltd., operator of China's largest online trading site for companies.

E*Trade Financial Corp. climbed $1.45, or 41 percent, to $5 for the top gain in the S&P 500. The online brokerage is ``highly unlikely'' to declare bankruptcy and may become a takeover target, BMO Capital Markets said. E*Trade plunged 59 percent yesterday after the company forecast a decline in fourth-quarter earnings and Citi Investment Research analyst Prashant Bhatia said E*Trade may go bankrupt.

Earnings Watch

TJX Cos. added $1.10 to $30.42. The owner of the T.J. Maxx and Marshalls discount chains said profit rose for the first time in four quarters on reduced inventory and higher sales in Canada and Europe. The company increased its forecast for the current quarter as a drop in the U.S. dollar helps boost revenue.

The reports from TJX and Wal-Mart helped push the S&P 500 Retailing Index higher for a second straight day. The gauge had tumbled 10 percent in two weeks on speculation consumers will restrain spending amid declining home values and tighter credit markets.

`Some Traction'

``Wal-Mart is the benchmark for all retail spending and positive numbers out of their results today was obviously beneficial to the marketplace,'' said Michael Mullaney, who helps oversee about $10 billion at Fiduciary Trust Co. in Boston. ``There's some traction to this rally.''

Companies in the S&P 500 have posted an average 2 percent drop in profits in the third-quarter, according to Bloomberg data. Excluding financial firms and so-called consumer discretionary companies, earnings have increased 8.2 percent, topping analysts' estimates for a gain of 7.5 percent on that basis.

Adobe Systems Inc., the biggest maker of graphic-design software, retreated $1.33, or 3.2 percent, to $40.86 for the second-biggest drop in the S&P 500. Chief Executive Officer Bruce Chizen unexpectedly resigned. Shantanu Narayen, currently Adobe's president and chief operating officer, will replace Chizen.

In economic reports, pending home sales unexpectedly rose in September after reaching a record low. The National Association of Realtors' index of signed purchase agreements increased 0.2 percent to 85.7, the first gain in three months. Economists in a Bloomberg survey forecast a decline of 2 percent.

Treasuries fell and yields on the shortest-term securities surged the most in more than two months as the gains in equities reduced demand for the safety of U.S. government debt. The dollar slipped against the euro following a 1 percent gain yesterday.

The Russell 2000 Index, a benchmark for companies with a median market value of $626.9 million, gained 2.9 percent to 789.15. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, added 2.8 percent to 14,950.65. Based on its advance, the value of stocks increased by $510 billion.

Adobe Systems Inc. (ADBE US)
Apple Inc. (AAPL US)
Bank of America Corp. (BAC US)
Bear Stearns Cos. (BSC US)
Citigroup Inc. (C US)
Corning Inc. (GLW US)
E*Trade Financial Corp. (ETFC US)
Goldman Sachs Group Inc. (GS US)
JPMorgan Chase & Co. (JPM US)
Lehman Brothers Holdings Inc. (LEH US)
TJX Cos. (TJX US)
Wal-Mart Stores Inc. (WMT US)
Yahoo! Inc. (YHOO US)