U.S. Stocks Advance as Confidence, Home Sales Beat Forecasts

Aug. 25 (Bloomberg) -- U.S. stocks rose as better- than- estimated consumer confidence and home prices bolstered optimism the recession is ending, while falling oil prices dragged down energy producers. Treasury yields declined after a record-tying $42 billion sale of two-year notes.
Macy’s Inc. and Bed Bath & Beyond Inc. added more than 3.5 percent as the Conference Board’s measure of consumer sentiment increased to 54.1, topping the median projection of 47.9. Pulte Homes Inc., the nation’s biggest builder by market value, rose 3.7 percent as the S&P/Case-Shiller home-price index for 20 U.S. cities dropped by the smallest amount since April 2008. Energy companies fell as crude lost 3.7 percent from a 10-month high.
The Standard & Poor’s 500 Index added 0.4 percent 1,029.73 at 3:01 p.m. after rallying as much as 1.2 percent. The Dow Jones Industrial Average advanced 48.30 points, or 0.5 percent, to 9,557.58, gaining for the sixth straight day. Both measures reached their highest levels of 2009.
“Obviously there’s a lot of questions about whether the economic recovery is sustainable, but stocks tend to react before the fundamentals do,” said Jeffrey Coons, who helps oversee $21 billion as co-director of research at Manning & Napier Advisors Inc. in Fairport, New York. “We haven’t yet begun to see investors shift more assets into equities, so we think stocks have more room to appreciate.”
The S&P 500 has advanced five straight months and in five of the past six weeks following better-than-forecast corporate profits and signs of an improving economy. More than 72 percent of its companies beat the average analyst estimate for second- quarter earnings, the most since Bloomberg began tracking the data in 1993. The Conference Board’s index of leading economic indicators has risen every month since April. With today’s gain, the S&P 500 has risen 53 percent from a 12-year low in March.
Europe, Asia Shares
The Dow Jones Stoxx 600 Index of European shares advanced 0.4 percent after earlier falling as much as 0.8 percent. The MSCI Asia Pacific Index slipped 0.3 percent as the Shanghai Composite Index slid for the first time in four days, decreasing 2.6 percent. Wen Jiabao, China’s premier, said yesterday that excess industrial capacity may limit growth and authorities can’t be “blindly” optimistic.
Treasury yields, which move inversely to the price of the securities, declined after the auction. The new two-year notes were sold at a yield of 1.119 percent, higher than the 1.115 percent average estimate of eight bond-trading firms surveyed by Bloomberg News.
Today’s auction will be followed by $39 billion of five- year notes tomorrow and $28 billion of seven-year notes on Aug. 27. The U.S. government is selling the securities to fund the record budget deficit that resulted from measures to prop up the economy. The deficit will widen to $1.5 trillion next year, reflecting a “deeper recession” than previously expected, White House budget chief Peter Orszag said today.
Teen Clothing
Macy’s, the second-biggest U.S. department-store chain, rose 4.2 percent to $15.96. Bed Bath & Beyond, the largest U.S. home-furnishings retailer, climbed 3.9 percent to $36.60. The S&P 500 Consumer Discretionary Index advanced 1.2 percent, the most among 10 industries, following the consumer-confidence report.
Pulte Homes, the biggest U.S. homebuilder, advanced 3.6 percent to $13.07. The four homebuilders in the S&P 500 gained 3.2 percent as a group, and reached the highest level since Oct. 2. The S&P/Case-Shiller home-price index declined 15.4 percent in June from a year earlier, less than the median economist estimate of 16.4 percent. Prices rose from the prior month by the most in four years.
Energy companies in the S&P 500 retreated 1.6 percent, the biggest drop among the 10 industries.
Big Lots Inc. rose 5.7 percent to $25.41. The closeout retailer said second-quarter profit from continuing operations was 35 cents a share, or 15 percent more than the average analyst estimate.
Hamburgers
Burger King Holdings Inc. increased 7.6 percent to $19. The second-largest U.S. hamburger chain said fourth-quarter profit was 43 cents a share, topping the average estimate by 32 percent, as the company expanded overseas.
Harman International Industries Inc. rose the most in the S&P 500, climbing 9.7 percent to $29.72. The maker of audio systems for homes and vehicles was rated “overweight” in new coverage at JPMorgan Chase & Co., which said the company has the potential to cut costs and boost sales.
Most U.S. stocks fell yesterday, led by financial companies, after SunTrust Banks Inc. said lenders face more credit losses and commercial real estate may falter through 2010. The S&P 500’s five-month rebound left it the valued at 18.9 times the trailing 12-month operating profits of its companies last week, the highest ratio since 2004, according to data compiled by Bloomberg.
Ouster From S&P 500
Manitowoc Co. fell 4.9 percent to $6.51. The crane maker was picked to replace CareFusion Corp., which is being spun off from Cardinal Health Inc., in the S&P 500.
Denbury Resources Inc. fell 7 percent to $15.70 for the biggest drop in the S&P 500. The oil and natural-gas producer was cut to “neutral” from “buy” at UBS AG.
U.S. companies with the worst finances are beating the S&P 500 even as their funding deteriorates, a sign their rally may falter should the economic recovery stall, Armstrong Investment Managers said.
The weakest non-financial companies in the S&P 500 surged 90 percent since March 9 through last week. After the S&P 500 sank to a 12-year low five months ago, those with the best finances gained 49 percent, data from Armstrong Investment show. The companies were identified using New York University Professor Edward Altman’s Z-Score method.

LATEST:- U.S. Markets Wrap: Stocks, Treasuries Rise on Improved Outlook

By Dakin Campbell and Matt Townsend

July 20 (Bloomberg) -- U.S. stocks rose, sending the Standard & Poor’s 500 Index to its highest level since November, as a gauge of economic indicators topped projections and speculation grew that CIT Group Inc. will avoid bankruptcy. Treasuries rose and the dollar fell.

Caterpillar Inc. and Alcoa Inc. rallied at least 3.7 percent as the Conference Board’s gauge of the economic outlook increased for a third straight month. CIT Group jumped 79 percent as a person briefed on the board’s deliberations said the lender has reached a financing agreement with bondholders. Federal Reserve Chairman Ben S. Bernanke may outline his strategy tomorrow for exiting history’s biggest monetary expansion in testimony to Congress.

“Given the general weakness of the economy and concerns over corporate profitability going into the second quarter, reports to date have been a pleasant surprise,” said Dean Gulis, part of a group that manages $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. “This week it’s going to continue to rally. The worm has turned a little bit. People are feeling better about the economy.”

The S&P 500 added 1.1 percent to 951.13 at 4:05 p.m. in New York, above its best close since Nov. 5. The Dow Jones Industrial Average rallied 104.21 points, or 1.2 percent, to 8,848.15, erasing its loss for the year and closing at a six- month high. Treasuries rose, pushing yields down from the highest levels in almost four weeks, amid speculation Bernanke may ease inflation concerns. The dollar dropped to a six-week low against the euro.

Industry Groups

All 10 industry groups in the S&P 500 rose today, led by consumer, commodity and industrial shares. Goldman Sachs Group Inc. boosted its forecast for the index, saying improving earnings will spur the steepest second-half rally since 1982. The bank raised its year-end target for the S&P 500 to 1,060, a 15 percent increase from its projection of 940 on June 30.

Earnings topped analysts’ estimates by an average of 15 percent for S&P 500 companies that reported quarterly results since July 8, according to data compiled by Bloomberg, with 35 out of 43, or 81 percent, beating estimates.

Ten-year note yields fell the most in six days before the central bank chairman’s semiannual economic report to lawmakers at 10 a.m. tomorrow in Washington. U.S. debt fell earlier and stocks rose as CIT, seeking to stave off bankruptcy, was said to be offered financing from bondholders, damping demand for the safety of government debt.

Testimony

“The focus of Treasuries is on Bernanke’s testimony,” said Kevin Giddis, head of fixed-income sales, trading and research at the brokerage Morgan Keegan Inc. in Memphis, Tennessee. “We are caught in a summertime range trade. The general feeling is that he will say things are getting better, but make no mention of when the economy will do a full turn.”

The 10-year note’s yield fell four basis points, or 0.04 percentage point, to 3.61 percent at 5:03 p.m. in New York, according to BGCantor Market Data. It earlier touched 3.72 percent, the highest level since June 23. The price of the 3.125 percent security maturing in May 2019 rose 11/32, or $3.44 per $1,000 face amount, to 96 1/32.

The dollar fell while the yen slid as the possibility of a CIT debt restructuring encouraged higher-yield demand. The U.S. currency declined 0.8 percent to $1.4234 per euro at 5:03 p.m. in New York, from $1.4102 on July 17. It reached $1.4249, the weakest level since June 5. The yen depreciated 0.9 percent to 134.11 per euro from 132.85 after trading at 134.76, the weakest level since July 3. Japan’s currency traded at 94.22 versus the dollar, compared with 94.19.

‘Risk Assets’

“People are looking for risk assets, not with a lot of conviction, but with equities there is some appetite,” said Brian Kim, a foreign-exchange strategist in Stamford, Connecticut, at UBS AG, the world’s second-largest currency trader. “They’re leaning away from safe havens, and the dollar and yen kind of suffered.”

The Dollar Index, which the ICE uses to track the greenback against the currencies of six major U.S. trading partners, touched 78.799, the weakest level since June 3. The index, which reached the highest in almost three years on March 4 and the lowest in 2009 on June 2, traded in a range of about 1.5 points above or below 80 since the beginning of last month.

Crude oil rose for a fourth day. The commodity advanced after a measure of economic indicators signaled that the worst of the recession is over. The Conference Board’s gauge of the outlook for the next three to six months increased 0.7 percent, more than forecast, and climbed three straight months for the first time since 2004.

‘A New High’

“We’ve reached a new high on the back of the weak dollar and equity market strength,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “There’s increased optimism and some earnings are better than expected.”

Crude oil for August delivery rose 48 cents, or 0.8 percent, to $64.04 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices reached $64.90, the highest since July 7. Oil has gained 44 percent this year.

Gold climbed to a five-week high as a weaker dollar and higher oil prices boosted the metal’s appeal as an alternative investment and a hedge against inflation.

Gold futures for August delivery gained $11.30, or 1.2 percent, to $948.80 an ounce on the New York Mercantile Exchange’s Comex division. Earlier, the price reached $955.40, the highest for a most-active contract since June 12.

“Gold is moving up today due to the lower U.S. dollar,” said Lannie Cohen, the president of Capitol Commodity Services Inc. in Indianapolis.