U.S. Stocks Advance, S&P 500 Jumps to 2-Month High; GM Rallies
By Elizabeth Stanton
Jan. 2 (Bloomberg) -- U.S. stocks climbed to a two-month high, following the market’s worst annual drop since the Great Depression, as General Motors Corp. got its first cash infusion from the government and rising oil prices lifted energy shares.
GM, the largest U.S. automaker, rallied 14 percent after receiving $4 billion in rescue loans from the Treasury to help the company avoid collapse. Exxon Mobil Corp. and Chevron Corp. led a gauge of energy producers to a sixth straight advance. Starwood Hotels & Resorts Worldwide Inc. jumped 16 percent on takeover speculation after agreeing to notify one of its largest investors of any offers.
“Wall Street is starting a new year, and there’s always more money at the beginning of the year,” said James Swanson, chief investment strategist at Boston-based MFS Investment Management, which oversees $160 billion. “The markets will see beyond the current bad economic data and begin a broad-based move upward in the next three or four months.”
The S&P 500 rose 3.2 percent to 931.8, capping its first three-day gain in five weeks and best start to a year since 2003. The Dow Jones Industrial Average increased 258.3 points, or 2.9 percent, to 9,034.69. The Russell 2000 Index of small U.S. companies advanced 1.3 percent.
Both the S&P 500 and Dow climbed to their highest closes since the first week of November. About 7.2 billion shares changed hands on all U.S. exchanges, 29 percent fewer than the three-month daily average as trading slowed at the end of the holiday-shortened week.
Stocks in Europe and Asia rose today, trimming losses from last year’s record slump in the MSCI World Index, as investors speculated governments will step up efforts to revive the global economy.
‘Worst Has Been Seen’
The S&P 500 decreased 38.5 percent in 2008, the most since the 38.6 percent plunge in 1937, and sank to an 11-year low on Nov. 20. Volatility increased, with the index rising or falling at least 5 percent in a single day 18 times during the year
“The worst has been seen,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, told Bloomberg Television. The firm manages $190 billion. “I’m not looking for a super year in 2009; I think we’ll do better” than in 2008.
The S&P 500 climbed 6.8 percent this week, its best week since November, and extended its rebound from Nov. 20 to 24 percent. Stocks rallied last month as the government rescued Citigroup, President-elect Barack Obama pledged to stimulate growth with spending on infrastructure and the Federal Reserve cut interest rates to as low as zero percent to combat the worst financial crisis in seven decades.
Energy Advance
Exxon Mobil, the world’s largest oil company, rose 2.3 percent to $81.64. Chevron, the second-biggest U.S. energy company, added 3.5 percent to $76.52. Crude jumped 3.9 percent to $46.34 a barrel, capping the biggest weekly gain since 1986, as retaliatory attacks by Israel against Hamas in the Gaza strip threatened to disrupt supplies from the Middle East. Natural gas climbed 6.2 percent as lower-than-normal temperatures were forecast for the U.S. East Coast in early January.
“The stocks are very attractively priced,” Robert Schaeffer, a money manager at Becker Capital Management Inc., said of energy companies. “The long-term supply-demand case for oil is very bullish.” Becker Capital oversees $1.6 billion in Portland, Oregon.
GM surged 45 cents to $3.65 for the biggest gain in the Dow average. The loans are part of $17.4 billion in financing that the Treasury has promised to GM and Chrysler LLC in a bid to avert a bankruptcy by either company. GM’s infusion will help the Detroit-based automaker pay suppliers as its cash dwindles.
Hotel Rally
Starwood added $2.90 to $20.80. The third-largest U.S. lodging company entered into a confidentiality agreement to give Equity Group Investments LLC the opportunity to top any third- party takeover bid, Starwood said in a regulatory filing.
Wyndham Worldwide Corp., the franchiser of Ramada and Super 8 hotels, advanced 15 percent to $7.56.
Citigroup Inc. climbed 43 cents, or 6.4 percent, to $7.14. Chief Executive Officer Vikram Pandit and Chairman Win Bischoff will forgo 2008 bonuses after the bank lost three-quarters of its market value in the year and got a $45 billion U.S. bailout, Pandit said on Dec. 31 in a memo to employees.
Stocks climbed even after a report showed manufacturing in the U.S. shrank in December at the fastest pace in almost three decades as the recession deepened. The Institute for Supply Management’s factory index fell to 32.2, less than forecast and the lowest level since 1980. Readings less than 50 indicate contraction. The group’s price measure fell to the lowest level in almost six decades.
‘Priced In’
“A lot of the bad news is priced in,” said Matthew DiFilippo, director of research at Indiana, Pennsylvania-based Stewart Capital Advisors LLC, which manages $1 billion. “From an economic perspective, we don’t expect good news for some time. In the long run the economy’s going to turn and earnings are going to improve.”
Dynegy Inc. rose the most in the S&P 500, gaining 19 percent to $2.38. The owner of power plants in 11 U.S. states agreed to dissolve its development venture with LS Power Associates LP, partly because of the credit crisis.
Oshkosh Corp. climbed 16 percent to $10.30. The Wisconsin- based maker of military trucks won a contract valued at as much as $1.12 billion to provide support services for heavy- and medium-duty trucks used by the U.S. government.
Shippers Gain
DryShips Inc. and Genco Shipping & Trading Ltd., whose vessels transport commodities, gained as rates to charter Capesize-class ships rose and China completed plans to support its steel and auto industries. Dryships rose 17 percent to $12.49. Genco added 15 percent to $17.01.
Europe’s Dow Jones Stoxx 600 Index climbed 3.1 percent today, while the MSCI Asia Pacific excluding Japan Index increased for a fifth day. South Korea’s president pledged to counter the economic slowdown, while India’s central bank cut interest rates for the fourth time in less than three months, extending the steepest set of reductions since 2000.
At its lowest closing level of 2008 on Nov. 20, the S&P 500 was down 49 percent for the year and 52 percent from its Oct. 9, 2007, record of 1,565.15. The plunge came as more than $1 trillion in credit-related losses at global financial companies triggered the first simultaneous recessions in the U.S., Europe and Japan since World War II.
Beer and Cigarettes
Brewers and tobacco companies boosted by takeovers as well as discount retailers were about the only winners in 2008.
Anheuser-Busch Cos. jumped 31 percent after InBev NV agreed to acquire the owner of Budweiser beer to create the world’s biggest brewer. Wal-Mart Stores Inc., the biggest retailer, and restaurant operator McDonald’s Corp. were the only two companies in the 30-stock Dow average that rose last year.
Corporate profits have fallen seven straight quarters, according to the U.S. Bureau of Economic Analysis. Should earnings fall through the first half of 2009, as analysts surveyed by Bloomberg project, it would be the longest streak of declines since the government began tracking quarterly data in 1947.
The Chicago Board Options Exchange Volatility Index, known as Wall Street’s fear gauge, posted a 78 percent gain to 40 in 2008. Its close of 80.86 on Nov. 20 was the highest in its 19- year history. The so-called VIX, a measure of how much investors are paying for insurance from stock declines in the options market, had never exceeded 50 before October. It slid 2 percent to 39.19 today.
The 10-day average S&P 500 swing between intraday high and low has narrowed to 2.43 percent, down by almost three-quarters from a peak of 9.02 on Oct. 16. The benchmark moved in a 3.92 percent range today, down from a 6.62 percent average in October. Options derive their value in part from the historic volatility of the underlying index or security.
To contact the reporters on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.
Last Updated: January 2, 2009 16:50 EST |
