U.S. Markets Wrap: S&P 500 Erases 2009 Loss
By Lynn Thomasson
May 4 (Bloomberg) -- U.S. stocks rose, erasing the Standard & Poor’s 500 Index’s 2009 loss, after home sales beat estimates and manufacturing in China increased for the first time in nine months, boosting confidence the global recession is easing.
Financial stocks rallied after a Goldman Sachs Group Inc. strategist boosted his rating on the industry, while Wells Fargo & Co. added 24 percent as Warren Buffett called it a “fabulous” bank. Alcoa Inc. and Freeport-McMoRan Copper & Gold Inc. gained more than 6.9 percent as metal prices climbed. Lennar Corp. surged 9.3 percent, helping lift an S&P measure of 13 homebuilders by 9.2 percent.
“It’s like a snowball,” said Walter “Bucky” Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. “It’s building with every favorable economic report that we get. That’s getting money coming out of cash and into riskier assets.”
The S&P 500 added 3.4 percent to a four-month high of 907.24 at 4 p.m. in New York. The index never rose in 2008, a year in which it plunged 38 percent for the worst performance since 1937. The Dow Jones Industrial Average increased 214.33 points, or 2.6 percent, to 8,426.74. The MSCI World Index of 23 developed markets gained 3 percent, also erasing its year-to- date retreat.
Stocks have soared since March 9, with the S&P 500 advancing 34 percent, as investors speculated U.S. Treasury Secretary Timothy Geithner’s plan to finance the purchase of as much as $1 trillion in illiquid assets from banks will help end the recession. Equities were propelled by companies beating first-quarter profit estimates. More than two-thirds of the S&P 500 companies have exceeded analysts’ earnings projections.
Unexpected 3.2% Rise
The market extended gains today after the National Association of Realtors said the number of Americans signing contracts to buy previously owned homes jumped 3.2 percent in March. Economists projected no change, according to the median estimate in a Bloomberg survey. A separate report from the Commerce Department showed spending on U.S. construction projects unexpectedly rose in March for the first time in six months on increases in commercial and government projects.
Financial shares in the S&P 500 advanced 10 percent, the most among 10 industries.
Wells Fargo rose 24 percent to $24.25, the highest price since January. Buffett, whose Berkshire Hathaway Inc. is the company’s largest shareholder, said that while he’d “love” to buy the entire bank, he is unable to because Berkshire wouldn’t get permission from regulators. He spoke on May 2 at Berkshire’s annual meeting in Omaha, Nebraska.
Distorted Perception
Buffett added that losses at Citigroup Inc. have distorted the public perception of U.S. banks. He said lenders including Wells Fargo are better able to withstand the recession.
David Kostin, a Goldman Sachs strategist, upgraded his rating on financial stocks to “neutral” from “underweight” today, citing the economic stimulus package and better-than- estimated results from banks during the first quarter. The U.S. government and the Federal Reserve have spent, lent or committed at least $12.8 trillion to help end the worst financial crisis since the Great Depression, according to Bloomberg data.
Crude oil rose to a five-month high following the reports on U.S. home sales and construction projects. Crude oil for June delivery rose $1.27 to $54.47 a barrel at 2:43 p.m. on the New York Mercantile Exchange, the highest settlement since Nov. 24. Oil is up 22 percent this year.
‘Pinning Their Thoughts’
“People are pinning their thoughts on things getting better as we go through the year,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market seems to be looking forward rather than at what’s immediately overhanging.”
Copper futures for July delivery rose 4.3 cents, or 2 percent, to $2.144 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $2.17, the highest for a most-active contract since April 20.
“I’m very optimistic about copper,” said Michael K. Smith, the president of T&K Futures & Options in Port St. Lucie, Florida. “We’ve seen good news about the economy in Asia, and as they start to come out of the recession, they will be a driving force for demand.”
Treasuries were little changed as the Federal Reserve bought $8.5 billion in debt, the largest amount since the central bank began purchasing government securities in March to drive borrowing rates lower.
Record Debt Sales
The acquisition helped to temper concern that the $71 billion in notes and bonds set to be sold later this week would push yields higher. Ten-year notes have declined for six straight weeks, the longest losing streak in almost two years, as the Treasury sells record amounts to finance bank bailouts, fiscal stimulus programs and a record budget deficit.
“It does give the market the feeling that the Fed is watching and that they actually care,” said Jim Caron, the New York-based global head of U.S. interest-rate strategy at Morgan Stanley, one of 16 primary dealers that trade with the Fed. “They were right to upsize this one. The Fed is going to be battling the Treasury so they might as well get it out of the way on Monday and then let the Treasury do its thing later this week.”
The 10-year note yield fell one basis point, or 0.01 percentage point, to 3.15 percent at 4:54 p.m. in New York, according to BGCantor Market data. The 2.75 percent security maturing in February 2019 rose 1/32, or 31 cents per $1,000 face amount, to 96 20/32.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
Last Updated: May 4, 2009 17:14 EDT |
