Business
US Stocks Gain Most In A Month
Citigroup, Banks Surge
By Lynn Thomasson, Bloomberg
New York — U.S. stocks advanced the most in a month, halting a six-day decline, after Federal Reserve Chairman Ben S. Bernanke’s statement that banks need not be nationalized helped lift equities from their lowest valuations in two decades.
Citigroup Inc. and Bank of America Corp. rose more than 20 percent, sending financial shares in the Standard & Poor’s 500 Index to the first advance in eight days, as Federal Deposit Insurance Corp. Chairman Sheila Bair said large U.S. banks have enough capital. Home Depot Inc., Macy’s Inc. and Nordstrom Inc. climbed at least 10 percent after the retailers reported profit that topped analysts’ estimates. All 24 S&P 500 industries advanced as the index rebounded from a 12-year low.
“There’s overwhelming value in this market,” said Randy Bateman, who oversees $15 billion as chief investment officer of the asset management unit of Huntington Bancshares Inc. in Columbus, Ohio. “If there’s any kind of momentum in the market, people want to jump on board.”
The S&P 500 added 4 percent to 773.14 for the biggest rally since Jan. 21. The Dow Jones Industrial Average increased 236.16 points, or 3.3 percent, to 7,350.94. The Russell 2000 Index of small companies climbed 4.5 percent to 412.48. Ten stocks gained for each that fell on the New York Stock Exchange, the broadest rally since Dec. 16.
The S&P 500 traded for 12.9 times company profits from the past 10 years as of Monday’s close, the cheapest valuation since 1986, according to data compiled by Yale University professor Robert Shiller. He uses a decade of earnings to smooth out short-term fluctuations.
‘Trading Buy’
The benchmark index for U.S. equities yesterday fell to 743.33, the lowest level since April 1997. JPMorgan Chase & Co. strategist Thomas Lee issued a “trading buy” recommendation, with a short-term forecast of 800 for the index.
Elliott Wave International Inc.’s Robert Prechter, who advised shorting U.S. stocks three months before the bear market began, said investors should end that bet. He warned of a “sharp and scary” rebound for anyone still wagering on a retreat, according to this month’s “Elliott Wave Theorist.” Prechter is famous for cautioning that stocks would crash two weeks before the Black Monday retreat in 1987.
Citigroup gained for a second day, adding 22 percent to $2.60. Bank of America increased 21 percent to $4.73. Both stocks tumbled more than 31 percent last week on speculation the government would seize them, wiping out shareholders.
The S&P 500 rallied to its highs of the day after Bernanke told lawmakers that the government’s bank-capitalization plan is designed to shore up lenders only if the worsening economy creates more losses.
VIX Tumbles
The VIX, as the Chicago Board Options Exchange Volatility Index is known, slumped 14 percent to 45.49 for the biggest drop in a month. Lower readings mean investors are paying less for insurance against declines in the S&P 500.
“Given that we’ve had a significant sell-off, it’s usually followed by a recovery,” said Alan Gayle, a Richmond, Virginia- based senior investment strategist at RidgeWorth Capital Management, which oversees $60 billion. “We still have a lot more work to do to establish a solid base for the equity market.”
Officials will start evaluating about 20 of the nation’s largest banks tomorrow to see if they have enough capital to withstand the deepening recession. Institutions that aren’t able to raise needed capital privately will get taxpayer money, regulators said yesterday.
Only AIG Falls
Financial stocks in the S&P 500 rose 12 percent, ending a seven-day losing streak that erased 23 percent of the industry’s value. Bair told the CBS Early Show that large banks are “fine for now.” Only American International Group Inc. fell among stocks in the S&P 500 measure of banks, brokerages and insurers.
JPMorgan rose 7.7 percent to $21.02. The second-largest U.S. bank slashed its dividend by 87 percent to save $5 billion a year and said it will earn roughly the amount that analysts estimate for the first quarter. The average profit forecast is 34 cents a share, according to data compiled by Bloomberg.
JPMorgan Chief Executive Jamie Dimon said the dividend cut is meant to protect the bank even if the economy deteriorates significantly.
Home Depot climbed 10 percent to $20.67. The largest home- improvement retailer reported fourth-quarter profit excluding some items of 19 cents a share, beating the average analyst estimate by 24 percent, after curbing costs by closing a unit and holding down inventory.
Inventory Reduced
Macy’s added 12 percent to $8.29. The second-biggest U.S. department-store chain reined in inventories, helping it post quarterly earnings excluding some items of $1.06 a share. That topped the average analyst projection by 5.2 percent.
Nordstrom increased 21 percent to $13.69. The retailer said it will be profitable this year and earned more in the fourth quarter than analysts forecast.
Consumer companies, including retailers, in the S&P 500 that are reliant on discretionary spending added 4.8 percent.
The U.S. stock market maintained its advance even after reports showed the housing slump and consumer confidence worsened and Bernanke told Congress a full economic recovery may take more than three years.
“We’re now in a phase where the market can stabilize and attempt a rally,” said Liam Dalton, who oversees about $1.1 billion as the New York-based chief executive officer of Axiom Capital Management. “In the near term, it’s a bit oversold.”
Home prices in 20 U.S. cities declined 18.5 percent in December from a year earlier, the fastest drop on record, as foreclosures climbed and sales sank. The decrease in the S&P/Case-Shiller index was more than forecast.
Confidence Sinks
The Conference Board’s consumer confidence index declined more than forecast to 25 this month, the lowest level since data began in 1967, from a January reading of 37.4.
Microsoft Corp. slumped 0.2 percent to $17.17 for the only drop in the Dow average. Chief Executive Officer Steve Ballmer said the biggest software maker faces more competition from Google Inc. and Apple Inc. in the market for personal-computer software.
Developers Diversified Realty Corp. rallied 54 percent to $3.85 for the S&P 500’s biggest gain. The shopping-center owner that plunged 94 percent in the past 12 months agreed to sell 30 million shares to German mall operator Alexander Otto and members of his family, as well as warrants for 10 million more shares.
Rambus Inc. jumped 40 percent to $9.38. The designer of memory chips rallied after a judge said it can collect $133.4 million in damages from Hynix Semiconductor Inc. and is entitled to royalties.
AIG declined 23 percent to 41 cents. The company may scrap a plan to repay a $60 billion U.S. government loan by selling businesses, after failing to find enough promising bidders, said two people with knowledge of the matter.
Citigroup Inc. and Bank of America Corp. rose more than 20 percent, sending financial shares in the Standard & Poor’s 500 Index to the first advance in eight days, as Federal Deposit Insurance Corp. Chairman Sheila Bair said large U.S. banks have enough capital. Home Depot Inc., Macy’s Inc. and Nordstrom Inc. climbed at least 10 percent after the retailers reported profit that topped analysts’ estimates. All 24 S&P 500 industries advanced as the index rebounded from a 12-year low.
“There’s overwhelming value in this market,” said Randy Bateman, who oversees $15 billion as chief investment officer of the asset management unit of Huntington Bancshares Inc. in Columbus, Ohio. “If there’s any kind of momentum in the market, people want to jump on board.”
The S&P 500 added 4 percent to 773.14 for the biggest rally since Jan. 21. The Dow Jones Industrial Average increased 236.16 points, or 3.3 percent, to 7,350.94. The Russell 2000 Index of small companies climbed 4.5 percent to 412.48. Ten stocks gained for each that fell on the New York Stock Exchange, the broadest rally since Dec. 16.
The S&P 500 traded for 12.9 times company profits from the past 10 years as of Monday’s close, the cheapest valuation since 1986, according to data compiled by Yale University professor Robert Shiller. He uses a decade of earnings to smooth out short-term fluctuations.
‘Trading Buy’
The benchmark index for U.S. equities yesterday fell to 743.33, the lowest level since April 1997. JPMorgan Chase & Co. strategist Thomas Lee issued a “trading buy” recommendation, with a short-term forecast of 800 for the index.
Elliott Wave International Inc.’s Robert Prechter, who advised shorting U.S. stocks three months before the bear market began, said investors should end that bet. He warned of a “sharp and scary” rebound for anyone still wagering on a retreat, according to this month’s “Elliott Wave Theorist.” Prechter is famous for cautioning that stocks would crash two weeks before the Black Monday retreat in 1987.
Citigroup gained for a second day, adding 22 percent to $2.60. Bank of America increased 21 percent to $4.73. Both stocks tumbled more than 31 percent last week on speculation the government would seize them, wiping out shareholders.
The S&P 500 rallied to its highs of the day after Bernanke told lawmakers that the government’s bank-capitalization plan is designed to shore up lenders only if the worsening economy creates more losses.
VIX Tumbles
The VIX, as the Chicago Board Options Exchange Volatility Index is known, slumped 14 percent to 45.49 for the biggest drop in a month. Lower readings mean investors are paying less for insurance against declines in the S&P 500.
“Given that we’ve had a significant sell-off, it’s usually followed by a recovery,” said Alan Gayle, a Richmond, Virginia- based senior investment strategist at RidgeWorth Capital Management, which oversees $60 billion. “We still have a lot more work to do to establish a solid base for the equity market.”
Officials will start evaluating about 20 of the nation’s largest banks tomorrow to see if they have enough capital to withstand the deepening recession. Institutions that aren’t able to raise needed capital privately will get taxpayer money, regulators said yesterday.
Only AIG Falls
Financial stocks in the S&P 500 rose 12 percent, ending a seven-day losing streak that erased 23 percent of the industry’s value. Bair told the CBS Early Show that large banks are “fine for now.” Only American International Group Inc. fell among stocks in the S&P 500 measure of banks, brokerages and insurers.
JPMorgan rose 7.7 percent to $21.02. The second-largest U.S. bank slashed its dividend by 87 percent to save $5 billion a year and said it will earn roughly the amount that analysts estimate for the first quarter. The average profit forecast is 34 cents a share, according to data compiled by Bloomberg.
JPMorgan Chief Executive Jamie Dimon said the dividend cut is meant to protect the bank even if the economy deteriorates significantly.
Home Depot climbed 10 percent to $20.67. The largest home- improvement retailer reported fourth-quarter profit excluding some items of 19 cents a share, beating the average analyst estimate by 24 percent, after curbing costs by closing a unit and holding down inventory.
Inventory Reduced
Macy’s added 12 percent to $8.29. The second-biggest U.S. department-store chain reined in inventories, helping it post quarterly earnings excluding some items of $1.06 a share. That topped the average analyst projection by 5.2 percent.
Nordstrom increased 21 percent to $13.69. The retailer said it will be profitable this year and earned more in the fourth quarter than analysts forecast.
Consumer companies, including retailers, in the S&P 500 that are reliant on discretionary spending added 4.8 percent.
The U.S. stock market maintained its advance even after reports showed the housing slump and consumer confidence worsened and Bernanke told Congress a full economic recovery may take more than three years.
“We’re now in a phase where the market can stabilize and attempt a rally,” said Liam Dalton, who oversees about $1.1 billion as the New York-based chief executive officer of Axiom Capital Management. “In the near term, it’s a bit oversold.”
Home prices in 20 U.S. cities declined 18.5 percent in December from a year earlier, the fastest drop on record, as foreclosures climbed and sales sank. The decrease in the S&P/Case-Shiller index was more than forecast.
Confidence Sinks
The Conference Board’s consumer confidence index declined more than forecast to 25 this month, the lowest level since data began in 1967, from a January reading of 37.4.
Microsoft Corp. slumped 0.2 percent to $17.17 for the only drop in the Dow average. Chief Executive Officer Steve Ballmer said the biggest software maker faces more competition from Google Inc. and Apple Inc. in the market for personal-computer software.
Developers Diversified Realty Corp. rallied 54 percent to $3.85 for the S&P 500’s biggest gain. The shopping-center owner that plunged 94 percent in the past 12 months agreed to sell 30 million shares to German mall operator Alexander Otto and members of his family, as well as warrants for 10 million more shares.
Rambus Inc. jumped 40 percent to $9.38. The designer of memory chips rallied after a judge said it can collect $133.4 million in damages from Hynix Semiconductor Inc. and is entitled to royalties.
AIG declined 23 percent to 41 cents. The company may scrap a plan to repay a $60 billion U.S. government loan by selling businesses, after failing to find enough promising bidders, said two people with knowledge of the matter.
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