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U.S. Stocks Rise for a Third Day, Led by Banks; Merrill Gains
Posted by regli
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U.S. Stocks Rise for a Third Day, Led by Banks; Merrill Gains August 08, 2007 08:18PM |
Admin Registered: 1 year ago Posts: 4,338 |
U.S. Stocks Rise for a Third Day, Led by Banks; Merrill Gains
http://www.bloomberg.com/apps/news?pid=20601084&sid=aJ2q4VKtd1Sk&refer=stocks
By Michael Patterson
Traders at the New York Stock Exchange Aug. 8 (Bloomberg) -- U.S. stocks continued their recovery from a three-week rout after Cisco Systems Inc. raised its sales forecast and speculation increased that banks and homebuilders may have weathered the worst of the subprime mortgage shakeout.
Merrill Lynch & Co. and Morgan Stanley helped lead the Standard & Poor's 500 Index higher for a third day after a Citi Investment Research analyst recommended buying the shares. Pulte Homes Inc. pushed a gauge of construction companies to its biggest advance in four years. Cisco, the world's largest maker of computer-networking equipment, climbed to a six-year high after saying demand for Internet gear increased.
The S&P 500 rose 20.78, or 1.4 percent, to 1497.49. The Dow Jones Industrial Average gained 153.56, or 1.1 percent, to 13,657.86. The Nasdaq Composite Index added 51.38, or 2 percent, to 2612.98, its biggest advance since October.
Stocks have recouped almost half of the $1.6 trillion lost the previous three weeks on concern mortgage defaults would spread through credit markets. An S&P 500 index of financial shares has gained 7.9 percent since ending last week at a 13- month low, helped yesterday when the Federal Reserve said the housing slump won't derail the economic expansion.
``You've got a pretty good opportunity in your money-center banks and brokers,'' said David Katz, who helps oversee $1.6 billion as chief investment officer of New York-based Matrix Asset Advisors Inc. ``The negative exposure they have is fairly minimal, and you're getting them at a great price.''
Stocks also got a boost after a government report showed sales at U.S. wholesalers climbed faster than inventories in June and the perceived risk of owning corporate bonds fell.
Financials Rally
Citi analyst Prashant Bhatia wrote that the drag on earnings at Wall Street's five biggest investment banks from the declining value of leveraged-buyout loans is ``very manageable.'' He said the banks may be stuck with $75 billion of loans that could reduce annual earnings by 2 percent to 5 percent.
Investors have been cutting back on riskier assets such as the loans and bonds that fund leveraged buyouts after being burned by losses on subprime mortgages.
Merrill Lynch, the third-biggest U.S. securities firm, climbed $2.98 to $78.17. Morgan Stanley, the second-largest securities firm, increased $1.06 to $65.39. Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage bonds, increased $4.07 to $64.78.
Goldman Speculation
Bear Stearns Cos., the No. 2 underwriter, climbed $4.23 to $121.12. Chief Executive Officer James Cayne is planning to go to China to look for a joint-venture partner or a partnership that would lead to a strategic investment in the company, CNBC reported, without citing anyone.
Goldman Sachs Group Inc. rose $2.05 to $193.30. The stock fell in the last hour, dragging down the S&P 500, on speculation the investment bank would announce losses at a hedge fund. Shares erased the decline after Goldman said there would be no announcement.
``There were all kinds of rumors about one of the Goldman funds having to liquidate,'' said Clarence Woods Jr., chief equity trader with Baltimore-based MTB Investment Advisors, which manages $12 billion. ``Then Goldman came out and made a comment that they didn't have any problems, and that's when the market rallied back.''
The S&P 500 Financials Index gained 2.2 percent and contributed the most to the advance in the overall index.
Mortgage Applications
The Mortgage Bankers Association said its index of applications to buy a home or refinance a loan rose 8.1 percent last week as cheaper borrowing costs encouraged more Americans to seek loans.
Pulte Homes, the third largest, increased $1.47 to $21.85. Toll Brothers Inc., the biggest U.S. luxury-home builder, climbed $1.38 to $24.33 after reporting third-quarter revenue that beat analysts' estimates.
Homebuilders in S&P indexes rallied for a third straight day, climbing 6.6 percent as a group, the most since October 2002. The mortgage bankers' gauge of demand for credit for home purchases gained 7.4 percent last week.
``The unknown for the summer has been when will the real- estate market bottom out and start to see a recovery,'' said Terri Campbell, who helps oversee $1.8 billion at Eastern Investment Advisors in Boston. ``If we get evidence that the housing market is picking up again, the one big worry that's outstanding goes away.''
Some mortgage companies also climbed after lawmakers who head oversight of Fannie Mae and Freddie Mac, the two biggest sources of money for U.S. home loans, said late yesterday the companies should be allowed to buy more mortgages as a way to curb foreclosures.
Fannie, Freddie
Fannie Mae rose for a third day, climbing $2.32 to $66.75. Freddie Mac increased $1 to $62.64. Countrywide Financial Corp., a California-based mortgage lender, added $1.76 to $29.11.
Cisco gained $1.99 to $31.68, the highest since February 2001. The company said revenue will grow by 12 percent to 17 percent a year, compared with a previous prediction of as much as 15 percent. Fiscal fourth-quarter sales and a forecast for the current period beat analysts' estimates.
Ciena Corp., a computer-network equipment maker, rose $2.17 to $37.97. A gauge of technology companies in the S&P 500 climbed 1.7 percent.
Profits at the 443 S&P 500 companies that reported second- quarter results as of yesterday climbed 10.9 percent on average, more than triple analysts' estimates at the end of March, according to Bloomberg data.
`Moderate' Expansion
The Fed yesterday left its benchmark interest rate at 5.25 percent and said losses in credit markets won't hamper the economy's ``moderate'' expansion.
``Markets are very comfortable with the Ben Bernanke Fed,'' said Doug Peta, strategist at J&W Seligman & Co. in New York, which oversees about $20 billion. ``He's chosen not to do something right now. We've just got to trust that he knows more about it than the average citizen.''
The government's wholesale inventories report showed that companies are likely to continue rebuilding stocks. Wholesaler stockpiles increased a greater-than-forecast 0.5 percent, matching May's gain, the Commerce Department said. Sales rose 0.6 percent after a 1.3 percent increase the previous month.
Credit-default swaps on the CDX North American Investment Grade Index Series 8 dropped as much as 14 basis points to 58 basis points, according to Deutsche Bank AG. A decrease indicates improving perceptions of credit quality.
Citigroup, Kraft
Citigroup Inc., the largest U.S. bank, and Kraft Foods Inc., the world's second-biggest foodmaker, led at least 13 companies taking advantage of a renewed appetite for debt in the busiest day in two months, according to Bloomberg data.
Citigroup shares gained 90 cents to $49.49. Kraft added 21 cents to $32.78.
Broadcom Corp. rose $3.22 to $35.98. Nokia Oyj, the world's largest maker of mobile phones, said Broadcom will supply chips for the company's phones that use Edge, or enhanced data rates for global evolution, technology.
MGIC Investment Corp. advanced $6.06, or 17 percent, to $40.90 for the best gain ever. The largest U.S. mortgage insurer said yesterday it may scrap plans to buy rival Radian Group Inc. as the subprime home loan market deteriorates. Radian, which said MGIC is obligated to complete the purchase, rose 38 cents to $21.
Polo Ralph Lauren Corp. declined $10.98, or 12 percent, to $81.80, the biggest drop since November 1998. The designer of Chaps and Club Monaco clothing said sales missed analysts' estimates and cut its forecast for the second time this year.
The Russell 2000 Index, a benchmark for companies with a median market value of $695 million, gained 2.8 percent to 795.66. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, climbed 1.5 percent to 15,046.23. Based on its advance, the value of stocks increased by $278.4 billion.
http://www.bloomberg.com/apps/news?pid=20601084&sid=aJ2q4VKtd1Sk&refer=stocks
By Michael Patterson
Traders at the New York Stock Exchange Aug. 8 (Bloomberg) -- U.S. stocks continued their recovery from a three-week rout after Cisco Systems Inc. raised its sales forecast and speculation increased that banks and homebuilders may have weathered the worst of the subprime mortgage shakeout.
Merrill Lynch & Co. and Morgan Stanley helped lead the Standard & Poor's 500 Index higher for a third day after a Citi Investment Research analyst recommended buying the shares. Pulte Homes Inc. pushed a gauge of construction companies to its biggest advance in four years. Cisco, the world's largest maker of computer-networking equipment, climbed to a six-year high after saying demand for Internet gear increased.
The S&P 500 rose 20.78, or 1.4 percent, to 1497.49. The Dow Jones Industrial Average gained 153.56, or 1.1 percent, to 13,657.86. The Nasdaq Composite Index added 51.38, or 2 percent, to 2612.98, its biggest advance since October.
Stocks have recouped almost half of the $1.6 trillion lost the previous three weeks on concern mortgage defaults would spread through credit markets. An S&P 500 index of financial shares has gained 7.9 percent since ending last week at a 13- month low, helped yesterday when the Federal Reserve said the housing slump won't derail the economic expansion.
``You've got a pretty good opportunity in your money-center banks and brokers,'' said David Katz, who helps oversee $1.6 billion as chief investment officer of New York-based Matrix Asset Advisors Inc. ``The negative exposure they have is fairly minimal, and you're getting them at a great price.''
Stocks also got a boost after a government report showed sales at U.S. wholesalers climbed faster than inventories in June and the perceived risk of owning corporate bonds fell.
Financials Rally
Citi analyst Prashant Bhatia wrote that the drag on earnings at Wall Street's five biggest investment banks from the declining value of leveraged-buyout loans is ``very manageable.'' He said the banks may be stuck with $75 billion of loans that could reduce annual earnings by 2 percent to 5 percent.
Investors have been cutting back on riskier assets such as the loans and bonds that fund leveraged buyouts after being burned by losses on subprime mortgages.
Merrill Lynch, the third-biggest U.S. securities firm, climbed $2.98 to $78.17. Morgan Stanley, the second-largest securities firm, increased $1.06 to $65.39. Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage bonds, increased $4.07 to $64.78.
Goldman Speculation
Bear Stearns Cos., the No. 2 underwriter, climbed $4.23 to $121.12. Chief Executive Officer James Cayne is planning to go to China to look for a joint-venture partner or a partnership that would lead to a strategic investment in the company, CNBC reported, without citing anyone.
Goldman Sachs Group Inc. rose $2.05 to $193.30. The stock fell in the last hour, dragging down the S&P 500, on speculation the investment bank would announce losses at a hedge fund. Shares erased the decline after Goldman said there would be no announcement.
``There were all kinds of rumors about one of the Goldman funds having to liquidate,'' said Clarence Woods Jr., chief equity trader with Baltimore-based MTB Investment Advisors, which manages $12 billion. ``Then Goldman came out and made a comment that they didn't have any problems, and that's when the market rallied back.''
The S&P 500 Financials Index gained 2.2 percent and contributed the most to the advance in the overall index.
Mortgage Applications
The Mortgage Bankers Association said its index of applications to buy a home or refinance a loan rose 8.1 percent last week as cheaper borrowing costs encouraged more Americans to seek loans.
Pulte Homes, the third largest, increased $1.47 to $21.85. Toll Brothers Inc., the biggest U.S. luxury-home builder, climbed $1.38 to $24.33 after reporting third-quarter revenue that beat analysts' estimates.
Homebuilders in S&P indexes rallied for a third straight day, climbing 6.6 percent as a group, the most since October 2002. The mortgage bankers' gauge of demand for credit for home purchases gained 7.4 percent last week.
``The unknown for the summer has been when will the real- estate market bottom out and start to see a recovery,'' said Terri Campbell, who helps oversee $1.8 billion at Eastern Investment Advisors in Boston. ``If we get evidence that the housing market is picking up again, the one big worry that's outstanding goes away.''
Some mortgage companies also climbed after lawmakers who head oversight of Fannie Mae and Freddie Mac, the two biggest sources of money for U.S. home loans, said late yesterday the companies should be allowed to buy more mortgages as a way to curb foreclosures.
Fannie, Freddie
Fannie Mae rose for a third day, climbing $2.32 to $66.75. Freddie Mac increased $1 to $62.64. Countrywide Financial Corp., a California-based mortgage lender, added $1.76 to $29.11.
Cisco gained $1.99 to $31.68, the highest since February 2001. The company said revenue will grow by 12 percent to 17 percent a year, compared with a previous prediction of as much as 15 percent. Fiscal fourth-quarter sales and a forecast for the current period beat analysts' estimates.
Ciena Corp., a computer-network equipment maker, rose $2.17 to $37.97. A gauge of technology companies in the S&P 500 climbed 1.7 percent.
Profits at the 443 S&P 500 companies that reported second- quarter results as of yesterday climbed 10.9 percent on average, more than triple analysts' estimates at the end of March, according to Bloomberg data.
`Moderate' Expansion
The Fed yesterday left its benchmark interest rate at 5.25 percent and said losses in credit markets won't hamper the economy's ``moderate'' expansion.
``Markets are very comfortable with the Ben Bernanke Fed,'' said Doug Peta, strategist at J&W Seligman & Co. in New York, which oversees about $20 billion. ``He's chosen not to do something right now. We've just got to trust that he knows more about it than the average citizen.''
The government's wholesale inventories report showed that companies are likely to continue rebuilding stocks. Wholesaler stockpiles increased a greater-than-forecast 0.5 percent, matching May's gain, the Commerce Department said. Sales rose 0.6 percent after a 1.3 percent increase the previous month.
Credit-default swaps on the CDX North American Investment Grade Index Series 8 dropped as much as 14 basis points to 58 basis points, according to Deutsche Bank AG. A decrease indicates improving perceptions of credit quality.
Citigroup, Kraft
Citigroup Inc., the largest U.S. bank, and Kraft Foods Inc., the world's second-biggest foodmaker, led at least 13 companies taking advantage of a renewed appetite for debt in the busiest day in two months, according to Bloomberg data.
Citigroup shares gained 90 cents to $49.49. Kraft added 21 cents to $32.78.
Broadcom Corp. rose $3.22 to $35.98. Nokia Oyj, the world's largest maker of mobile phones, said Broadcom will supply chips for the company's phones that use Edge, or enhanced data rates for global evolution, technology.
MGIC Investment Corp. advanced $6.06, or 17 percent, to $40.90 for the best gain ever. The largest U.S. mortgage insurer said yesterday it may scrap plans to buy rival Radian Group Inc. as the subprime home loan market deteriorates. Radian, which said MGIC is obligated to complete the purchase, rose 38 cents to $21.
Polo Ralph Lauren Corp. declined $10.98, or 12 percent, to $81.80, the biggest drop since November 1998. The designer of Chaps and Club Monaco clothing said sales missed analysts' estimates and cut its forecast for the second time this year.
The Russell 2000 Index, a benchmark for companies with a median market value of $695 million, gained 2.8 percent to 795.66. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, climbed 1.5 percent to 15,046.23. Based on its advance, the value of stocks increased by $278.4 billion.
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