June 9 (Bloomberg) -- U.S. stocks advanced, snapping a six- day decline, as the trade deficit unexpectedly narrowed amid record exports and consumer confidence improved.
The Morgan Stanley Cyclical Index of companies most-tied to economic growth rose 1 percent. Mosaic Co. and CF Industries Holdings Inc. paced gains among fertilizer producers, climbing at least 4.2 percent, after the government reduced its corn-crop estimate. American International Group Inc. advanced 2.9 percent as Deutsche Bank AG recommended buying the shares. Brown-Forman Corp. added 2 percent after the maker of Jack Daniel’s whiskey reported earnings that beat analysts’ estimates.
The Standard & Poor’s 500 Index gained 0.7 percent to 1,289 at 4 p.m. in New York. The benchmark gauge yesterday fell to 12.1 times its companies’ forecast operating earnings, the cheapest valuation since August, according to data compiled by Bloomberg. The Dow Jones Industrial Average increased 75.42 points, or 0.6 percent, to 12,124.36 today.
“The stock market got oversold,” said James Dunigan, chief investment officer in Philadelphia for PNC Wealth Management, which oversees $110 billion. “We’ve got some positive news against the string of poor economic data of the last few weeks. Earnings are still pretty strong. There’s value out there if you want to build a long-term position.”
The S&P 500 yesterday completed its longest slump since February 2009 on concern the economy is slowing. A report last week showed that payrolls grew at the slowest pace in eight months. The benchmark equity index doubled from its March 2009 low to 1,363.61 on April 29, its highest level since June 5, 2008, as earnings topped estimates for nine straight quarters.
Trade Deficit Narrows
Stocks rose today as a report showed that the U.S. trade deficit unexpectedly narrowed in April, reflecting a plunge in auto and oil imports combined with record exports. The gap shrank 6.7 percent to $43.7 billion, the lowest since December, Commerce Department figures showed. Exports increased 1.3 percent to $175.6 billion, boosted by sales of fuel oil, petroleum products and computers.
A separate report showed that consumer confidence rose last week for the third consecutive time as lower gasoline prices lifted Americans’ outlook on their finances. The Bloomberg Consumer Comfort Index climbed to minus 45.9 in the period to June 5, the best showing since the end of April, from the prior week’s minus 47.1. Across income groups, sentiment improved the most among those making less than $50,000 a year.
Benchmark indexes advanced even as initial jobless claims unexpectedly rose by 1,000 to 427,000 last week, the Labor Department said. Economists surveyed by Bloomberg News projected a drop to 419,000, according to the median forecast.
Today’s rally in stocks also happened after the S&P 500 yesterday got close to its average price of the last 200 days, a level monitored by analysts and traders who study charts to make forecasts. The index yesterday closed at 1,279.56, about 2 percent above its 200-day moving average.
“That’s a very significant level,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research in Cincinnati. “That’s where we expect some buyers to step in to defend the longer-term trend.”
A gauge of raw material shares led the gains in the S&P 500 within 10 industries, rallying 1.6 percent.
Fertilizer stocks rose as the government said that the U.S. corn harvest may be 2.3 percent smaller than forecast in May as farmers reduced acreage because of excessive Midwest rains.
Mosaic, North America’s second-largest fertilizer producer, gained 4.8 percent to $68.84. CF Industries increased 4.2 percent to $154.86. Makers of agriculture machinery also climbed. Agco Corp. rose 2.5 percent to $48.24. Deere & Co. jumped 2.6 percent to $82.
AIG advanced 2.9 percent to $28.10. Deutsche Bank recommended buying the shares of the insurer, saying that earnings consistency should drive the stock higher.
The insurer may buy mortgage-backed securities from European banks seeking to bolster their balance sheets as the company works to boost investment results, Deutsche Bank wrote in a note to investors. AIG Chief Executive Officer Robert Benmosche is hunting for assets to add to the investment portfolio after the Federal Reserve Bank of New York rejected his $15.7 billion offer to buy back a pool of mortgage bonds turned over as part of the company’s bailout.
Brown-Forman rose 2 percent to $71.75. The maker of Jack Daniel’s whiskey and Finlandia vodka reported fourth-quarter earnings of $1.13 a share. On average, the analysts surveyed by Bloomberg estimated profit of 64 cents.
Banks had the biggest gain in the S&P 500 within 24 industries, rising 1.9 percent as a group. The KBW Bank Index of 24 stocks advanced 1.2 percent. Wells Fargo & Co. rallied 3.4 percent to $26.22. JPMorgan Chase & Co. rose the most in the Dow, adding 1.5 percent to $40.98.
Goldman Sachs Group Inc. rose 1.5 percent to $133.53 after agreeing to pay a $10 million fine and stop holding private meetings of stock analysts and traders known as “huddles” to settle an investigation by Massachusetts’s chief securities regulator.
The settlement ends a two-year probe by William Galvin, the secretary of the commonwealth, into New York-based Goldman Sachs’s “Asymmetric Service Initiative,” in which information on analysts’ trading ideas was disseminated earlier to favored clients. The company will “permanently discontinue” the practice, Galvin’s office said in a statement today.
Macy’s Inc. gained 1.1 percent to $28.13. The second- biggest U.S. department-store chain was raised to “overweight” from “equal weight” at Barclays. The share-price estimate is $35.
Bullish on Stocks
The Dow dropped for five straight weeks through June 3, with one disappointing economic report after another. That’s the longest streak of declines for the Dow since 2004. Still, the grim news is doing little to reduce bullishness among U.S. money managers and market strategists such as JPMorgan Chase & Co.’s David Kelly and Liz Ann Sonders of Charles Schwab Corp., who say profit growth and below-average valuations will lift equities this year.
“The economy is still growing, albeit at a slow pace, and sufficient for corporate revenues, corporate earnings and corporate cash flow to advance,” said Bob Doll, who helps oversee $3.65 trillion at New York-based BlackRock Inc., the world’s biggest money manager. “We’re at the end of the recovery and the beginning of the expansion. That’s typically a time when stocks still go up, just at a lesser pace.”
--Editors: Joanna Ossinger, Michael Regan
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