Bloomberg News

U.S. Stocks Advance on Retail Sales, China Industrial Production

June 14, 2011

June 14 (Bloomberg) -- U.S. stocks rallied and the Standard & Poor’s 500 Index advanced the most in almost two months after better-than-estimated data on American retail sales and Chinese industrial production.

Home Depot Inc. advanced the most in the Dow Jones Industrial Average, gaining 4.5 percent. Best Buy Co., the world’s largest consumer electronics retailer, surged 4.6 percent after profit exceeded analysts’ forecasts on rising demand for smartphones. J.C. Penney Co. soared 17 after naming Ron Johnson, Apple Inc.’s retail head, as its chief executive officer. Energy shares rallied the most among 10 groups in the S&P 500 as oil rebounded from its lowest in a month.

The S&P 500 rose 1.3 percent, the most since April 20, to 1,287.87 at 4 p.m. in New York. The Dow increased 123.14 points, or 1 percent, to 12,076.11.

“The China numbers were fine and the retail sales report was pretty much in line,” said Liam Dalton, president of Axiom Capital Management Inc. in New York, which oversees $1.4 billion. “We got ourselves into a short-term oversold condition and the market wants to bounce back now. That’s indicative of the trading range we will be in for a while. There’s a change in tone in the data as it has been coming in slower, but on the other hand valuations are relatively low.”

Retail Sales

Stock futures extended their gains after a Commerce Department report showed sales at retailers fell 0.2 percent in May, less than forecast and indicating that American consumers are overcoming elevated gasoline costs. The median forecast of economists surveyed by Bloomberg News was a drop of 0.5 percent.

China reported that industrial production climbed more than estimated in May, while the country’s inflation last month accelerated to the fastest pace in almost three years. Production gained 13.3 percent from the year before, exceeding the median economist forecast of 13.1 percent in a Bloomberg survey. The 5.5 percent annual gain in consumer prices matched estimates.

U.S. stocks rose yesterday, rebounding from six weeks of losses, as a pickup in takeovers and the cheapest valuations in almost a year helped offset concern that the economic recovery is faltering.

More than $1 trillion was erased from U.S. equity markets from the S&P 500’s peak on April 29 through yesterday, leaving the measure trading at about 12.8 times its companies’ estimated earnings for 2011. That’s the cheapest valuation since August. The index is still up 2.4 percent for 2011.

The S&P 500 fell 6.8 percent from the end of April through June 10 as sales of existing homes unexpectedly declined, the unemployment rate rose and concern escalated that one or more European countries will fail to repay all their debt.

Birinyi’s Bullish

Birinyi Associates Inc.’s Jeffrey Yale Rubin said the firm is bullish on equities this year, while Dean Curnutt of Macro Risk Advisors said the performance of stocks depends on the actions by the Federal Reserve.

“For the remainder of the year, we’re positive,” Rubin said today at a panel discussion on equities at the Bloomberg Money Managers conference in Boston. For the S&P 500, “we have a target of 2,100 but that’s not this year, that’s not next year. When we look at stock markets that go on for a long period of time, that start off quickly -- 1974, 1982, 2009 -- those markets are not ones that end quickly. If you also look at those markets during this period, phase two of the market, it runs into difficulty.”

S&P 500 at 2,100

Curnutt, the New York-based chief executive officer of Macro Risk, said the firm’s view on stocks is “largely conditional” on the next policy response by the U.S. central bank. The Fed’s $600 billion program of buying Treasuries to stimulate the economy is ending this month. The S&P 500 could rise to 2,100 if the Fed decided it wanted it to, he said at the conference.

Wholesale costs in the U.S. rose more than forecast in May, led by higher prices for fuel and the fastest rise in 30 years for apparel and textiles. The 0.2 percent increase in the producer-price index compares with the 0.1 percent median estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington.

Home Depot, the largest U.S. home-improvement retailer, added 4.5 percent to $34.75. Best Buy gained 4.6 percent to $30.13 after net income fell 12 percent to $136 million, or 35 cents a share, in the quarter ended May 28. Analysts predicted 33 cents, the average estimate in a Bloomberg survey.

J.C. Penney Soars

J.C. Penney rallied 17 percent to $35.37. The department- store owner named Johnson, 52, as CEO to help revive sales. He will take his role on Nov. 1 and report to current CEO Myron Ullman, who will become executive chairman. Johnson, a former Target Corp. executive, was hired by Apple Chief Steve Jobs to help build the company’s retail operation in 2000.

Apple climbed 1.8 percent to $332.44 as the maker of the iPhone and iPad agreed to pay an undisclosed sum and royalties to Nokia Oyj, settling all patent litigation between the two companies. The Finnish mobile-phone maker filed a lawsuit in October 2009, accusing Apple of infringing its patents. Apple will pay Nokia royalties for the term of the agreement.

Energy shares gained 2 percent, the most among 10 S&P 500 industry groups, as oil rose for the first time in three days in New York. Crude for July delivery gained $2.07 to settle at $99.37 a barrel in the biggest one-day increase since May 18.

Caterpillar Rises

Caterpillar Inc., the world’s largest maker of construction and mining equipment, climbed 2.5 percent to $97.86 for the second-biggest gain in the Dow. Industrial companies rallied the third-most as a group in the S&P 500, materials producers gained the second-most. All ten groups in the benchmark gauge for U.S. equities advanced.

McGraw-Hill Cos. gained 2.6 percent to $41.79. The publisher and provider of financial data said it retained Morgan Stanley to pursue the divestiture of its broadcasting group.

Dollar Thrifty Automotive Group Inc., the third-biggest U.S. car-rental company, slumped 9.3 percent to $72.43. Avis Budget Group Inc., which has been bidding against Hertz Global Holdings Inc. for Dollar Thrifty, agreed to buy Avis Europe Plc, the second-biggest car-rental company on the continent. The announcement left investors wondering if Avis could buy both companies. Avis rose 7.6 percent to $17.17, while Hertz rose 9.1 percent to $15.40.

Kellogg Co. fell 0.8 percent to $54.96. The largest U.S. breakfast cereal maker was warned by U.S. regulators after listeria was found in an inspection of a plant that had flies and pools of water.

--With assistance from Inyoung Hwang in New York and Adria Cimino in Paris. Editors: Joanna Ossinger, Michael Regan

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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