Oct. 26 (Bloomberg) -- U.S. stocks rose, following the biggest decline in three weeks for the Standard & Poor’s 500 Index, as Europe reached an agreement on plans to recapitalize banks and American economic reports surpassed forecasts.
Financial stocks in the S&P 500 advanced 2 percent, reversing an earlier decline, as European leaders agreed on a plan to safeguard banks even as talks on bondholder losses ran aground. Alcoa Inc. and Caterpillar Inc. increased at least 1.8 percent to pace gains among companies most-tied to the economy. Boeing Co. climbed 4.5 percent as earnings topped estimates.
The S&P 500 gained 1.1 percent to 1,242 at 4 p.m. New York time, after falling as much as 0.7 percent today. The index fell 2 percent yesterday. The Dow Jones Industrial Average climbed 162.42 points, or 1.4 percent, to 11,869.04.
“This European situation has been kicked down the road far enough,” Peter Sorrentino, a senior fund manager at Huntington Asset Advisors in Cincinnati, which oversees $14.5 billion of assets, said in a telephone interview. “There’s a general feeling that we’re coming close to perhaps not the final chapter in this, but the next chapter in terms of getting the banks recapitalized and keeping the system from locking up.”
The S&P 500 rose from the threshold of a bear market early this month on steps by European leaders to support banks and higher-than-estimated corporate earnings. The benchmark gauge for American equities has rallied 9.8 percent in October, following a five-month decline.
EU leaders said in a statement that they reached an agreement on a plan to recapitalize banks. The European leaders convened for the second summit in four days -- and the 14th in 21 months -- amid mounting global exasperation over their failure to extinguish the two-year-old crisis that now threatens to ravage Italy and France and brake the world economy.
French President Nicolas Sarkozy and German Chancellor Angela Merkel want to meet Greek creditors in Brussels to break a deadlock of the terms of a debt writedown, said a person familiar with the matter. Sarkozy plans to call Chinese leader Hu Jintao tomorrow to discuss China contributing to a fund European leaders may set up to bolster its debt-crisis fight, according to a person familiar with the matter.
“We’re at a key juncture here,” Barry Knapp, the New York-based head of U.S. equity strategy at Barclays Plc, said in a telephone interview. “The growth outlook is improving. That holds the key as to capital markets’ ability to be able absorb any of these continuous overpromising and underdelivering coming out of Europe.”
Stocks also rallied as orders for U.S. durable goods excluding transportation equipment rose in September by the most in six months. Separate data showed purchases of new houses increased more than forecast in September as discounted prices lured buyers in some parts of the country.
The Morgan Stanley Cyclical Index of companies most-tied to the economy rallied 1.4 percent. A gauge of homebuilders in S&P indexes gained 1.9 percent. The KBW Bank Index advanced 2.1 percent. Alcoa rose 2.2 percent to $10.36. Caterpillar increased 1.9 percent to $91.57. Bank of America Corp. climbed 2 percent to $6.59.
Today, 52 companies in the S&P 500 were scheduled to report quarterly results. Profit for all companies in the index climbed 16 percent during the third quarter, and will increase 18 percent to a record $99.38 a share for all of 2011, according to analyst estimates compiled by Bloomberg.
Boeing gained 4.5 percent, the most in the Dow, to $66.56. The company topped profit estimates for the quarter when it delivered the first 787 Dreamliner and said the new model’s production costs will be spread over 1,100 planes, matching analysts’ projections.
Clearwire Corp. rallied 20 percent, the second-biggest gain in the Russell 1000 Index, to $1.96. The money-losing wireless broadband provider surged after partner Sprint Nextel Corp. said the two companies are negotiating to extend a network-sharing agreement beyond 2012.
Sprint slumped 7 percent to $2.51. The third-largest U.S. wireless carrier said it needs as much as $7 billion in new capital to pay for new handsets and a network upgrade after posting its 16th straight quarterly loss.
A gauge of companies that rely on consumer discretionary spending had the only decline in the S&P 500, falling 0.4 percent among 10 industry groups.
Amazon.com Inc. tumbled 13 percent, the biggest decline since 2008, to $198.40. Profit at the world’s largest Internet retailer plunged as it ramped up spending on new products. The company is sacrificing profit margins in search of sales volume and market-share gains. Amazon will sell its Kindle Fire tablet for as low as $199, less than half the price of Apple Inc.’s cheapest iPad.
Ford Motor Co. dropped 4.5 percent to $11.87. The company said its automotive operating profit margin may fall this year to 5.7 percent from 6.1 percent last year and 6.5 percent in the first nine months of the year, primarily because of a loss on commodity hedges.
--Editors: Jeff Sutherland, Michael P. Regan
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