Bloomberg News

U.S. Stocks Rise on Italy Optimism as Retail Sales Top Estimates

November 15, 2011

Nov. 15 (Bloomberg) -- U.S. stocks rose, rebounding from earlier losses, on speculation Italian Prime Minister designate Mario Monti will succeed in forming a new government to battle the debt crisis and after growth in retail sales beat estimates.

Technology and industrial shares had the biggest gains among 10 groups in the Standard & Poor’s 500 Index, rising at least 0.5 percent. Intel Corp. spurred a rally in semiconductor companies, climbing 2.9 percent, after Warren Buffett’s Berkshire Hathaway Inc. said it invested in the world’s largest chipmaker. Wal-Mart Stores Inc. slumped 2.4 percent as profit at the world’s biggest retailer trailed analysts’ forecasts.

The S&P 500 gained 0.5 percent to 1,257.81 at 4 p.m. New York time, rebounding from a loss of 0.6 percent. The Dow Jones Industrial Average advanced 17.18 points, or 0.1 percent, to 12,096.16. About 6.3 billion shares changed hands on U.S. exchanges, 24 percent below the three-month average.

“It was good to hear about retail sales,” Randy Bateman, chief investment officer of Huntington Asset Management in Columbus, Ohio, said in a telephone interview. His firm oversees $14.5 billion. “People are getting tired of hearing about Europe. They are trying to resolve their issues. With Mario, Italy has an economist. Europe will muddle through.”

Equities recovered as Monti, an economist and former adviser to Goldman Sachs Group Inc., said he’s “convinced” that the country can overcome the current crisis as he prepares to meet with President Giorgio Napolitano tomorrow to present his new government. Stocks had fallen earlier after Spainn’s borrowing costs rose at an auction. Italian 10-year yields topped 7 percent and rates on French, Belgian, Spanish and Austrian debt rose to euro-era records above German bunds.

Retail Sales

Benchmark gauges also rose after the U.S. Commerce Department reported a 0.5 percent increase in retail sales, compared with the median economist forecast that called for 0.3 percent growth. The Federal Reserve Bank of New York’s general economic index showed growth for the first time since May. Goldman Sachs Chief Executive Officer Lloyd Blankfein said the economy will rebound “faster than people think.”

“When the market isn’t focused on Europe, it will focus on stronger U.S. data,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, said in an e- mail. His firm oversees $550 billion. “Retail sales are starting the quarter stronger than anyone would have estimated back in August at the depth of the recession fears.”

The Morgan Stanley Cyclical Index added 0.4 percent, after slumping 1.1 percent earlier, on speculation about an economic rebound. The Dow Jones Transportation Average rose 0.8 percent.

Technology Rally

Technology shares in the S&P 500 rose 1.3 percent. Intel gained 2.9 percent to $25.34. Apple Inc., the world’s biggest technology company by market value, added 2.5 percent to $388.83. Dell Inc. advanced 2 percent to $15.63 before reporting quarterly results after U.S. exchanges closed. The shares slumped 1.8 percent to $15.35 after the close of regular trading at 4:27 p.m. as revenue missed estimates.

Computer and software makers may extend gains after a gauge of the industry surged to the highest ratio versus the S&P 500 in more than nine years, according to Brown Brothers Harriman & Co.

The level of the Technology Select Sector SPDR Fund, an exchange-traded fund that tracks companies including Apple and International Business Machines Corp., divided by the SPDR S&P 500 ETF Trust was 0.2128 on Oct. 17, the highest since January 2002, data compiled by Bloomberg show. The figure fell to 0.2069 as of yesterday.

Enough Momentum

The advance by the technology fund suggests the industry may have enough momentum to rise further, said Ari Wald, a New York-based technical strategist at Brown Brothers. Technology shares posted the second-best performance after utilities among the S&P 500’s 10 groups, losing 0.8 percent, over the past six months. The broader benchmark index fell 6.4 percent.

“We broke out to the upside recently, showing relatively strong demand,” Wald said in a telephone interview yesterday. “That’s a pretty good sign, especially that it’s able to post relative gains during this period of market volatility.”

The KBW Bank Index of 24 stocks rose 0.5 percent after falling as much as 1.2 percent earlier today.

Bank of America Corp. climbed 1.3 percent to $6.13. The second-largest U.S. bank by assets is ahead of schedule on plans to bolster its balance sheet and meet new international standards, Chief Executive Officer Brian T. Moynihan said today at a conference. Separately, the lender said net credit card write-offs and delinquencies declined in October from September.

Wal-Mart Slumps

Wal-Mart lost 2.4 percent to $57.46. It didn’t pass higher prices charged by suppliers along to customers struggling with persistent unemployment, Bill Simon, Wal-Mart’s U.S. chief, said. That hurt gross profit margin, or the percentage of net sales left after subtracting the cost of goods sold, which shrank to 24.6 percent, narrower than the 24.8 percent estimate of Colin McGranahan at Sanford C. Bernstein & Co.

“The miss on weak gross margins was not expected, and that is new news,” McGranahan said in an e-mail. “The stock is down on the incremental news as more negative than expected.” He rates the shares “market perform.”

Energy shares had the only decline in the S&P 500 among 10 industries, falling 0.2 percent. Chevron Corp. slumped 2.7 percent, the most in the Dow, to $103.27. The company said it appears to have halted a leak at the Frade project offshore Brazil after plugging a well. It said it has seen a significant decrease in the amount of oil seeping from the development.

American Airlines parent AMR Corp. tumbled 10 percent to $1.92, the lowest price since March 2003, after trying to end a five-year stalemate with a contract proposal that offers pilots smaller pay increases than they had sought. The Allied Pilots Association said today it was reviewing the plan as its board began a three-day meeting, and declined to comment further. AMR urged the union to permit members to vote on the offer.

LinkedIn Corp. slumped 4.6 percent to $74.86 after saying shareholder Bain Capital Ventures will sell all of its 3.71 million shares of the professional-networking website in a secondary stock offering.

--With assistance from Paul Dobson in London and Lu Wang and Kaitlyn Kiernan in New York. Editors: Nick Baker, Michael P. Regan

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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


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