Bloomberg News

U.S. Stocks Rise on Holiday Sales, Optimism Over Europe Progress

November 29, 2011

Nov. 28 (Bloomberg) -- U.S. stocks rose, snapping a seven- day decline in the Standard & Poor’s 500 Index, after Thanksgiving retail sales climbed to a record amid speculation European leaders will boost efforts to end the debt crisis.

The S&P 500 advanced 2.9 percent to 1,192.69 at 4 p.m. New York time, according to preliminary closing data. The benchmark equity gauge fell 7.9 percent from Nov. 15 through Nov. 25, including the worst Thanksgiving-week drop since 1932.

“The market is reflecting that the U.S. retail sales were just colossal and some movement forward in Europe,” Tom Mangan, who helps oversee about $2.8 billion at James Investment Research Inc. in Xenia, Ohio, said in a telephone interview. “There’s a sense of urgency developing among European leaders as well as a recognition that the stakes are extremely high now,” he said. “The volatility is still with us to a major extent, we’re not out of the woods.”

The S&P 500 is trading for 10.95 times analysts’ forecast for earnings in 2012, compared with its five-decade average of 16.4 times reported profits, data compiled by Bloomberg show. Companies in the benchmark gauge for American common equity are projected to increase earnings 10 percent next year, extending a streak of gains to 13 quarters, the data show.

U.S. retail sales during the Thanksgiving weekend increased 16 percent to $52.4 billion, the National Retail Federation said, citing a survey conducted by BIGresearch. The average shopper spent $398.62, up from $365.34 a year earlier. Consumer spending, which accounts for about 70 percent of the economy, grew at a 2.3 percent annual rate in the third quarter, the fastest pace in 2011, the Commerce Department said Nov. 22.

New Home Sales

U.S. stocks maintained gains after a report showed fewer new homes were purchased in October than forecast. Sales increased 1.3 percent to a 307,000 annual pace, the Commerce Department reported today in Washington. The median estimate of economists surveyed by Bloomberg News projected a 315,000 rate.

“It’s a sea of green and nothing is being left behind in this rally,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. “Equity prices are being powered higher by the quite good Black Friday sales in the U.S. and reports that European officials are rallying around some form of political cohesion to solve the debt crisis.”

In Europe, German newspaper Welt am Sonntag reported German Chancellor Angela Merkel and French President Nicolas Sarkozy are discussing an agreement under which member states will commit to tighter budget discipline without waiting for treaty changes. The newspaper did not say where it got the information.

German Finance Minister Wolfgang Schaeuble called for fast- track treaty changes to tighten budget discipline among member states of the euro area. He spoke in an interview with ARD television in Berlin yesterday. The European Financial Stability Facility may insure the bonds of debt-stricken countries with guarantees of 20 percent to 30 percent of each issue, depending on market circumstances, according to EFSF guidelines that finance ministers will discuss this week.

Euro-area finance ministers meet in Brussels tomorrow as governments bid to regain the confidence of financial markets.

The increased severity of the debt crisis is threatening the credit standing of the region’s countries, Moody’s Investors Service said in a report today. More than $1.2 trillion has been erased from U.S. stocks since Nov. 15 on mounting concern that the crisis will spread and American policy makers failed to reach agreement on reducing the federal budget.

--With assistance from Julie Cruz in Frankfurt and Lynn Thomasson in Hong Kong. Editors: Jeff Sutherland, Michael P. 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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