Bloomberg News

Most U.S. Stocks Advance on Employment Data, Rally Among Banks

January 09, 2012

Jan. 5 (Bloomberg) -- Most U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a third day, as a rally by banks and improving jobs data offset reduced profit forecasts at companies including Target Corp. and J.C. Penney Co.

Citigroup Inc. and JPMorgan Chase & Co. rallied at least 1.2 percent after Deutsche Bank AG saw “encouraging signs” for the industry’s fourth-quarter earnings. Bank of America Corp. soared 8.6 percent amid speculation that the Obama administration may introduce a nationwide loan refinancing program. Target and J.C. Penney lost more than 2.6 percent. Chevron Corp. slipped 1 percent as oil prices tumbled.

About three shares rose for every two that fell on U.S. exchanges as of 4 p.m. New York time. The S&P 500 climbed 0.3 percent to 1,281.06, after tumbling as much as 0.9 percent earlier. The Dow Jones Industrial Average dropped 2.72 points, or less than 0.1 percent, to 12,415.70 today.

“We’re starting to see better data in the U.S. as opposed to the obsession with Europe that we’ve seen all of last year,” Donald Selkin, the chief market strategist at National Securities Corp. in New York, said in a telephone interview. “People are seeing that our economy will definitely not fall into the recession. Now you can see that there’s a separation between what’s happening here, which is better, and Europe, which is still projected to go into recession.”

The S&P 500 closed at a two-month high yesterday and the Dow Jones Industrial Average reached its highest level since July after gaining during the first two trading sessions of the year on signs of manufacturing growth and improving sales at carmakers and retailers.

Banks Rally

Financial shares rose the most among 10 S&P 500 groups today, reversing earlier losses. The KBW Bank Index added 2.2 percent. JPMorgan increased 2.1 percent to $35.68, Citigroup added 1.2 percent to $28.51, while SunTrust Banks Inc. rallied 5.4 percent to $19.66.

Fourth-quarter earnings reports from the largest U.S. banks should include some “encouraging signs” including accelerating loan growth, higher mortgage revenues and improving credit, Deutsche Bank analyst Matt O’Connor said in a note to clients.

Bank of America soared 8.6 percent, the most in the Dow and the biggest advance since October, to $6.31. The shares tumbled 1.7 percent in after-market trading as an administration official with knowledge of the matter said the White House has no plans for a new mass mortgage refinancing program.

The Morgan Stanley Cyclical Index rose 0.4 percent, while the Dow Jones Transportation Average slipped 0.2 percent. Boeing Co. dropped 1.1 percent to $73.53. Walt Disney Co. jumped 1.7 percent to $39.50.

Retail Sales

Target and J.C. Penney tumbled as retailers announced mixed December same-store sales results. Gap Inc., Target and Kohl’s Corp. reported sales that trailed analysts’ estimates after mistiming promotions or running out of inventory during a projected record holiday shopping season.

J.C. Penney dropped 2.7 percent to $33.97. The retailer forecast fourth-quarter earnings of 65 cents to 70 cents a share, less than the average analyst estimate of $1.08 a share. Target lost 3 percent to $48.51. The second-largest U.S. discount retailer cut its fourth-quarter profit forecast to no more than $1.43 a share, below the average analyst estimate of $1.48, according to a Bloomberg survey.

Gap fell 3.2 percent to $18.27, while Kohl’s slipped 1.8 percent to $46.52.

Macy’s Inc. added 3.9 percent to $33.92. The Cincinnati- based retailer reported a 6.2 percent increase in same-store sales, topping the 4.6 percent estimate.

Earnings Season

Alcoa Inc. is scheduled to mark the unofficial start of the fourth-quarter earnings season on Jan. 9. Profit at S&P 500 companies rose 6.2 percent during the September-December period, according to analyst estimates compiled by Bloomberg, which would mark the slowest growth since the third quarter of 2009.

Stock futures pared early losses after ADP Employer Services said payrolls increased by 325,000 last month, topping the median economist forecast for growth of 178,000 jobs. Applications for jobless benefits decreased 15,000 in the week ended Dec. 31 to 372,000, Labor Department figures showed today. The median estimate of 38 economists in a Bloomberg News survey forecast 375,000 claims. The data comes before tomorrow’s payrolls report from the Labor Department.

“On the surface these are positive numbers ahead of tomorrow’s jobs report,” James Gaul, a money manager at Boston Advisors LLC in Boston, said in a telephone interview. His firm oversees about $2 billion. “The market is trying very hard to be constructive here,” he said. “Everything is still seen in the context of whether the austerity measures taken in Europe force a global recession that will impact U.S. businesses.”

French Debt

Global stocks fell earlier as France sold 7.96 billion euros ($10.2 billion) of debt, with borrowing costs rising in its first auction of the year. UniCredit SpA retreated for a second day after Italy’s biggest bank yesterday announced plans to hold a rights offer to boost capital. The lender is selling shares at a 43 percent discount because of a deepening in the debt crisis, Chief Executive Officer Federico Ghizzoni told Il Sole 24 Ore.

Monsanto Co. rose 5.5 percent to $76.68. The world’s largest seed company posted first-quarter earnings that exceeded estimates as Latin American farmers grew more genetically modified corn and said U.S. orders are ahead of last year.

LSI Corp. gained the second-most in the S&P 500, rallying 7.7 percent to $6.70. The maker of chips used in computer disk drives was raised to “outperform” from “neutral” at Wedbush Securities, which cited better-than-estimated hard drive disk shipments last quarter.

Energy Shares

Energy companies had the biggest drop as a group among 10 S&P 500 industries, losing 0.6 percent. Chevron slipped 1 percent to $109.10 as oil prices tumbled 1.4 percent.

Tesoro Corp. fell 5.9 percent to $22.60. The largest independent refiner on the U.S. West Coast said it lost 55 cents to 80 cents a share in the fourth quarter, missing analysts’ forecasts for a profit.

MetroPCS Communications Inc. sank 8.9 percent to $8.01 for the biggest drop in the S&P 500. The Texas-based pay-as-you-go wireless carrier said it added 197,000 net new users in the fourth quarter. Analysts predicted 223,000 on average.

Eli Lilly & Co. slumped 1 percent to $40.30. The maker of the antipsychotic Zyprexa provided a 2012 earnings forecast that missed analyst estimates.

Barnes & Noble Inc. tumbled 17 percent to $11.24. The largest U.S. bookstore said it will lose as much as $1.40 a share in fiscal 2012, after previously projecting a loss of a maximum of 50 cents a share. Sales of its Nook Simple Touch trailed its estimates during the holiday shopping season.

Beating Foreign Markets

U.S. stocks will return at least 10 percent in 2012, beating foreign markets for a third year, while Treasury yields climb, according to BlackRock Inc.’s Bob Doll. The S&P 500 may exceed 1,350 this year, he said at a BlackRock presentation in New York today. The stock index ended 2011 at 1,257.60.

Health-care and energy stocks will perform better than utilities and financials, he said. Doll expects dividends and stock buybacks to rise by 20 percent or more this year.

“If companies continue to deliver -- and there are a lot of reasons why they are -- stocks should continue to do well,” Doll said.

--With assistance from Mark Barton and Adam Haigh in London and Jeff Sutherland in New York. Editors: Jeff Sutherland, Michael P. Regan

To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net; Ksenia Galouchko in New York at kgalouchko1@bloomberg.net

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


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