Bloomberg News

U.S. Stocks Erase Losses on Foreclosure Aid, Greece Swap Talks

January 29, 2012

Jan. 27 (Bloomberg) -- U.S. stocks erased losses as banks rallied after the Obama administration said it will relax rules on a loan-modification program and optimism grew that Greece will reach a debt-restructuring agreement with bondholders.

Wells Fargo & Co. and Regions Financial Corp. added at least 2 percent, pacing gains among banks. Ford Motor Co. slumped 3.6 percent as profit missed estimates on overseas challenges. Chevron Corp., the second-largest U.S. energy company, slid 2.2 percent after reporting its biggest earnings decline in two years. T. Rowe Price Group Inc., the asset manager that has posted a profit every quarter since going public in 1986, dropped 1.8 percent as earnings fell.

The Standard & Poor’s 500 Index advanced 0.1 percent to 1,319.35 as of 3:45 p.m. New York time, after earlier declining as much as 0.5 percent. The Dow Jones Industrial Average retreated 43.67 points, or 0.3 percent, to 12,690.96 today.

The revised Home Affordable Modification Program, or HAMP, would pay Fannie Mae and Freddie Mac to forgive debt on homes that have lost value. The government-owned companies so far have refused to reduce principal, citing cost. Greek Finance Minister Evangelos Venizelos said the government was “one step away” from completing talks on a voluntary debt swap and was negotiating with international creditors on the terms for a second financing package at the same time.

A gauge of banks rallied 1.2 percent, the biggest gain in the S&P 500 among 24 industries. Wells Fargo added 2 percent to $29.62. Regions Financial rose 2.3 percent to $5.29.

Economic Data

The rally in banks helped the market overcome earlier losses triggered by lower-than-forecast growth in the U.S. economy. Gross domestic product, the value of all goods and services produced, climbed at a 2.8 percent annual rate following a 1.8 percent gain in the prior quarter. The median forecast of 79 economists surveyed by Bloomberg News called for a 3 percent increase. Growth excluding a jump in inventories was 0.8 percent.

Benchmark gauges rose earlier this week as Federal Reserve officials said they were concerned about the economy’s lack of vigor two years after the recession ended, prompting a pledge to keep interest rates low at least until late 2014. The Fed also didn’t rule out bond purchases to bolster the economy.

“Having the world’s economic locomotive showing signs of strain is adding to investors concern worldwide,” Jack Ablin, who helps oversee $55 billion as chief investment officer for Chicago-based Harris Private Bank, said in a telephone interview. “The GDP report creates doubt about how solid the recovery is. It’s a very difficult environment to assess.”

Earnings Season

The S&P 500 has risen 4.8 percent this year through yesterday, poised for the best January since it gained 6.1 percent during the first month of 1997, according to data compiled by Bloomberg. Of the 169 S&P 500 companies that reported results since Jan. 9, 112 posted per-share earnings that beat projections, according to data compiled by Bloomberg.

Solar shares gained as chief executive officers from Suntech Power Holdings Co. and Trina Solar Ltd. said China may double its installations of solar panels this year, absorbing excess production that depressed prices and margins in 2011. Suntech added 6.8 percent to $3.46. Trina rose 7.4 percent to $8.68. First Solar Inc. climbed 12 percent to $45.73 for the biggest gain in the S&P 500.

Newell Rubbermaid Inc. gained 8 percent to $18.83. The maker of Sharpie pens and Graco car strollers reported fourth- quarter earnings of 40 cents a share, excluding some items, beating the average analyst estimate of 38 cents.

M&A Deal

Eastman Chemical Co. rallied 6.4 percent to $50.12 after agreeing to buy Solutia Inc. for about $4.7 billion, including debt, to drive expansion into higher-margin specialty plastics and chemicals. Solutia surged 40 percent to $27.36.

The S&P 500 Automobiles & Components Index dropped 2.1 percent, the most among 24 industries. Ford slumped 3.6 percent to $12.28. In the fourth quarter, the Dearborn, Michigan-based automaker was hamstrung by a weakening European market and flooding in Thailand that wiped out profits in its Asian operations, Chief Financial Officer Lewis Booth said today.

Chevron slid 2.2 percent to $104.28. Chief Executive Officer John Watson has been selling oil refineries and filling stations in Europe and Africa to focus on higher-profit crude production and gas-liquefaction projects.

T. Rowe Price retreated 1.8 percent to $59.93. Net income decreased 1.7 percent to $188.4 million, or 73 cents a share, from $191.6 million, or 72 cents, a year earlier, the Baltimore- based company said today in a statement. Earnings per share increased as the number of outstanding shares fell 2.7 percent. The average estimate of 12 analysts surveyed by Bloomberg was for profit of 69 cents a share.

--Editors: Jeff Sutherland, 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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