Bloomberg News

U.S. Stocks Advance Amid Optimism About Global Manufacturing

February 02, 2012

Feb. 1 (Bloomberg) -- U.S. stocks advanced, snapping a four-day decline in the Standard & Poor’s 500 Index, amid signs that manufacturing across the world is strengthening.

Financial and industrial shares in the S&P 500 rose at least 1.1 percent to lead gains among 10 groups. Morgan Stanley and Bank of America Corp. added more than 3.2 percent. Whirlpool Corp. surged 13 percent as the appliance maker projected earnings that beat forecasts. Technology companies in the benchmark index rallied to an 11 year-high. Broadcom Corp. jumped 8.1 percent as it forecast sales that may top estimates.

The S&P 500 increased 0.9 percent to 1,324.09 at 4 p.m. New York time, following the biggest January advance in 15 years. The Dow Jones Industrial Average rallied 83.55 points, or 0.7 percent, to 12,716.46, trimming an earlier 152-point gain that sent it above its highest close since May. The Russell 2000 Index of small companies jumped 2.1 percent to 809.66.

“The manufacturing is looking pretty good,” Allan Flader, a senior vice president at RBC Wealth Management, said in a telephone interview from Phoenix. His firm oversees $227 billion. “It shows that there’s not a contraction going on and that we’re progressing and moving forward.”

Equities rallied after data showing manufacturing in the U.S. grew at the fastest pace in seven months. Factory indexes in China improved and a U.K. manufacturing gauge jumped to an eight-month high. In Germany, output grew for the first time since September. Manufacturing contracted less than initially estimated in the euro region. A spokesman said Greece expects to complete talks on a private sector debt swap and a second international financing deal for the country in the next days.

‘Still Growing’

“The news on the economy is better,” David Sowerby, a Bloomfield Hills, Michigan-based portfolio manager at Loomis Sayles & Co., which oversees $150 billion, said in a telephone interview. “The uncertainty in Europe has diminished. While corporate profits have been less robust, they are still growing. That’s what’s moving stock prices higher.”

The S&P 500 rose 4.4 percent for the best January since it gained 6.1 percent in 1997, according to data compiled by Bloomberg. Earnings beat projections at 67 percent of the 209 companies in the S&P 500 that reported quarterly results since Jan. 9, the data show. Profits probably grew 4.6 percent in the fourth quarter, according to a Bloomberg survey of analysts. The projection has fallen from 6.2 percent at the end of last year.

The Morgan Stanley Cyclical Index of companies most-tied to the economy rallied 1.6 percent. A gauge of homebuilders in S&P indexes jumped 3 percent. Construction spending increased 1.5 percent in December, the biggest gain since August, Commerce Department figures showed today.

Banks Rally

The KBW Bank Index rose 1.7 percent as 23 of its 24 stocks gained. Morgan Stanley climbed 4 percent to $19.39. Bank of America added 3.2 percent, the most in the Dow, to $7.36. Citigroup Inc. advanced 2.9 percent to $31.60.

Facebook Inc., the social-networking website that began about eight years ago in a Harvard University dorm, filed to raise $5 billion in an initial public offering. The $5 billion amount is a placeholder used to calculate fees and may change. The company hired Morgan Stanley, JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America, Barclays Plc and Allen & Co. to manage the IPO. The announcement came after the close of regular trading.

Whirlpool surged 13 percent to $61.64 after also reporting a 20 percent gain in fourth-quarter profit. Cost reductions and price increases “positively impacted” the results last quarter, the company said today in a statement.

Technology Shares

A measure of technology shares in the S&P 500 gained 0.9 percent as some of the industry’s largest companies rallied. Microsoft Corp., the largest software maker, advanced 1.2 percent to $29.89. Hewlett-Packard Co. increased 2.8 percent to $28.76. The Philadelphia Semiconductor Index rose 2.4 percent.

Broadcom jumped 8.1 percent to $37.13. The company is benefiting from demand for radio chips that help Apple Inc.’s smartphones and tablets connect over Wi-Fi and Bluetooth signals. Apple’s phone sales more than doubled to 37 million in the quarter.

Casino companies gained after revenue in Macau, the world’s largest gambling hub, rose 35 percent in January. MGM Resorts International climbed 5 percent to $13.70. Las Vegas Sands Corp. increased 2.2 percent to $50.18.

AOL Inc. soared 9.6 percent to $17.76. Profit exceeded analysts’ estimates as display advertising sales gained for the fourth straight period.

Amazon.com Inc. tumbled 7.7 percent, the most in the S&P 500, to $179.46. Sales missed estimates, signaling that its investments in media services, Kindle devices and shipping promotions have been slow to pay off.

‘Near-Monopoly’

NYSE Euronext slid 0.5 percent to $26.43. European Union regulators vetoed the plan by Deutsche Boerse AG and NYSE Euronext to create the world’s biggest exchange after concluding that the merger would have led to a “near-monopoly” in European exchange-traded derivatives.

Strategists at the biggest banks are capitulating on their bearish forecasts after the best start to a year for global stocks since 1994.

Just two weeks after saying that investors should “remain cautious,” Larry Hatheway, the chief economist at UBS AG, raised his recommendations on global shares and high-yield bonds in a Jan. 23 note to customers entitled, “Wrong, but not too late.” Royal Bank of Scotland Group Plc, and Benoit Anne, the global head of emerging-markets strategy at Societe Generale SA, said their estimates for developing nations were proven wrong.

The MSCI All-Country World Index climbed 5.7 percent in January, surprising strategists at Bank of America Corp., Goldman Sachs Group Inc. and Barclays Plc who had forecast first-half losses because of Europe’s debt crisis.

“In hindsight, everybody was so beared up at the end of last year,” Mary Ann Bartels, the New York-based head of technical and market analysis at Bank of America, who predicted on Dec. 27 that the S&P 500 would probably fall about 15 percent in the first half before recovering, said in a Jan. 31 phone interview. “There was nowhere for the market to go but up.”

--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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