Bloomberg News

Dow Average Rises to Highest Level Since May 2008 on Greek Talks

February 07, 2012

Feb. 7 (Bloomberg) -- U.S. stocks advanced, sending the Dow Jones Industrial Average to its highest level since May 2008, as Greece made progress on measures to secure international aid.

Seven out of 10 groups in the Standard & Poor’s 500 Index gained, helping the measure rebound from an earlier decline. McDonald’s Corp., the world’s biggest restaurant chain, added 1.4 percent ahead of its sales report. Yum! Brands Inc., owner of the KFC and Taco Bell fast-food chains, climbed 2.6 percent as earnings surged 30 percent. Anadarko Petroleum Corp., the biggest U.S. independent oil and natural-gas producer by market value, increased 5.2 percent as profit beat estimates.

The S&P 500 rose 0.2 percent to 1,347.05 at 4 p.m. New York time, wiping out an earlier decline of as much as 0.6 percent. The Dow advanced 33.07 points, or 0.3 percent, to 12,878.20.

“We need to see some real austerity from Greece," Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania, said in a telephone interview. His firm manages about $6.5 billion. ‘‘When we see that, we will have more confidence that Europe is serious about growth. I have confidence that we’ll get some sort of resolution that allows for additional funding.’’

Greek Prime Minister Lucas Papademos postponed a meeting with heads of the political parties supporting his caretaker government a second time in as many days as the government and international creditors haggled over terms to secure a second aid package. Papademos will meet with the leaders in Athens tomorrow, instead of tonight as previously scheduled, a spokeswoman for his office said. In the U.S., consumer borrowing rose more than forecast in December.

Earnings Season

Today’s gain put the S&P 500 about 1.2 percent away from its peak nine months ago, which would send it to the highest level since June 2008. The index rose 7.1 percent this year amid better-than-expected economic data and corporate profits. Earnings beat projections at 68 percent of the 280 companies in the S&P 500 that reported quarterly results since Jan. 9, according to data compiled by Bloomberg.

The S&P 500 Consumer Services Index had the biggest advance among 24 industries, rising 0.9 percent.

McDonald’s added 1.4 percent, the most in the Dow, to $100.91. It may say tomorrow that sales at global stores open at least 13 months gained 5.8 percent in January, according to the average estimate of six analysts surveyed by Bloomberg News.

Yum gained 2.6 percent to $64.85. The company, with about 18,800 restaurants outside the U.S., said fourth-quarter sales at stores open at least 12 months grew 21 percent in China. Yum said it opened a record 656 stores last year in the Asian nation, where it gets more than 40 percent of its revenue.

Coca-Cola

Coca-Cola Co. advanced 0.8 percent to $68.55. The largest soft-drink maker reported fourth-quarter profit that topped analysts’ estimates as teas and juices boosted sales in Asia.

Anadarko climbed 5.2 percent to $87.21. Output rose 12 percent to the equivalent of 683,000 barrels of oil a day during the last three months of 2011, The Woodlands, Texas-based company said. Sales volumes climbed to 63 million barrels at an average price of $104.82 a barrel of oil and condensate, more than the $98 estimate from Raymond James & Associates Inc.

Cliffs Natural Resources Inc. rose 0.7 percent to $75.51. The iron-ore producer yesterday sold for 6.4 times its cash from operations, after deducting capital expenses, according to data compiled by Bloomberg. That was less than every other metals or mining company in the U.S. or Canada exceeding $5 billion in market value, and a 70 percent discount to the median.

Takeover Target

With Glencore International Plc and Xstrata Plc agreeing to merge to create a $90 billion global mining company, Cliffs may attract interest from BHP Billiton Ltd. or Rio Tinto Group, Lutetia Capital said. An acquirer could pay a 30 percent premium and still get Cliffs for less than any comparable publicly traded mining company versus its free cash flow, the data show.

‘‘There could be more vertical integration” after Glencore and Xstrata, Mark Keller, chief executive officer of Confluence Investment Management in St. Louis, which manages $1 billion including shares of Cliffs, said in a telephone interview. As a result, “the first-rate mid-sized companies like Cliffs I think potentially become takeover targets,” he said.

Becton Dickinson & Co. slipped 3.8 percent to $77.51. The maker of medical devices and supplies cut its forecast for 2012 to no more than $5.70 a share, below an earlier projection of as much as $5.85 and the average analyst estimate of $5.80.

Walgreen Co., the largest U.S. drugstore chain, slumped 2.4 percent to $33.46. Citigroup cut its recommendation for the shares to “sell” from “neutral.”

Bull Market

A potential retreat in U.S. stocks will set the stage for the S&P 500 to approach 1,370, the level where the current bull market ran out of steam last year, according to analysts who study charts to predict market moves.

The S&P 500 had gained for five weeks through Feb. 3, the longest streak in a year, sending its 14-day relative strength index, which measures the degree that gains and losses outpace each other, to the highest level since February 2011, according to data compiled by Bloomberg.

“We need to pause, rest, consolidate in order to stay healthy,” Carter Worth, New York-based chief market technician at Oppenheimer & Co., wrote in a note yesterday. “Any such consolidation would cure the market from a tad unhealthy right back to very healthy, and would be the perfect ‘setup’ for a breakout-type move to new 52-week highs.”

--With assistance from Lu Wang, Charles Mead and Courtney Dentch in New York and Leslie Patton in Chicago. 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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