U.S. stocks rose, as the Standard & Poor’s 500 Index (SPX) rebounded from its biggest weekly drop in four months, after American retail sales and Citigroup Inc. (C:US)’s earnings topped estimates.
Citigroup (C) soared 5.5 percent, the most since March, as results were helped by a surge in bond-trading revenue. Texas Instruments Inc. (TXN:US) rose 3.5 percent on a report Amazon.com Inc. (AMZN:US) may buy its mobile chip unit. PulteGroup Inc. (PHM:US) and KB Home jumped more than 4.9 percent as homebuilders rallied. Apple Inc. (AAPL) added 0.8 percent after falling as much as 0.9 percent earlier.
The S&P 500 (SPX) climbed 0.8 percent to 1,440.13 at 4 p.m. in New York. The Dow Jones Industrial Average (INDU) rose 95.38 points, or 0.7 percent, to 13,424.23. About 5.9 billion shares traded hands on U.S. exchanges, 2 percent below the three-month average.
“The retail sales report looked a little bit better than expected,” Dan Veru, who oversees $3.5 billion as chief investment officer at Palisade Capital Management LLC in Fort Lee, New Jersey, said in a phone interview. “The big question regarding earnings is whether expectations have come down enough so that companies can beat guidance.”
U.S. stocks rose as the Commerce Department said retail sales climbed 1.1 in September following a revised 1.2 percent increase in August that was the biggest since October 2010 and larger than previously reported. The median forecast of 77 economists surveyed by Bloomberg called for a 0.8 percent rise. A separate report showed manufacturing in the New York region contracted for a third straight month in October as shipments and employment declined.
The Bloomberg Economic Surprise Index, which compares 38 indicators with analysts’ predictions, jumped to 0.02 today from minus 0.06 on Oct. 12. The index, based on gauges compiled by private businesses and trade groups in addition to government, turned positive for the first time since May.
The S&P 500 sank 2.2 percent last week, the biggest retreat since June 1, as the International Monetary Fund reduced its global growth forecasts and earnings projections from Alcoa Inc. and AMD disappointed investors. The benchmark index has rallied 15 percent this year as the Fed announced a third round of bond purchases and companies posted better-than-expected earnings in the first half of 2012.
Some 84 companies in the S&P 500 release results this week, according to data compiled by Bloomberg. Of the 38 companies in the benchmark index that have reported since Oct. 9, 27 posted earnings that exceeded analyst estimates, according to data compiled by Bloomberg.
Citigroup jumped 5.5 percent to $36.66 today. Chief Executive Officer Vikram Pandit, 55, is cutting jobs and shedding unwanted assets, including a 49 percent stake in Smith Barney, as he seeks to return capital to shareholders and comply with new regulations on buffers against losses. Revenue from fixed-income trading surged 63 percent excluding accounting adjustments after tumbling last year during the European sovereign-debt crisis.
Texas Instruments, the largest maker of analog chips, jumped 3.5 percent to $28.22. Amazon.com is seeking to provide processors for smartphones and tablets by buying Texas Instruments’ mobile chip unit, Calcalist reported without saying where it got the information.
Advanced Micro Devices Inc. (AMD:US) added 0.4 percent to $2.75 after a person familiar with the matter said the second-largest maker of processors for personal computers plans to cut as many as 2,340 jobs, or about 20 percent of its workforce. Third- quarter sales will decline about 10 percent from the prior period, a bigger drop than previously forecast, the company said on Oct. 11.
Investors bought shares of companies most tied to economic growth. The Morgan Stanley Cyclical Index (CYC), containing 30 U.S. stocks, gained 1.1 percent, while an S&P gauge of homebuilders rallied 3.6 percent as all of its 11 members advanced. PulteGroup soared 5.1 percent to $16.40. KB Home (KBH:US) jumped 4.9 percent to $15.32.
Apple, the world’s most valuable company, gained 0.8 percent to $634.76. Shares of the iPhone maker have fallen 9.6 percent from an all-time high of $702.10 on Sept. 19, driving the stock below its average price in the past 50 days for the first time since July. The shares are still up 57 percent this year.
Sprint Nextel Corp. (S:US) lost 0.7 percent to $5.69, while phone stocks erased 0.6 percent for the only decline among 10 groups in the S&P 500. Softbank Corp. agreed to buy a 70 percent stake in Sprint as Japan’s third-biggest mobile-phone operator seeks growth overseas amid a declining local market.
AT&T Inc. (T:US), the largest U.S. phone carrier, retreated 1.2 percent to $35.21 for the biggest decline in the Dow. MetroPCS Communications Inc. (PCS:US), which Sprint has considered buying, fell the most in the S&P 500, dropping 4.6 percent to $11.33.
Hasbro Inc. (HAS:US) fell 3.9 percent to $37.75. The world’s second- largest toymaker was downgraded to sell from neutral at Goldman Sachs Group Inc.
Consol Energy Inc. (CNX:US) decreased 2.2 percent to $34.36. The largest U.S. coal producer by market value announced an unexpected third-quarter net loss after idling mines in response to lower demand.
“The upcoming U.S. election and resolution of the fiscal cliff pose a significant risk for equities,” Marko Kolanovic, global head of derivatives and quantitative strategy at JPMorgan & Chase Co., wrote in a report today. “Higher taxes could negatively impact all equities with a proportionally larger impact on specific groups such as high-dividend yielding stocks.”
The so-called fiscal cliff refers to the $600 billion of tax increases and spending cuts that will kick in automatically in 2013 unless Congress fails to break a partisan deadlock and reach agreement on the nation’s budget deficit.
Republican presidential nominee Mitt Romney and President Barack Obama will hold their second debate at 9 p.m. tomorrow at Hofstra University in Hempstead, New York. It will be a town hall format, which will allow audience questions on a full range of issues.
“In the U.S., the continuous threat to raise taxes has led to unprecedented levels of public policy uncertainty, dampening economic activity,” Barry Knapp, head of U.S. equity strategy at Barclays Plc’s securities unit, wrote in a note to clients today. “If the small business sector believes pro-growth tax reform and entitlement restructuring will keep the tax issue off the table, then the cyclical recovery becomes more probable.”
The S&P 500 has gained 16 percent on average in election years when a Republican wins and an equal amount when the incumbent remains in the White House, according to Credit Suisse Group AG.
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