U.S. Stocks Gain as Oil Retreats; General Motors, Yahoo Advance

By Eric Martin

July 7 (Bloomberg) -- U.S. stocks rose for a second day as a $4-a-barrel drop in oil boosted the outlook for profit growth and a five-week retreat left the Standard & Poor's 500 Index at the cheapest relative to earnings since April.

General Motors Corp., the largest U.S. automaker, posted its steepest gain since May after crude slid and the Wall Street Journal said the company is considering cutting jobs and dropping some brands. Yahoo! Inc. rallied the most since February after Microsoft Corp. said it may renew takeover talks if investor Carl Icahn succeeds in replacing Yahoo's board. General Electric Co. advanced after its NBC Universal unit agreed to buy the Weather Channel with two buyout firms.



The S&P 500 added 5.25 points, or 0.4 percent, to 1,268.15 at 10:17 a.m. in New York. The Dow Jones Industrial Average increased 64.24, or 0.6 percent, to 11,352.78. The Nasdaq Composite Index rose 20.48, or 0.9 percent, to 2,265.86. More than three stocks climbed for every two that fell on the New York Stock Exchange.

``If the threat of catastrophes starts to leave the marketplace, people can start once again to look at fundamentals,'' Alan Kral, who helps manage more than $700 million at Trevor Stewart Burton and Jacobsen in New York, said in an interview with Bloomberg Radio. ``We're looking for a growing stability in the marketplace.''

The S&P 500, which last week completed the longest streak of weekly declines in four years, was valued at 20.84 times earnings before the start of trading, the lowest since April 11, according to Bloomberg data. Stocks climbed in Europe and Asia following a rout that left global equities at the cheapest valuations in at least 13 years.

General Motors

General Motors added 49 cents, or 4.8 percent, to $10.61. GM said Hummer is the only one of its eight U.S. brands being formally reviewed for possible sale or shutdown as the automaker's domestic market share falls to an 83-year low. The Wall Street Journal said the automaker may cut white-collar jobs and is considering whether to drop some of its eight brands. GM spokesman Tony Cervone wouldn't comment on possible job cuts.

Crude oil dropped 3.2 percent to $140.62 a barrel in New York after Iran's foreign minister expressed confidence in talks with western governments on the country's nuclear program.

Discussions are ``in a new environment with a new approaching perspective,'' Foreign Minister Manouchehr Mottaki said in an interview with CNN yesterday, adding that ``new approaches'' are possible in Iran's relations with the U.S. Oil reached a record $145.85 on July 3 on speculation any attack on Iran may disrupt exports from OPEC's second-biggest producer.

Yahoo, Microsoft

Yahoo, operator of the most-visited U.S. Web site, jumped $2.26, or 11 percent, to $23.61. Microsoft said it may try to buy the search business or the whole company. Microsoft has been in talks over the past week with Icahn, who controls about 69 million Yahoo shares, or about 5 percent.

General Electric rose 30 cents to $27.21. NBC Universal and buyout firms Bain Capital LLC and Blackstone Group LP agreed to buy the Weather Channel from Landmark Communications Inc., adding a cable network that reaches 96 million households. With the purchase, General Electric's NBC can bolster the company's own NBC Weather Plus channel and Web site.

Broadcom Corp., the maker of chips for Nintendo Co.'s Wii video-game console, rallied $1.39 to $27.61 after the shares were raised to ``buy'' from ``hold'' at Piper Jaffray Cos.

Earnings Season

Alcoa Inc. is scheduled to report second-quarter results tomorrow after the close of U.S. trading, beginning an earnings season that will probably mark the longest streak of consecutive profit declines for S&P 500 companies since 2002. The world's third-largest aluminum producer may say profit dropped 19 percent to 66 cents a share, according to consensus estimates compiled by Bloomberg. Alcoa added 85 cents to $33.63.

Earnings for S&P 500 companies probably shrank for a fourth straight quarter, falling 11.2 percent, according to the average estimate of analysts surveyed by Bloomberg. GE, which in April posted its first quarterly earnings decline in five years, is expected to announce results on July 11. GE may say profit decreased 2.7 percent to less than 54 cents a share, according to analysts' estimates.

Merrill

Merrill Lynch & Co. added 29 cents to $31.41. The third- largest U.S. securities firm may sell part of its stake in New York-based money manager BlackRock Inc. and save more than $1 billion by cutting its dividend, Citigroup Inc. analyst Prashant Bhatia, who has a ``buy'' rating on the stock, wrote in a note to clients. Merrill may also sell its 20 percent passive stake in Bloomberg LP, parent of Bloomberg News, to a blind trust run by Michael Bloomberg, the New York Post reported July 4, citing unidentified people.

APP Pharmaceuticals Inc. jumped $5.71, or 32 percent, to $23.53. Fresenius SE, Europe's biggest maker of intravenous drugs, agreed to buy the company for as much as $4.6 billion to enter the faster-growing U.S. market for generic injectable medicines used in hospitals. Fresenius agreed to pay $23 a share in cash for APP, 29 percent more than APP's closing price on July 3.

Teva Pharmaceutical Industries Ltd. fell $2.93 to $44.27 after test results may make it easier for rivals to sell copies of its top-selling Copaxone medicine.

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.