U.S. Stocks Gain a Third Week as Oil's Retreat Boosts Retailers

By Elizabeth Stanton

Aug. 16 (Bloomberg) -- U.S. stocks rose for the third straight week after oil's retreat and better-than-estimated results from J.C. Penney Co. and Kohl's Corp. lifted consumer shares.

J.C. Penney, Kohl's and Dillard's Inc. led a measure of retailers in the Standard & Poor's 500 Index to the highest level since June 5. The gauge gained 4.8 percent as crude oil slumped 1.2 percent to $113.77 a barrel in New York. The S&P 500's rally was limited after analysts cut profit estimates for banks and brokerage firms and lower fuel prices hurt energy producers.

The S&P 500 climbed 0.2 percent to 1,298.20, extending its rebound from a 2 1/2-year low on July 15 to 6.9 percent. The Dow Jones Industrial Average decreased 0.6 percent to 11,659.90.

``When we had oil in the $140's, the red lights were flashing,'' said Patrick Becker Jr., chief investment officer at Becker Capital Management in Portland, Oregon. ``The red lights stopped flashing.''

The S&P 500 is still down 12 percent this year, a retreat led by financial companies as losses stemming from the collapse of the U.S. housing market surpassed $500 billion. All 10 industries in the benchmark index for U.S. equities have fallen. Crude oil's 23 percent retreat since a July record of $147.27 a barrel has driven a four-week rebound in U.S. stocks.

Retailers in the S&P 500 added 1.8 percent as a group. J.C. Penney gained the most, rising 12 percent to $39.94, after the third-largest U.S. department-store chain reported more profit than analysts estimated. Kohl's, the No. 4 chain, climbed 11 percent to $51.79 as it beat forecasts by 5.1 percent. Dillard's climbed 10 percent to $11.95.

Home Improvement Retailers

Home Depot Inc. rose 4.4 percent to a two-month high of $27.53. Lowe's Cos., the second-largest home-improvement retailer behind Home Depot, added 7.6 percent to $24.50.

Home Depot and Hewlett-Packard Co., the biggest personal- computer maker, are scheduled to release second-quarter results on Aug. 19, the last of the 30 companies in the Dow average to do so. Lowe's reports on Aug. 18. Second-quarter profits at the 473 companies in the S&P 500 that have posted results were 24 percent lower than a year earlier, according to data compiled by Bloomberg. Excluding financials, whose profits tumbled 94 percent, earnings rose 4.2 percent.

Financial institutions in the S&P 500 fell 2.8 percent this week, the most among 10 industries. Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. retreated. Analysts including Oppenheimer & Co.'s Meredith Whitney and Deutsche Bank AG's Mike Mayo cut profit estimates and predicted more writedowns on mortgage-related bonds. Merrill Lynch & Co.'s Guy Moszkowski downgraded Goldman, Morgan Stanley and Lehman.

`Deteriorated Significantly'

Industry conditions ``have deteriorated significantly from July,'' Moszkowski wrote in an Aug. 13 report.

Goldman lost 7.3 percent to $163.18, Morgan Stanley slipped 9.2 percent to $40.88 and Lehman fell 13 percent to $16.17.

JPMorgan Chase & Co. retreated 7.3 percent to $38.07. The second-biggest U.S. bank said it's had losses of $1.5 billion on mortgage-backed assets so far this quarter as the housing slump deepened amid turmoil in credit markets. Trading conditions ``have substantially deteriorated'' since July, and ``sharply widened'' spreads on mortgage-backed securities and loans caused losses, JPMorgan said.

Energy companies in the S&P 500 fell 0.8 percent, giving the group a 20 percent retreat since the record set in May. Schlumberger Ltd., the world's biggest oilfield contractor, slumped 0.9 percent to a four-month low of $91.47. ConocoPhillips, the second-largest U.S. refiner, slid 4 percent to $77.66, the lowest since March 31. Exxon Mobil Corp., the biggest oil company, dropped 2.1 percent to $77.07.

Collateral Obligations

Constellation Energy Group Inc. fell 15 percent to $63.14 for the biggest decline in the S&P 500. The biggest U.S. power marketer increased its estimated collateral obligations should it lose its investment-grade credit rating.

The cost of using options as insurance against losses in the S&P 500 declined for a fifth straight week. The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell 5.2 percent to 19.58, the lowest since June 5.

MBIA Inc. rose the most in the S&P 500, climbing 31 percent to $11.22, the highest since May 6. The largest bond insurance company had its AA credit rating affirmed by Standard & Poor's, which ended its review of the company's capital levels. MBIA shares tumbled from a peak of $73.31 in December 2006 as it posted losses related to its guarantees of mortgage bonds and derivatives.

Ambac Financial Group Inc., the second-largest bond insurer, rose 31 percent to $5.68.

Stock Buyback

Nvidia Corp. rose 18 percent to $12.96 for the second- biggest advance in the S&P 500. The maker of computer-graphics chips Aug. 13 expanded its stock-buyback plan to cover almost half the shares outstanding.

General Motors Corp. climbed 11 percent to $11.18. The largest U.S. automaker, seeking to speed up a restructuring plan announced last month, said it may be able to reap more of the $10 billion in projected savings this year instead of in 2009.

Hansen Natural Corp. rose 23 percent to $28.63. Billionaire Nelson Peltz bought shares of the maker of Monster Energy drink in the second quarter, according to a filing with the Securities and Exchange Commission.

U.S. builders began work in July on the fewest houses in 17 years and the economic outlook dimmed, indicating the real- estate slump is at the epicenter of the growth slowdown, economists said before reports next week. Housing starts plunged 9.9 percent to an annual rate of 960,000, according to the median estimate in a Bloomberg News survey before the Commerce Department's Aug. 19 report. The Conference Board's index of leading indicators probably fell 0.2 percent last month, a third consecutive drop.

Yields on Treasury securities declined as traders pared bets the Federal Reserve will raise interest rates this year. The 10-year note's yield fell to 3.84 percent, the lowest in a month, from 3.93 percent.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net