U.S. Stocks Advance as Lehman, FedEx, Exxon Mobil Shares Rally

By Elizabeth Stanton

Sept. 10 (Bloomberg) -- U.S. stocks advanced after Lehman Brothers Holdings Inc. said it will shore up capital by selling assets, FedEx Corp. beat profit estimates and energy shares rallied with oil.

Lehman advanced 4.9 percent, rebounding from yesterday's record plunge, on plans to sell a majority stake in its asset- management unit, spin off commercial real estate and slash its annual dividend 93 percent. FedEx climbed 2 percent as the largest air-parcel shipper said lower fuel costs drove quarterly profit above projections. Exxon Mobil Corp. climbed 2.2 percent, leading energy stocks to the biggest advance among 10 Standard & Poor's 500 Index industries, as crude added $1.14 a barrel.

The S&P 500 advanced 12.40, or 1 percent, to 1,236.9i1 at 9:58 a.m. in New York. The Dow Jones Industrial Average added 31.02 to 11,261.75, and the Nasdaq Composite Index rose 15.26 to 2,225.07. Almost four stocks climbed for each that dropped on the New York Stock Exchange.

``The market should take strong reassurance from Lehman's announcement today and that they're objective on what they have to do and they have a plan to do it,'' said Bruce Bent, who manages about $130 billion in assets as chairman of The Reserve Funds in New York. ``The best way to keep it together is to be as candid and conservative as you can possibly be.''

$500 Billion in Losses

The S&P 500 is down 16 percent this year as slowing economic growth and more than $500 billion in credit losses and asset writedowns at the world's largest banks damped the outlook for earnings. Analysts expect profits at companies in the measure to fall 1.7 percent on average in the third quarter and slip 2.1 percent in 2008, according to estimates compiled by Bloomberg.

Stocks tumbled yesterday as concern about Lehman's ability to raise capital rattled the banking industry and a drop in oil prices pushed energy companies down by the most in six years.

Lehman added 38 cents to $8.17. The company said it aims to complete the asset-management sale in an auction, without naming potential bidders. The real-estate spinoff is expected to be completed in the first fiscal quarter of 2009, according to a statement today. Its loss of $3.9 billion was 77 percent more than analysts estimated on average.

``Just having the information is helpful for the market, as bad as it is,'' said Walter Todd, portfolio manager at Greenwood Capital, which manages $750 million in Greenwood, South Carolina. Todd worked at Lehman as a real-estate investment banker from 1999 to 2002. ``Absent the news, the market was going to assume the worst.''

FedEx, Texas Instruments

FedEx added $1.66 to $86.41. Earnings were $1.23 a share for the period ended Aug. 31, eclipsing the outlook of 80 cents to $1, FedEx said yesterday. Analysts expected 95 cents, according to the average of 12 estimates compiled by Bloomberg.

Texas Instruments Inc. added 2 percent to $22.14 after the chipmaker maintained its sales projection despite slower mobile- phone demand. Third-quarter revenue will be between $3.33 billion and $3.47 billion, the Dallas-based company said yesterday. The midpoint, $3.4 billion, matched a previous forecast and the average estimate of analysts in a Bloomberg survey.

``There was some decent news with FedEx upping guidance and Texas Instruments looked pretty good,'' said Ed Laux, head of U.S. trading at Cantor Fitzgerald & Co. in New York. ``FedEx is important because it deals with Main Street issues away from the Wall Street issues. It's one data point that if people are shipping more there's good economic activity.''

Output Quotas

Exxon increased $1.64 to $74.90, driving the S&P 500 Energy Index to a 3.3 percent advance. Chevron Corp. added 2.7 percent to $80.94. Crude oil futures gained 1.1 percent to $104.40 a barrel in New York after OPEC urged its members to comply with output quotas, a move that would reduce supplies by 500,000 barrels a day.

American International Group Inc., the largest U.S. insurer, rose 1.9 percent to $18.71 after falling 19 percent yesterday on concern it will join Lehman in facing obstacles to raising new funds. The company can sell units and scale back insurance underwriting to boost capital, and is ``not similar'' to Lehman, Citigroup Inc. analyst Joshua Shanker wrote in a report.

Salesforce.com Inc., the biggest seller of Internet-based customer-management software, added 6.4 percent to $55.43. Fastenal Co., the largest U.S. retailer of nuts and bolts, gained 3.5 percent to $54. They were picked to replace Fannie Mae and Freddie Mac in the S&P 500.

GFI Group Inc. fell 21 percent to $7.60. Tullett Prebon Plc, the second-biggest broker of transactions between banks, and GFI, the largest interdealer broker of credit derivatives trades, ended merger discussions after failing to reach an agreement on terms.

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