U.S. Stocks Rise, Led by Energy Shares on Rebound in Oil Prices

By Elizabeth Stanton

Oct. 23 (Bloomberg) -- U.S. stocks rose for the first time in three days as a rebound in oil from a 16-month low bolstered speculation that the global economic slump won't worsen.

Exxon Mobil Corp. and Chevron Corp. rallied more than 8 percent on expectations OPEC will trim output to stem a slide in crude prices. The Dow Jones Industrial Average recovered from a 276-point drop that sent it below its lowest close since April 2003 as Boeing Co. and AT&T Inc. climbed more than 6 percent. Amgen Inc., the world's largest biotechnology company, jumped 12 percent on profit that rose fivefold and an increased forecast.

The Standard & Poor's 500 Index rebounded from a 5 1/2-year low, gaining 11.33 points, or 1.3 percent, to 908.11. The Dow rose 172.04, or 2 percent, to 8,691.25. The Nasdaq Composite Index slipped 11.84, or 0.7 percent, to 1,603.91.

``There are whole segments of stocks moving in the same direction, if not the same magnitude, as oil,'' said Janna Sampson, co-chief investment officer at Oakbrook Investments LLC in Lisle, Illinois, which manages $1.2 billion. ``It's serving as a proxy for the health of the broader global economy.''

The earlier retreat in stocks was led by financial and consumer shares after home foreclosures surged to a record and the credit crisis hammered earnings at asset-management and real-estate companies.

The S&P 500 closed at the lowest level since April 2003 and oil futures touched the lowest since June 2007 yesterday on concern a deepening global economic slump will damp profits.

Emerging Markets Tumble

An index of emerging-market stocks slid 3.7 percent today and developing nations' borrowing costs neared a six-year high after S&P threatened to cut Russia's debt ratings as the global credit crisis deepened. Russian stocks tumbled to a three-year low.

Exxon Mobil, the largest oil company, added $5.82 to $70.39. Chevron, the second-biggest U.S. energy producer, advanced $5.03 to $66.77.

The S&P 500 Energy Index climbed 6.6 percent, rebounding from a 10 percent tumble yesterday. The group is trading for 6.5 times estimated earnings for the next 12 months, near the lowest valuation since Bloomberg began tracking the data.

Crude oil for December delivery rose 1.6 percent to settle at $67.84 a barrel at 2:42 p.m. on the New York Mercantile Exchange, then climbed to $69.20 in after-hours electronic trading. Prices are down 20 percent from a year ago.

`Still Need Energy'

``For a certain level of base economic activity, we still need to consume energy,'' said Erick Maronak, the New York-based chief investment officer at Victory Capital Management, which oversees $63 billion, including National Oilwell Varco. ``Everything has a clearing price, and we may be hitting that in the energy sector right now.''

National Oilwell Varco Inc., the biggest U.S. maker of oilfield equipment, climbed 9.4 percent to $26.78 after its profit increased 50 percent, topping analysts' estimates, as customers increased spending on rigs and supplies.

Dow Chemical Co., the largest U.S. chemical company, added 10 percent to $24.43 as earnings beat projections on higher prices for latex and plastics used in packaging.

Amgen gained $5.85 to $55.55 for the biggest advance in the S&P 500. The world's largest biotechnology company said third- quarter profit advanced as sales of anemia drugs increased. The company forecast full-year earnings of at least $4.45 a share, topping the average estimate of $4.37 by analysts in a Bloomberg survey.

Citrix Systems Inc. climbed 11 percent to $22.12. The maker of computer-networking software said, excluding some items, it expects to earn 43 cents a share in the fourth quarter. That beat the average analyst estimate by 16 percent.

Volatile Month

The S&P 500 has moved more than 1 percent on 14 of the 17 trading days this month, making it the most volatile by that measure since September 1932, according to S&P analyst Howard Silverblatt. Stock prices are gyrating as investors weigh government efforts to unlock credit markets with growing concern that the global economy is headed for a recession.

MGIC Investment Corp. slumped 35 percent to $2.71 for the biggest drop in the S&P 500. The company eliminated its dividend today after five quarters of losses. Fox-Pitt Kelton Cochran Caronia Waller cut its rating on the shares to ``in line'' from ``outperform'' on concern the company will forced to raise capital.

Goldman Sachs Group Inc. was the biggest drag on financials, falling 5.3 percent to $108.58. The New York-based securities firm that plans to convert into a bank may cut about 3,200 jobs, or 10 percent of its workforce, said a person briefed on the plans who declined to be identified.

Housing Slump

Pulte Homes Inc. retreated 18 percent to $8.11 and led a gauge of 15 homebuilders to a seven-year low after Chief Executive Officer Richard Dugas said the U.S. housing market worsened in the third quarter and urged the government to pass a tax credit for homebuyers to spark demand.

Banks and builders also retreated as a report showed home foreclosures climbed 71 percent in the third quarter. A total of 765,558 U.S. properties got a default notice, were warned of a pending auction or were foreclosed on in the quarter, RealtyTrac, an Irvine, California-based seller of default data said. Rick Sharga, executive vice president of marketing for RealtyTrac, said he wouldn't be surprised if foreclosures continue to increase.

Money Managers

An S&P index of money managers slid as much as 8.2 percent with 14 of 16 of its companies declining after two investment management firms reported lower earnings stemming from this year's stock-market rout. The group pared its drop to 1.2 percent in the afternoon as the market climbed higher.

Franklin Resources Inc., manager of the Franklin and Templeton mutual funds, tumbled 10 percent to $55.74 after fiscal fourth-quarter earnings fell 30 percent. Janus Capital Group Inc. lost 17 percent to $8.61 following a 49 percent decline in third-quarter earnings.

Losses stemming from the collapse of the U.S. subprime mortgage market have surpassed $650 billion globally, prompting the U.S. and at least 10 European countries to inject capital into their banking systems to resuscitate lending.

A key gauge of banks' willingness to lend, the London interbank offered rate for dollars, has declined over the past two weeks, indicating the measures are working to some degree. Three-month Libor held at 3.54 percent today, down from 4.82 percent on Oct. 10. During the six months through Sept. 15, the rate ranged from 2.54 percent to 2.92 percent.

Coca-Cola Enterprises Inc. fell 18 percent to $9. The world's largest soft-drink distributor lowered its profit forecast for the year after third-quarter sales of cold bottled drinks in North America fell. Coca-Cola Co., which owns 35 percent of Coca-Cola Enterprises, was the biggest drag on the Dow average, falling 5.1 percent to $43.06.

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