U.S. Stocks Rise on Rate Cuts; Bank of New York, Intel Gain

By Lynn Thomasson

Oct. 8 (Bloomberg) -- U.S. stocks rose for the first time in six days as a coordinated cut in interest rates by six central banks bolstered expectations the economy will recover from the worst financial crisis since the Great Depression.

Bank of New York Mellon Corp., Occidental Petroleum Corp. and Intel Corp. climbed more than 3 percent after the Federal Reserve joined its European counterparts in lowering benchmark rates by half a percentage point.

The Standard & Poor's 500 Index added 20.64 points, or 2.1 percent, to 1,016.87 at 9:52 a.m. in New York. The Dow Jones Industrial Average added 162.32, or 1.7 percent, to 9,609.43. The Nasdaq Composite Index increased 29.57, or 1.7 percent, to 1,784.45. Eleven stocks rose for every 10 that fell on the New York Stock Exchange.

The S&P 500 snapped its longest losing streak since January. The gauge's 15 percent slide from Sept. 30 through yesterday was its third-steepest five-day losing streak on record, according to Bespoke Investment Group LLC, a Harrison, New York-based research firm. The bigger declines from five straight losses occurred in 1932.

Rate Cuts

The Fed, European Central Bank and four other central banks lowered interest rates in an unprecedented, emergency coordinated bid to ease the economic effects of the financial crisis. The Fed cut its benchmark rate by a half point to 1.5 percent and said the ECB and central banks of the U.K., Canada, Sweden and Switzerland are also reducing borrowing costs.

Bank of America Corp. dropped $1.93 to $21.84. The bank that's buying Merrill Lynch & Co. sold 455 million shares for $22 each, 8 percent less than yesterday's closing price of $23.77. The shares fell 26 percent in New York Stock Exchange composite trading Oct. 7, the biggest drop in at least 28 years, after the bank slashed its dividend in half.

The world's major banks may need $675 billion in fresh capital over the next several years to recover from a credit crisis that shows few signs of abating, the International Monetary Fund said yesterday.

Today is the last day of a U.S. Securities and Exchange Commission rule banning short sales in more than 980 financial companies. Since it was announced Sept. 18, companies covered by the rule are down an average of 16 percent, according to data compiled by Bloomberg.

Earnings at S&P 500 companies probably dropped on average of 5.6 percent in the third quarter, according to analysts' estimates compiled by Bloomberg.

Financial companies are forecast to lead the decline in profits with a 64 percent decrease, followed by an 11 percent slide in earnings at retailers, hoteliers, restaurant chains and other so-called consumer discretionary companies.

At the open of exchanges today, the S&P 500 had tumbled 36 percent from its record a year ago, leaving it valued at 19 times the earnings of its companies. Europe's Dow Jones Stoxx 600 Index, which has lost 35 percent this year, was valued at 10 times the reported earnings of its companies as of yesterday, the cheapest since Bloomberg began compiling the data in January 2002. The MSCI World Index was valued at 12.4 times profit yesterday, the cheapest since at least 1995.

To contact the reporter for this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.