U.S. Stocks Advance After JPMorgan Takes Steps to Ease Crisis

By Lynn Thomasson

Oct. 31 (Bloomberg) -- U.S. stocks rose, capping the biggest weekly gain since 1974, after JPMorgan Chase & Co. took steps to end the housing crisis, bank lending rates declined and earnings from companies outside the financial industry expanded four times faster than the previous quarter.

JPMorgan added 9.7 percent after saying it will modify terms on $110 billion of mortgages and delay foreclosures. Morgan Stanley climbed 8.6 percent after the cost of borrowing dollars for three months fell. Wynn Resorts Ltd., the biggest U.S. casino company, soared 30 percent after increased gambling in Macau boosted profit.

``It's nice to see more of a treat than a trick on the last day of October,'' said James Dunigan, who helps oversee $66 billion as managing executive of investments at PNC Wealth Management in Philadelphia. ``The sooner we can get to a place where housing has bottomed and put some fence around the mortgage problem, the sooner we'll be heading in the right direction.''

The Standard & Poor's 500 Index advanced 1.5 percent to 968.75, rallying on consecutive days for the first time in five weeks. The Dow Jones Industrial Average added 1.6 percent to 9,325.01. The MSCI World Index of 23 developed markets rose 0.6 percent.

The S&P 500's 10 percent increase this week wasn't enough to overcome losses from earlier this month caused by evidence of a worsening global slowdown and credit freeze. The U.S. stock benchmark index slid 17 percent in October, the most for a month since 1987.

$9.5 Trillion Lost

Eight out of 10 industries in the S&P 500 climbed today. Financial stocks led the advance after losing 49 percent this year. The group gained 12 percent this week, the most since JPMorgan bought Bear Stearns Cos. in March.

This month's sell-off erased more than $9.5 trillion from the value of stocks worldwide, almost one-third of the total value erased this year, as credit-related losses and writedowns by financial firms approached $700 billion. The S&P 500 has slumped 34 percent in 2008.

All but one of the 68 markets tracked by MSCI Inc. declined in October, with 37 losing at least 20 percent. Bulgaria, Peru and Argentina did the worst, plunging more than 36 percent. Pakistan gained less than 0.1 percent.

Before today, U.S. stocks failed to rise on consecutive days for five weeks, the longest period since 2001, as the most volatile trading since the 1930s sapped investor confidence.

Cash Infusion

JPMorgan, the largest U.S. bank by market value, gained 9.7 percent to $41.25. The lender, which two weeks ago accepted a $25 billion cash infusion from the government, said it will examine home loans and may agree to reduce interest rates or principal amounts. It will also open 24 centers to provide counseling in areas with high delinquency rates.

``We're actually getting to the meat and bones of the bailout package. Hopefully that will get the wheels of credit turning again,'' said Robert Stimpson, a money manager at Oak Associates Ltd. in Akron, Ohio, which oversees $900 million.

A measure of borrowing costs between banks dropped, capping the first monthly decline since May, after central banks provided cash and cut interest rates to unlock the supply of credit. The London interbank offered rate, or Libor, for three month loans in dollars slid 0.16 point to 3.03 percent, the 15th consecutive drop, according to the British Bankers' Association.

Morgan Stanley rose 8.6 percent to $17.47. American Express Co., the largest U.S. credit-card company by purchases, increased 5.5 percent to $27.50. Financial companies in the S&P 500 added 5.5 percent as a group.

`Hopeful'

The Federal Reserve Bank of New York said it's ``hopeful'' that one or more credit-default swap clearinghouses will begin guaranteeing trades in November or December as it pushes dealers to reduce market risks.

Express Scripts Inc., the third-largest manager of pharmacy benefits, added 5.3 percent to $60.61 after boosting its 2008 forecast to a range of $3.07 to $3.10 a share.

Medco Health Solutions Inc., the biggest U.S. manager of drug plans, rose 3.3 percent to $37.95, completing the steepest weekly advance since July.

Wynn Resorts, whose shares jumped 65 percent this week, climbed 30 percent to $60.40. Third-quarter profit rose 14 percent as more gambling in Macau made up for declines in Las Vegas, the company said. Revenue gained 18 percent to $769.2 million, beating the average estimate from analysts surveyed by Bloomberg.

S&P 500 companies, excluding financial institutions, reported a 13 percent increase in third-quarter profit, according to Bloomberg data. The more than 400 companies in the group grew earnings by 4 percent the previous quarter.

Burt's Bees

Clorox Co. rose 2.7 percent to $60.81. The maker of Glad trash bags and its namesake bleach reported profit and sales that rose more than analysts estimated, helped by purchases of Burt's Bees lotions and Green Works biodegradable cleaning products.

Monster Worldwide Inc. climbed for a fourth day, adding 11 percent to $14.24. The operator of the world's biggest online job-search Web site said third-quarter profit increased 28 percent as the company cut costs and squeezed more revenue from the slumping employment market.

General Motors Corp. dropped 4.6 percent to $5.79, the most in the Dow average. The nation's largest automaker told its U.S. dealers that the company was only halfway to its October goal for sales to consumers, with just one day left in the month.

American Electric Power Co., the biggest U.S. producer of electricity from coal, slid 1.7 percent to $32.63. Progress Energy Inc., the owner of utilities in three states in the U.S. Southeast, fell 3.7 percent to $39.37. Both companies said third- quarter profit fell as mild weather cut power demand for cooling.

Utility stocks in the S&P 500 slumped 1.6 percent, the most among 10 industries.

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