U.S. Stocks Gain, S&P 500 Surges Most in Four Days Since 1933

By Elizabeth Stanton

Nov. 26 (Bloomberg) -- U.S. stocks gained, driving the Standard & Poor’s 500 Index to the steepest four-day surge since 1933, as a rally in oil prices lifted energy shares and investors speculated President-elect Barack Obama’s economic team will bolster growth.

Exxon Mobil Corp. and Chevron Corp., the biggest U.S. oil companies, were among the largest contributors to the advance as crude jumped 7.2 percent to trade above $50 a barrel for a third day. General Motors Corp., which will make its case for federal bailout funds after tomorrow’s Thanksgiving holiday, rallied 35 percent. The market overcame an early tumble spurred by government reports depicting a deepening recession.

The S&P 500 climbed 3.5 percent to 887.68 after falling as much as 1.9 percent. The index has now surged 18 percent since dropping to an 11-year low on Nov. 20. The Dow Jones Industrial Average increased 247.14 points, or 2.9 percent, to 8,726.61.

“The market has very bad economic data coming out, but layered onto that is renewed optimism from the Obama nominations that are being rolled out daily,” said Robert Lutts, president of Cabot Money Management in Boston, which oversees about $400 million. “Eternal hope is being poured into that vessel, that this team is going to rescue us.”

Benchmark indexes erased earlier declines after Obama picked former Federal Reserve Chairman Paul Volcker to head an economic advisory board and said he will implement a plan to bolster growth on “day one.” This week, Obama also named Fed Bank of New York chief Tim Geithner as Treasury secretary and former Harvard University President Lawrence Summers as White House economic director.

$800 Billion

The S&P 500 gained yesterday after the deepening recession prompting the Fed to commit as much as $800 billion to help resuscitate lending markets. The index has still tumbled 43 percent from its October 2007 record as credit-related losses and writedowns at global financial companies approached $1 trillion, threatening global economic growth.

Exxon rose 3.6 percent to $80.89 and contributed the most to the S&P 500’s gain. Chevron added 4.4 percent to $79.93.

GM, the nation’s largest automaker, jumped $1.25 to $4.81. Ford Motor Co., the second-biggest, rallied 30 percent to $2.15.

The two companies, which reported almost $30 billion in 2008 losses, and Chrysler LLC have cut jobs and production as U.S. sales this year appear headed toward the lowest in 17 years. The automakers have been lobbying the U.S. for $25 billion in aid after their cash burn accelerated. Lawmakers plan to consider a rescue of the industry after the Thanksgiving holiday.

Fluor, Target Gain

Fluor Corp. added 14 percent to $44.68. The largest publicly traded U.S. engineering firm was raised to “buy” from “hold” at Stanford Group, which cited the likelihood of infrastructure spending under Obama and the “notable competitive capabilities” of the company.

Target Corp. and Kohl’s Corp. led S&P 500 retailers to a 5.9 percent gain before the traditional start of the holiday shopping season on the day after Thanksgiving. Stores including Kohl’s and Macy’s Inc. offered discounts last week and this week, before what analysts project will be the weakest season in six years.

Target, the second-largest U.S. discount chain, climbed 9.8 percent to $35.13. Kohl’s, the fourth-biggest U.S. department- store company, gained 8.9 percent to $32.71. Macy’s Inc., the second-biggest, added 8.8 percent to $7.03.

J. Crew Group Inc. fell 2 percent to $10.83. The clothing retailer run by former Gap Inc. Chief Executive Officer Millard Drexler lowered its annual earnings forecast for the third time this year.

Mortgage Rates Fall

Lennar Corp. led homebuilders in the S&P 500 to a 14 percent advance, climbing 23 percent to $7.40. U.S. mortgage rates plunged by the most in at least seven years yesterday on the Fed’s plan to buy $600 billion of mortgage-related debt. The average rate for a 30-year fixed mortgage fell to about 5.5 percent last night after starting the day at 6.38 percent, according to an estimate from Bankrate Inc.

Cisco Systems Inc., the biggest maker of networking gear, and Intel Corp., the largest semiconductor producer, contributed most to a 4.2 percent gain by technology companies in the S&P 500. The group is trading at a price-to-earnings ratio under 13. Its valuation slid to 11.4 times reported profits last week, the cheapest since Bloomberg began tracking the data in 1995.

Cisco gained 6.3 percent to $16.39 and Intel added 6.4 percent to $13.97.

“No one can escape the gravity of what’s going on in the global economy -- it’s too powerful -- but we’re approaching the point where the worst is fully in the stocks,” said Matthew Kaufler, a money manager at Clover Capital Management Inc., which oversees $2.6 billion in Rochester, New York.

Bargaining Power

Nucor Corp. led gains in steelmakers amid speculation yesterday’s decision by BHP Billiton Ltd., the world’s biggest mining company, to scrap its $66 billion hostile takeover bid for Rio Tinto Group will strengthen the industry’s bargaining position for iron ore. Nucor, the largest U.S.-based producer, advanced 8.2 percent to $34.90.

Earlier declines in the stock market came after government reports showed orders for durable goods shrank 6.2 percent, twice as much as the median economist forecast, and consumer spending declined the most since 2001.

“There’s still a lot of stress and strain in the economy and the market as a whole that hasn’t been alleviated yet by the steps taken by the Fed and the Treasury,” said Michael Mullaney, a Boston-based money manager at Fiduciary Trust Co., which oversees $10 billion. “It’s going to take the fiscal stimulus coming from Obama in 2009 to hopefully get liftoff in the real economy. I don’t think we have any significant catalyst between now and then to really jumpstart the entire stock market.”

Takeover Unravels

Citigroup Inc. rose 16 percent to $7.05 for the second- biggest advance in the Dow average after General Motors. BCE Inc., the Canadian phone carrier that had planned to go private in a leveraged buyout, signaled the takeover may unravel because the debt load might force the company into insolvency. A collapse of the deal may allow Citigroup, Toronto-Dominion Bank and Deutsche Bank AG to avert potential writedowns from financing it.

Borders Group Inc. plunged 40 percent to $1. The second- largest U.S. bookseller said it’s no longer considering a sale of the company after posting a wider third-quarter loss.

Rambus Inc. climbed 31 percent to $9.10. The designer and licensor of memory chips won a pretrial ruling that other chipmakers infringed one element of a patent in a case scheduled for trial in January.

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