By Lynn Thomasson
Nov. 10 (Bloomberg) -- U.S. stocks rose for a second day as the government expanded its rescue of American International Group Inc. and China unveiled a $586 billion economic stimulus plan.
AIG jumped 22 percent after the government boosted the insurer's bailout to $150 billion following its fourth straight quarterly loss. Caterpillar Inc. climbed as much as 6.3 percent and Freeport-McMoRan Copper & Gold Inc. added 8 percent as China's plan eased concern that construction spending will slow in the world's fastest-growing major economy. McDonald's Corp., the largest restaurant chain, added as much as 4.7 percent after its dollar menu lifted October sales above analysts' estimates.
The Standard & Poor's 500 Index gained 1.3 percent to 943.31 at 10:10 a.m. in New York. The Dow Jones Industrial Average added 137.16, or 1.5 percent, to 9,080.97. The Nasdaq Composite Index rose 0.6 percent to 1,657.35. About two stocks advanced for each that fell on the New York Stock Exchange.
``The market is probably bottoming right around here,'' said Thomas Nyheim, a Greenville, Delaware-based fund manager for Christiana Bank & Trust Co., which oversees $4 billion. ``There's a lot of money coming into the system and eventually it has to start working. The government is taking a much more proactive role.''
The gains in the U.S. extended a global rally that sent Europe's Dow Jones Stoxx 600 Index up 1.3 percent and the MSCI Asia Pacific Index to a 3.3 percent gain. The S&P 500, which has rebounded 11 percent from a five-year closing low on Oct. 27, is still down more than 35 percent this year after the financial crisis caused the economy to contract in two of the last four quarters.
China Package
China's stimulus package, equivalent to almost a fifth of the country's gross domestic product last year, will be used by the end of 2010, the Beijing-based State Council said yesterday.
China's plan came as the Group of 20 nations urged central banks to cut interest rates to support global growth.
``The announcement from China suggests there's a great deal of stimulus coming,'' Alan Gayle, the Richmond, Virginia-based senior strategist at Ridgeworth Investments, which oversees about $70 billion, told Bloomberg Television. ``There's a good chance we're going to see further stimulus here in the U.S.''
Caterpillar, Freeport
Caterpillar, the world's largest maker of bulldozers and excavators, increased $1.48 to $39.93 and gained as much as $2.43. General Electric Co., which gets about 44 percent of its revenue from energy and technology infrastructure businesses, climbed 1.7 percent to $19.19.
Freeport-McMoRan, the largest publicly traded copper producer, jumped $2.06 to $29.13. Exxon Mobil Corp., the world's biggest oil company, advanced $1.43 to $75.38.
Crude oil climbed more than $3 a barrel and metals rose after the announcement by China, the world's largest user of the metal and second-largest oil consumer.
China accounted for 27 percent of global economic growth last year, more than any other nation, according to the International Monetary Fund.
AIG surged 47 cents to $2.58. The U.S. will reduce the original $85 billion loan that saved AIG in September to $60 billion, buy $40 billion of preferred shares, and purchase $52.5 billion of mortgage securities owned or backed by the company, according to the Federal Reserve. The insurer lost $24.5 billion, or $9.05 a share, in the period ended Sept. 30, compared with profit of $3.09 billion, or $1.19, a year earlier, AIG said.
Citigroup Inc. increased as much as 3.9 percent and JPMorgan Chase & Co. added as much as 1.9 percent.
Fed Bets
Futures on the Chicago Board of Trade showed a 72 percent chance the Federal Reserve will cut its 1 percent target rate for overnight lending between banks in half at its Dec. 16 meeting, compared with 54 percent odds a week ago.
The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars dropped to the lowest level in four years. The rate slid almost 6 basis points to 2.24 percent today, the lowest level since Nov. 5, 2004, according to British Bankers' Association data. It was the 21st consecutive decline. The overnight rate rose 2 basis points to 0.35 percent, still 65 basis points below the Federal Reserve's target rate.
Double Cheeseburgers
McDonald's added $1.64 to $57.11 and climbed as high as $58.10. Global sales at restaurants open at least 13 months climbed 8.2 percent, paced by Europe's gain of 9.8 percent compared with a year earlier. U.S. same-store sales increased 5.3 percent, the company said, as consumers pinched by rising food bills and unemployment bought double cheeseburgers and other $1 items.
General Motors Corp. fell 26 percent to $3.23 after the biggest U.S. automaker was cut to ``underweight'' from ``equal- weight'' at Barclays Capital, which predicted the shares may tumble to $1.
NRG Energy Inc. slid 2.5 percent to $23.27. The second- largest power producer in Texas rejected an unsolicited $6.1 billion takeover offer from Exelon Corp., citing a recent downgrade of the largest U.S. utility owner's credit rating.
Circuit City Stores Inc. trading was halted on the NYSE after the company filed for Chapter 11 bankruptcy amid rising competition from Best Buy Co., Wal-Mart Stores Inc. and online electronics retailers. The retailer, with 721 stores in the U.S., plunged 97 percent this year to less than $1 a share.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
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