By Whitney Kisling
Dec. 8 (Bloomberg) -- Stocks rose around the world, sending the Dow Jones Industrial Average to a one-month high, as President-elect Barack Obama pledged to boost the economy with the biggest public-works spending package since the 1950s.
The Standard & Poor’s 500 Index extended its gain from an 11-year low last month to 21 percent. U.S. Steel Corp. and Alcoa Inc. climbed at least 17 percent, while Chevron Corp. added 4.9 percent, as Obama’s plan to improve infrastructure triggered gains in commodities. General Motors Corp. jumped 21 percent as lawmakers agreed in principle with the White House to provide funds to shore up the car industry.
“Hopefully it helps get the economy turned around, jumpstarting private spending with public spending,” said Bill Stone, who helps oversee about $56 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “That’s the whole point of this is to try to get that jumpstart going.”
The S&P 500 surged 3.8 percent to 909.7, with all 10 industry groups advancing. The Dow added 298.76 points, or 3.5 percent, to 8,934.18 and earlier rose above 9,000 for the first time in a month. The Nasdaq Composite Index increased 4.1 percent to 1,571.74. Five stocks gained for each that fell on the New York Stock Exchange.
The S&P 500 has climbed in nine of the 11 trading sessions since Nov. 20, in part on speculation the Federal Reserve will cut interest rates and Congress will step up efforts to boost the economy. The benchmark index is still down 38 percent in 2008 after the collapse of the subprime mortgage market reduced average profits for five straight quarters.
‘Mad Bull’
All 10 industry groups in the S&P 500 have risen at least 9.2 percent since the U.S. benchmark sank to its 11-year low on Nov. 20. Financial stocks led the rally, climbing 46 percent collectively, followed by consumer discretionary and telephone companies.
Today’s gains put a technical end to the 13-month bear market that began after the S&P 500 reached a record close of 1,565.15 in October 2007. An advance of more than 20 percent from a low is the standard definition of a bull market.
“If it’s a bull it’s a mad bull, a very confused bull,” said John Carey, a Boston-based fund manager at Pioneer Investment Management, which oversees about $200 billion. “People are looking at the ruins of the stock market and saying there’s awfully cheap stocks. That’s different from strong conviction prices are moving in an upward direction because of improving fundamentals.”
The S&P 500 Financials Index is still down 53 percent this year, as credit-related losses and writedowns at banks and financial firms climbed to $981.2 billion worldwide amid the worst economic slump since the Great Depression.
‘Dramatic Action’
Obama said Dec. 6 he will boost investment in roads, bridges and public buildings to create or preserve 2.5 million jobs after companies cut payrolls at the fastest pace in 34 years last month.
“There’s an awareness now that this is across the board,” Laszlo Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut, told Bloomberg Television. “A Band-Aid here and a Band-Aid there is not going to form a solution. You’ve got to really take some dramatic action, and I think that’s what investors are responding to today.”
U.S. Steel Corp. helped lead gains among raw material producers in the S&P 500 with a 24 percent advance to $35.79, its biggest gain in at least 17 years. The second-largest U.S. steelmaker was raised to “conviction buy” by Goldman Sachs Group Inc. analysts, who predicted steel prices are on the verge of rebounding after supply cuts outpaced the global collapse in demand.
Commodities Rally
Olympic Steel Inc. gained 25 percent to $19.02 after Goldman raised it to “buy” from “neutral.” AK Steel Holding Corp., the fourth-largest U.S. steelmaker, added 26 percent to $8.99.
Alcoa Inc., the largest U.S. aluminum maker, jumped $1.43 to $9.58. Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, added 19 percent to $20.01.
Raw materials producers in the S&P 500 climbed 7.7 percent as a group for the biggest advance among 10 industries.
Commodity prices rebounded from last week’s losses on speculation Obama’s spending on roads, bridges and school repairs will boost demand. Copper rallied more than 9 percent, while crude climbed 7.1 percent to $43.71 a barrel.
Exxon Mobil Corp., the world’s largest oil company, climbed 3.9 percent to $79.60. Chevron, the second-biggest, increased $3.67 to $78.09.
Chesapeake Energy Corp. surged 24 percent to $14.08 for the steepest gain since April 1999. The second-biggest independent U.S. natural-gas producer said it will cut spending and plans to build cash resources because of a plunge in energy prices.
Construction, Automakers
Construction-equipment makers rallied, with Caterpillar Inc., the world’s largest maker of backhoes and excavators, adding 11 percent to $42.42. Manitowoc Co., the construction- crane maker based in the Wisconsin city of the same name, rose 18 percent to $8.80.
GM, the largest U.S. automaker, rallied the most in the Dow average, adding 85 cents to $4.93. Ford Motor Co., the second- biggest, surged 24 percent to $3.38.
Congress and the Bush administration are close to agreeing on the details of a $15 billion, short-term rescue plan for the auto-industry that will probably be passed and signed into law this week, House Financial Services Committee Chairman Barney Frank said.
House Speaker Nancy Pelosi also dropped her opposition to drawing on $25 billion in funds from the Energy Department intended to help carmakers develop more fuel-efficient vehicles, according to a Democratic aide who declined to be identified.
Merger Speculation
NYSE Euronext jumped 23 percent to $26.21. Deutsche Boerse AG said it explored a merger offer for the world’s biggest owner of stock exchanges. The talks “ended without any conclusion,” Deutsche Boerse said.
NASDAQ OMX Group Inc. increased 9.1 percent to $25.47. The FTSE/Mondo Visione Exchanges Index, which tracks 17 of the world’s publicly traded exchanges, rose 14 percent.
JPMorgan Chase & Co. gained 9.4 percent to $36.49 after it was raised to “buy” from “neutral” by Ladenburg Thalmann Inc. analyst Dick Bove, who said the bank’s acquisition of Washington Mutual Inc. should contribute “meaningfully” to earnings.
End to ‘Hysteria’
“Additionally, the hysteria surrounding the banking industry is likely to come to an end in 2009 as these companies continue to report earnings,” Bove wrote in a note.
Bank of America Corp. rallied 17 percent to $17.84, while Citigroup Inc. added 9.9 percent to $8.47. The S&P 500 Financials Index advanced 6.9 percent.
Sun Microsystems Inc. climbed after agreeing to let its biggest shareholder pick two new independent directors, giving Southeastern Asset Management Inc. more authority to guide a restructuring. Sun, the server maker that has lost 79 percent of its value this year, rallied 9.7 percent to $3.83.
3M Co. posted the biggest decline in the Dow average after the maker of products from Post-it Notes to electronic road signs said it may need to cut more jobs next year, after eliminating 2,300 this quarter. 3M slipped 4.1 percent to $57.38.
Obama’s plan to boost the economy with a “substantial” infrastructure stimulus package triggered a global rally, with the MSCI World Index jumping 5.5 percent.
Global Rally
Benchmark indexes in Germany and France added 7.6 percent and 8.7 percent respectively, while Tokyo’s Nikkei 225 climbed 5.2 percent.
Siemens AG, Europe’s largest engineering company, jumped 10 percent to 49.40 euros. Hochtief AG, Germany’s biggest builder, added 16 percent to 30.94 euros. Royal Dutch Shell Plc, Europe’s biggest energy producer, advanced 8.3 percent to 1,691 pence in London.
Komatsu Ltd., the world’s No. 2 maker of construction machinery, rose 11 percent to 1,007 yen. India’s biggest mortgage lender, Housing Development Finance Corp., added 5.7 percent to 1,511.95 rupees.
Stocks had fallen so far this year that 2,267 companies around the globe offered profits to investors for free as of the open of trading today. That’s eight times as many as at the end of the last bear market, when the shares rose 115 percent over the next year.
Bank of New York Mellon Corp., Danieli SpA in Buttrio, Italy, and Seoul-based Namyang Dairy Products Co. held more cash than the value of their stock and debt as the slowing world economy wiped out $32 trillion in capitalization this year. Companies in the MSCI World Index traded for an average $1.17 per dollar of net assets, the lowest since at least 1995, and 39 percent sold at a discount to shareholder equity as of the open, data compiled by Bloomberg show.
To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.
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