U.S. Stock Futures Rise as Obama Pledges Spending; GE, GM Gain

By Daniela Silberstein

Dec. 8 (Bloomberg) -- U.S. stock futures rallied after President-elect Barack Obama pledged the largest infrastructure- spending package since the 1950s to stimulate economic growth and lawmakers worked to reach an agreement on automaker aid.

Citigroup Inc. and General Electric Co. rose more than 3.1 percent after Obama said he’s planning the biggest spending package since President Dwight D. Eisenhower created the interstate highway system. General Motors Corp. and Ford Motor Co. jumped more than 16 percent after U.S. lawmakers agreed in principle with the Bush administration on providing funds to prevent the collapse of GM and Chrysler LLC.

Futures on the Standard & Poor’s 500 Index expiring in December surged 3.5 percent to 903.3 at 8:50 a.m. in New York. Dow Jones Industrial Average futures added 2.8 percent to 8,856 and Nasdaq-100 Index futures increased 2.8 percent to 1,210.5.

“Obama’s announcement had very good timing and we’ll see euphoria today,” said Claudio Meiger, who manages about $100 million at Basel, Switzerland-based Bank CIC Schweiz AG. “Financials and industrials will be the big winners. The U.S. auto industry will be rescued as it is too big to fail.”

The S&P 500 has climbed 16 percent from an 11-year low Nov. 20 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 40 percent in 2008 after the collapse of the subprime mortgage market reduced profits.

Cash, Market Value

Stocks have fallen so far that 2,267 companies around the globe are offering profits to investors for free. 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. in New York, Danieli SpA in Buttrio, Italy, and Seoul-based Namyang Dairy Products Co. hold 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 trade for an average $1.17 per dollar of net assets, the lowest since at least 1995, and 39 percent sell at a discount to shareholder equity, data compiled by Bloomberg show.

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.

Citigroup, the second-largest U.S. bank by assets, added 6.6 percent to $8.22. GE, the world’s biggest maker of power- generation equipment, climbed 3.2 percent to $18.42.

GM, Ford

GM, the largest U.S. automaker, rallied almost 17 percent to $4.77. Ford, the second-biggest, surged 16 percent to $3.15. U.S. lawmakers are working to hammer out details of legislation to bail out ailing auto companies, after reaching an agreement in principle with the Bush administration.

The legislation is taking shape after House Speaker Nancy Pelosi dropped her opposition to drawing on $25 billion in funds from the Energy Department intended to help automakers develop more fuel-efficient vehicles, according to a Democratic aide who declined to be identified.

Exxon Mobil Corp., the world’s largest oil company, climbed 3 percent to $78.88. Chevron Corp. the fourth-biggest, increased 2.5 percent to $76.30.

Crude for January delivery rose as much as 8.2 percent to $44.16 a barrel as OPEC’s president said the group may make a “significant” output reduction to halt the more than 70 percent decline in prices since the July record.

Commodity prices rebounded from last week’s losses on speculation Obama’s spending on roads, bridges and school repairs will boost demand. Copper futures rose as much as 8.1 percent in London.

Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, added 11 percent to $18.70. Alcoa Inc., the biggest U.S. aluminum company, rose 8 percent to $8.80.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.