U.S. Stocks Advance as Technology Shares Rise; GM, Energy Fall

By Whitney Kisling

Dec. 12 (Bloomberg) -- U.S. stocks advanced as speculation the government will boost spending on technology overshadowed concern a bailout of carmakers won’t bring the nation out of a recession, spurring a 3.3 percent rebound by the Standard & Poor’s 500 Index from the day’s low.

Intel Corp. and Micron Technology Inc. rose more than 5.2 percent after Nancy Pelosi said the House is likely to act next month on an economic-stimulus measure that would boost computer expenditures. General Growth Properties Inc. surged 25 percent, leading a real-estate rally, after refinancing debt to stave off bankruptcy. General Motors Corp. and energy stocks fell.

The S&P 500 increased 0.7 percent to 879.73 after falling as much as 2.6 percent. The index swung between gains and losses at least 30 times and jumped more than 1 percent in the final four minutes of trading. The Dow Jones Industrial Average climbed 64.59 points, or 0.8 percent, to 8,629.68. The VIX, a measure of how much investors are paying for protection from stock declines, slipped 2.7 percent to 54.28, the lowest since Nov. 4.

“The market is hovering, waiting for some kind of catalyst to get it going,” said Thomas Nyheim, a Greenville, Delaware- based fund manager for Christiana Bank & Trust Co., which oversees $4 billion. “We can see valuations are attractive, but I think the next real catalyst will be a major stimulus package and that’s not until the first quarter of next year.”

The Senate’s rejection last night of $14 billion in emergency loans to GM and Chrysler LLC spurred a global rout in equities that sent Europe’s Dow Jones Stoxx 600 Index down 2.7 percent and the MSCI Asia Pacific Index to a 4.2 percent slide.

Rebound, Resume Slide

GM and Ford Motor Co. rebounded, driving the U.S. stock market higher, after the White House said it might finance an industry rescue with funds set aside for banks. GM later resumed its slide. Technology shares gained the most among 10 industries in the S&P 500 after Pelosi said the House will act next month on as much as $600 billion in spending to fund improvements in broadband internet technology and making environmentally friendly improvements to the nation’s electric-power grid.

Intel, the world’s biggest computer chipmaker, added 5.3 percent to $14.75. Micron, the largest U.S. memory-chip maker, rose 12 percent to $2.07. They helped drive technology companies in the S&P 500 to a 2.4 percent advance.

General Growth jumped 25 percent to $1.80. The second- largest U.S. mall owner refinanced $814 million of mortgage loans and retired a $58 million bond. Real-estate companies in the S&P 500 rose 8.7 percent collectively, the most among 24 industries.

GM Drops

CB Richard Ellis Group Inc. gained 21 percent to $4.08. Developers Diversified Realty Corp. rallied 13 percent to $5.69.

GM fell 4.4 percent to $3.94 in its fourth straight day of declines. It lost as much as 37 percent earlier. Ford added 4.8 percent to $3.04.

Implied volatility, the key gauge of options prices and a measure of how much investors are paying for insurance against stock declines, surged for GM, the nation’s biggest automaker. The figure for at-the-money contracts expiring in 30 days rose 4.4 percent to 293.4, highest among S&P 500 companies behind XL Capital Ltd.

Neither the Treasury nor the White House’s statements today indicated whether the funds from the Troubled Asset Relief Program would come with terms or concessions. Treasury Secretary Henry Paulson, who until today had resisted using the bank bailout money on carmakers, had repeatedly insisted that any injection of funds must include a plan ensuring “viability” for the companies.

FDIC-Backed Notes

JPMorgan Chase & Co. climbed 3.3 percent to $30.94. The largest U.S. bank by assets raised $250 million in a sale of additional notes backed by the Federal Deposit Insurance Corp., according to data compiled by Bloomberg.

Wachovia Corp. rallied 5.4 percent to $5.29, while Wells Fargo & Co. gained 3.2 percent to $26.72. Financials had the second-steepest gain among 10 S&P industries, adding 2.1 percent.

Energy shares in the S&P 500 slumped 0.9 percent as crude oil lost 3.3 percent to $46.40 a barrel in New York. Goldman Sachs Group Inc. cut its first-quarter forecast for the price of oil by half to $30. Occidental Petroleum, the fourth-largest U.S. energy company, slid 4.7 percent to $55.12.

The VIX, as the Chicago Board of Options Exchange Volatility Index is known, has fallen 33 percent since rising to 80.86, the highest in its 18-year history, on Nov. 20.

The S&P is poised for a 40 percent loss this year, the steepest annual slump since 1931, as writedowns and credit losses neared $1 trillion amid the worsening financial crisis.

More Declines?

New York University Professor Nouriel Roubini, who predicted the global financial crisis, said shares will keep falling.

“I’m still quite bearish on U.S. and global equities,” he said in an interview with Bloomberg Television. “They’ve fallen a lot, but they might surprise on the downside. U.S. and global equities could be 15-to-20 percent lower before they start to recover toward the end of next year.”

Earlier declines in the market today also came after FBI agents arrested Bernard Madoff, a former chairman of the Nasdaq Stock Market. Madoff allegedly confessed that he defrauded investors of $50 billion by running his firm, Bernard L. Madoff Investment Securities LLC, like a “giant Ponzi scheme” and “paid investors with money that wasn’t there.”

“His market making operations are big, his investor base was widespread and the fraud will destroy confidence in some areas of money management,” Peter Boockvar, a New York-based equity strategist at Miller Tabak & Co., wrote in an e-mail to clients.

To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net.