U.S. Stocks Gain on Prospects of Obama Economic Stimulus Plan

By Whitney Kisling

Dec. 18 (Bloomberg) -- U.S. stocks advanced, rebounding from yesterday’s declines, on prospects that President-elect Barack Obama and Treasury Secretary Henry Paulson will step up efforts to prevent the recession from deepening.

Citigroup Inc. and Bank of America Corp. rose more than 2 percent after an adviser said Obama may ask Congress to approve a stimulus plan of around $850 billion and people familiar with the deliberations said Paulson may push for the second half of a $700 billion bank rescue program. General Growth Properties Inc., the second-largest U.S. shopping mall owner, rallied 18 percent after receiving an extension on a loan repayment.

The Standard & Poor’s 500 Index rose 0.1 percent to 905.37 at 9:34 a.m. in New York. The Dow Jones Industrial Average added 32.66, or 0.4 percent, to 8,857. The Russell 2000 Index of small U.S. companies increased less than 0.1 percent.

“It’s the massive monetary and fiscal stimulus that will push us out of the mess we’re in,” Bob Doll, who oversees $1.3 trillion as chief investment officer of global equities at BlackRock Inc. in Plainsboro, New Jersey, told Bloomberg Television. He predicted a “double-digit” advance in U.S. stocks in 2009.

The S&P 500 has fallen 38 percent in 2008, poised for its biggest annual drop since 1937, as credit losses and writedowns at the world’s largest banks surpassed $1 trillion amid a yearlong U.S. recession. Reports today may show the economic outlook dimmed and manufacturing in the Philadelphia region contracted, according to economists surveyed by Bloomberg.

Europe, Asia

European stocks retreated as lower forecasts from ASML Holding NV and Carrefour SA offset speculation that Obama’s plan will boost the global economy.

The MSCI Asia Pacific Index advanced to a six-week high, led by financial companies, on speculation lower interest rates will help revive economic growth.

Obama may ask Congress next year to approve a stimulus plan of around $850 billion, an amount that has grown as the U.S. economy sinks deeper into recession, an adviser to the president-elect said. Obama’s transition team believes that the amount is necessary to reverse rising unemployment, said the adviser, who spoke on condition of anonymity.

Paulson could soon exhaust the first $350 billion with the bailout that President George W. Bush’s administration has pledged for General Motors Corp. and Chrysler LLC. The Treasury chief is discussing with aides strategies to seek congressional approval for the rest of the Troubled Asset Relief Program, people familiar with the deliberations said.

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