U.S. Stocks Jump as Hartford Surges on Boosted Profit Forecast

By Elizabeth Stanton

Dec. 5 (Bloomberg) -- U.S. stocks jumped, reversing an early slide, as Hartford Financial Services Group Inc. led a rally in insurers after increasing its profit forecast and saying it’s weathering the credit crisis.

Hartford, which tumbled 92 percent in 2008 before today, doubled and all 21 insurance companies in the Standard & Poor’s 500 Index advanced. Prudential Financial Inc. and MetLife Inc. climbed at least 22 percent as UBS AG said they may benefit from potential regulatory changes. The gains helped the market overcome a morning tumble spurred by government data showing the nation lost the most jobs in 34 years last month as the recession deepened.

“The bad news is out; people know the economy’s lousy,” said Barry James, president of James Investment Research in Xenia, Ohio, which oversees $2 billion. “The market is so oversold that we’re entering into what I’d call a bear-market rally.”

The S&P 500 rose 3.7 percent to 876.07 after retreating 3.2 percent earlier. All 10 industry groups advanced as the benchmark index for U.S. stocks pared losses in its fourth weekly retreat since October. The Russell 2000 Index of small U.S. companies climbed 4.9 percent to 461.09. The Dow Jones Industrial Average added 259.18 points, or 3.1 percent, to 8,635.42.

Rebound Extended

The S&P 500 extended its rebound from an 11-year low on Nov. 20 to 16 percent, gains driven in part by speculation the Federal Reserve will cut interest rates and Congress will pass another economic stimulus. Still, the benchmark index for U.S. equities is down 40 percent in 2008, headed for its worst year since 1931, after the collapse of the subprime mortgage market reduced average profits for five consecutive quarters.

The S&P 500 trimmed its weekly loss to 2.3 percent, while the Dow fell 2.2 percent and the Nasdaq Composite decreased 1.7 percent in the week.

Hartford jumped a record 102 percent to $14.59 and pared its yearly loss to 73 percent. The insurer raised its full-year operating profit forecast and said the capital outlook at its insurance subsidiaries is “strong.” The company’s operating businesses are “performing well, particularly in light of the challenging markets,” Chief Executive Officer Ramani Ayer said.

Insurance Rally

The S&P 500 Financials Index added 8.6 percent for the steepest advance among 10 industry groups, as insurance companies climbed 14 percent collectively. Prudential jumped 35 percent to $28.52. MetLife gained 22 percent to $30.76. Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. each climbed at least 4.1 percent.

Hartford, Prudential, MetLife, Lincoln National Corp. and money manager Ameriprise Financial Inc. would benefit if the National Association of Insurance Commissioners opts to relax capital requirements for managers of variable annuities, UBS’s Andrew Kligerman wrote in a report today. The association is likely to reach a decision by year-end and could announce one as early as Dec. 9, Kligerman said.

Annuities are retirement products that guarantee buyers income for life in return for an up-front payment.

Financial stocks in the S&P 500 last week traded for an average of 0.8 times book value, the lowest in at l3 years. Banks are posed for their worst annual drop on record and have plunged 66 percent since reaching an all-time high in February 2007.

SanDisk, Micron

SanDisk Corp. climbed 14 percent to $9.23. The world’s largest maker of memory cards used in digital cameras is poised to benefit from a reduction in the supply of so-called NAND semiconductors, American Technology Research said in upgrading the stock to “buy” from “neutral.”

AmTech analyst Dinesh Moorjani also upgraded Micron Technology Inc. to “buy,” citing falling supply. The largest U.S. memory chip maker gained 13 percent to $2.04, helping push an index of technology companies to the second-biggest advance in the S&P 500.

The market’s earlier retreat came after the Labor Department reported that the nation lost 533,000 jobs last month, 59 percent more than the average estimate in a Bloomberg survey. The decrease exceeded all 73 forecasts in the survey. The unemployment rate rose to 6.7 percent, the highest level since 1993.

“We’re looking at a pretty ugly economic outlook, but an awful lot of that is being reflected” in stock prices, Leo Grohowski, chief investment officer at Bank of New York Mellon Wealth Management, which oversees $158 billion, said on Bloomberg Television.

General Motors Corp. fell 0.7 percent to $4.08 after saying it will cut production at four North American plants next year. GM, the biggest U.S. automaker, and rivals Ford Motor Co. and Chrysler LLC are asking Congress for a combined $34 billion to stay afloat. Lawmakers are considering options such as providing automakers with enough aid to get them through next year’s first quarter on condition they make significant progress on restructuring their operations.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.