U.S. Stocks Rise for Third Day; Wal-Mart Leads Retailer Rally

By Elizabeth Stanton

Dec. 4 (Bloomberg) -- U.S. stocks rose for a third day, erasing early declines, after better-than-expected sales at Wal- Mart Stores Inc. overshadowed concern General Motors Corp. may make a pre-arranged bankruptcy filing.

Wal-Mart, the biggest discounter, helped push up retailers in the Standard & Poor’s 500 Index by 4.8 percent. D.R. Horton Inc., the largest U.S. homebuilder, rallied 16 percent after mortgage rates decreased. General Motors, the largest U.S. automaker, slipped 2.8 percent after a person familiar with the matter said the company is exploring a reorganization with workers, creditors and lenders.

The S&P 500 added 2.7 points, or 0.3 percent, to 873.44 as of 11:03 a.m. in New York. The Dow Jones Industrial Average gained 26.05, or 0.3 percent, to 8,617.74. The Nasdaq Composite Index climbed 7.28, or 0.5 percent, to 1,499.67. Futures dropped earlier after the Labor Department said more Americans are collecting jobless benefits than at any time since 1982.

“When you keep getting bad news and stocks still go up, that’s when the market is going to turn,” said Thomas Garcia, head of trading at Thornburg Investment Management, which oversees $35 billion in Santa Fe, New Mexico. “We’re getting to the point where all the bad news is priced in and stocks are so beat up that there are some bargains out there.”

The S&P 500 has increased 16 percent since dropping to an 11-year low of 752.44 on Nov. 20. The index is down 41 percent this year as writedowns at financial firms approach $1 trillion and more economists forecast that the U.S. recession will be one of the most severe in the post-World War II era.

Shares rose in London after the European Central Bank lowered interest rates by the most in its 10-year history and the Bank of England cut its benchmark rate to the lowest since 1951.

November Sales

Wal-Mart gained 1.8 percent to $55.34. The world’s largest retailer said November sales rose, spurred by discounts. Revenue at U.S. stores open at least a year increased 3.4 percent, exceeding Wal-Mart’s forecast of 1 percent to 3 percent. December sales may rise near the “high end” of its 1 percent to 3 percent estimate, Wal-Mart said.

Other chain stores rallied on November sales that topped analysts’ estimates. Nordstrom Inc., the U.S. department store operator with more than 100 namesake locations, jumped 15 percent to $12.56. Office Depot Inc. added 14 percent to $2.15. Macy’s Inc., the second-biggest department store chain, climbed 9.2 percent to $8.07 after affirming its fourth-quarter sales outlook.

Homebuilder Rally

Homebuilders gained amid reports the Treasury Department is considering stepping up purchases of mortgage-backed securities to drive rates on some loans down to 4.5 percent. The average rate on a 30-year fixed-rate loan dropped to 5.47 percent last week, the lowest level since 2005, according to the Mortgage Bankers Association.

D.R. Horton advanced $1.21 to $8.45. Lennar Corp. added 17 percent to $9.01. Centex Corp. climbed 15 percent to $11.70. An index of homebuilders in the S&P 500 rose 13 percent to 241.64, the highest since Oct. 8.

General Motors fell 2.8 percent to $4.76. Chrysler LLC executives also are considering a pre-arranged bankruptcy filing, a person familiar with the companies’ internal discussions said.

GM and Chrysler told Congress Dec. 2 that they need $11 billion in government loans just to survive the year as the auto industry slump deepens. To get the money, the companies agreed to slash payrolls, shed brands and shrink dealerships. Bankruptcy was not part of their plans.

Merck Drops

Merck dropped 2.2 percent to $25.89. The company said net income in 2009 may miss analysts’ expectations as it works to offset falling sales of its top-selling products with job reductions and spending cuts.

Adobe Systems Inc. lost 5.2 percent to $21.37. The world’s biggest maker of graphics and Web-design software forecast sales that trailed analysts’ estimates. Revenue in the first quarter ending in February probably will fall to between $800 million and $850 million, Adobe said. That missed the $928.8 million average of estimates compiled by Bloomberg.

Adobe also plans to cut 600 jobs, which amount to about 8 percent of the workforce globally as of the end of the third quarter.

The Labor Department said today that 4.09 million fired workers received government unemployment checks in the week ended Nov. 22, the most since December 1982 and more than economists estimated in a Bloomberg survey.

AT&T Inc., the largest U.S. phone company, and DuPont Co., the third-biggest U.S. chemical maker, said they will cut jobs to lower costs as the recession erodes profit.

Labor Department data to be released tomorrow are forecast to show U.S. payrolls shrank in November for the 10th straight month, sending the unemployment rate to 6.8 percent, the highest since 1993.

AT&T rose 0.3 percent to $29.16. The company plans to cut 12,000 jobs, or about 4 percent of its workforce. DuPont lost 2.6 percent to $23 after saying it will cut about 2,500 jobs because the global recession is cutting demand for products such as auto paint and Tyvek weather wrap.

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