U.S. Stocks Gain, S&P 500 Index Rebounds From Three-Month Low

By Elizabeth Stanton

Feb. 19 (Bloomberg) -- U.S. stocks rose, with the Standard & Poor’s 500 Index halting a three-day slide, after CVS Caremark Corp., Sprint Nextel Corp. and Whole Foods Market Inc. reported results that topped analyst estimates.

CVS Caremark, the largest U.S. drugstore chain, jumped as much as 9.7 percent. Sprint Nextel, the third-largest U.S. mobile-phone carrier, rallied 20 percent and Whole Foods Market, the nation’s biggest natural-goods grocer, climbed 35 percent. The S&P 500 rebounded from a three-month low after this week’s losses dragged the benchmark index for American equities to near its cheapest price-to-earnings valuation since 1985.

The S&P 500 advanced 1 percent to 796.1 at 10:04 a.m. in New York. The Dow Jones Industrial Average rose 43.97 points, or 0.6 percent, to 7,599.6. The Russell 2000 Index added 1.1 percent.

“A lot of companies are in great shape but are being tarred and feathered like everybody else,” said Erick Maronak, who manages $1 billion, including CVS shares, as chief investment officer at Victory Capital Management Inc. in New York. “The negatives are overstated when you look at general market activity. This is an opportunity to upgrade your portfolio as long as you’re not looking for results overnight.”

Today’s gains also came after Priceline.con Inc, the Internet travel agency, and GameStop Corp., the world’s largest video-game retailer, posted higher-than-estimated profits. The S&P 500 traded for 10.71 times the earnings of its companies at the open, approaching the 23-year low of 10.46 reached in November, after the measure slumped 13 percent this year.

Three-Day Slide

The S&P 500 yesterday fell for a third day as the Federal Reserve cut its forecast for the U.S. economy this year, while government reports showed industrial production shrank more than forecast and housing starts slid to a record low last month.

Reports today showed that the Conference Board’s index of leading economic indicators climbed more than forecast, while a Federal Reserve gauge of manufacturing in the Philadelphia region slumped more than estimated.

Stocks in Asia advanced today as a weaker yen boosted the earnings prospects of Japanese automakers. The MSCI Asia Pacific Index increased 0.6 percent, while Europe’s Dow Jones Stoxx 600 Index added 0.8 percent.

Governments across the world are stepping up measures to stem the worst global recession since World War II. China’s government will seek to boost domestic demand, increase financial input for the electronics and information-technology industry and maintain the level of export tax rebates for electronic products, the State Council, or cabinet, said. The Bank of Japan said it will buy 1 trillion yen ($10.7 billion) in corporate bonds from financial institutions and extend lending programs to prevent a shortage of credit.

Whole Foods Rallied

Whole Foods surged 35 percent to $12.50. The largest U.S. natural-foods grocer reported fiscal first-quarter earnings excluding certain items of 25 cent a share, beating the average analyst estimate by 46 percent.

Goldman Sachs Group Inc. rose 2.9 percent to $87.40. The investment bank, which reported its first quarterly loss since going public in 1999, has returned to profit after boosting fees it charges customers for trades, according to Bank of America Corp.

Goldman Sachs will probably report first-quarter earnings of $1.58 a share, Bank of America analyst Guy Moszkowski wrote in a report after meeting with Chief Executive Officer Lloyd Blankfein and Chief Financial Officer David Viniar. That would beat the $1.12 average analyst estimate in a Bloomberg survey.

Hewlett-Packard Co. fell 7.5 percent to $31.54. The world’s largest personal-computer maker reduced its profit forecast for the year as PC demand waned.

Earnings Slump

Profits dropped 33 percent on average at the 394 companies in the S&P 500 that have reported fourth-quarter earnings since Jan. 12, according to data compiled by Bloomberg. The period is poised to be the sixth straight quarter of decreasing profits, the longest streak on record.

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