By Adam Haigh and Rita Nazareth
Sept. 22 (Bloomberg) -- U.S. stock futures rose, indicating the market may resume a six-month rally, amid signs the global economy is improving and analyst upgrades of companies from U.S. Steel Corp. to Hewlett-Packard Co.
U.S. Steel Corp., the largest U.S.-based steelmaker, gained 2.5 percent after Bank of America Corp. raised its rating on the shares and said the company may return to profit next year. Hewlett-Packard, the world’s largest personal-computer maker, added 2.2 after being raised to “outperform” at Credit Suisse Group AG. Newmont Mining Corp. and ConocoPhillips added more than 0.8 percent as metals and crude oil prices climbed.
“The stock rally will keep going and any correction will be muted,” said James Dunigan, the chief investment officer at PNC Financial Services Group Inc.’s wealth-management unit, which oversees $100 billion in Philadelphia. “The appetite for riskier assets will continue to increase. There’s a lot of cash on the sidelines, corporate America has been very diligent on expenses and economic activity is improving globally.”
Futures on the S&P 500 expiring in December rose 0.6 percent to 1,066.2 at 9 a.m. in New York. Dow Jones Industrial Average futures gained 0.5 percent to 9,764. Nasdaq- 100 Index futures added 0.5 percent to 1,736.25. Stocks in Europe and Asia increased today.
Growth Forecast Raised
The Asian Development Bank raised its economic growth forecast for the region on strengthening expansions in China, India and Indonesia, predicting Asia, excluding Japan, will grow 3.9 percent in 2009. The Group of 20 country leaders will meet in Pittsburgh on Sept. 24-25 to cement a plan to hammer out an accord to prevent a repeat of the worst crisis since the Great Depression and ensure a sustained recovery.
Speculation that government measures will help revive the economy and better-than-estimated earnings at companies from Goldman Sachs Group Inc. to Johnson & Johnson has spurred a 57 percent rebound in the S&P 500 from its 12-year low on March 9.
U.S. Steel added 2.5 percent to $49.20 after Bank of America raised its recommendation to “neutral” from “underperform,” saying the company “should return” to profitability in 2010.
Hewlett-Packard rose 2.2 percent to $47.39 after being raised to “outperform” from “neutral” at Credit Suisse Group AG, according to a report dated today.
Newmont, the biggest U.S. gold producer, rallied 2 percent to $45.29. ConocoPhillips, the third-largest U.S. oil company, added 0.8 percent to $46.52. Copper rose for a second day, while crude oil climbed above $70 a barrel in New York. Gold increased, ending a three-day decline, as the dollar weakened against major global currencies, boosting the appeal of precious metals.
Macy’s Upgrade
Macy’s Inc. jumped 6.2 percent to $18.90 in early trading after Citigroup Inc. upgraded the second-biggest U.S. department store company to “buy” from “hold,” citing expectations for increasing revenue.
American International Group Inc. surged 13 percent to $54.50. The insurer bailed out by the U.S. extended its rally for a second day after Representative Edolphus Towns, chairman of the House Oversight and Government Reform Committee, said he’d give “serious consideration” to a plan to ease the terms of the company’s $182.5 billion bailout.
CarMax Inc. climbed 7.5 percent to $20.77. The biggest U.S. used car dealer said it had a second-quarter profit of 46 cents a share. Analysts estimated 18 cents a share in a Bloomberg survey.
ConAgra Foods Inc. gained 0.8 percent to $22.50. The maker of Healthy Choice dinners said profit from continuing operations rose to 38 cents a share, excluding some items, from 27 cents a year earlier. The average analyst estimate was 34 cents. Profit for the year that ends in May 2010, excluding some items, will “approach” $1.70 a share, the company said. ConAgra in June had forecast $1.63 to $1.66. Analysts, on average, predicted $1.66.
‘Over the Worst’
“The rally will continue for a while,” said Christian Blaabjerg, a Copenhagen-based strategist at Saxo Bank A/S. “The G-20 will come out as a unit and say we are over the worst and a more prosperous time is ahead,” he told Bloomberg Television.
Federal Reserve Chairman Ben S. Bernanke’s efforts to stoke an economic recovery may be undermined by the central bank’s other goal of restoring the banking system to health. The Federal Open Market Committee, at the conclusion tomorrow of a two-day meeting, will probably maintain its assessment that “tight” bank credit is impeding growth.
Economists surveyed by Bloomberg News unanimously forecast the Fed will leave its benchmark interest rate unchanged tomorrow following a two-day meeting.
U.S. bank shares are set to drop because loans made for commercial real estate will sour and lenders will need to raise more capital to cover credit losses, according to Mike Mayo, an analyst at CLSA Ltd.
Mayo’s Bank Call
Regional banks will perform the worst among U.S. lenders because they have the biggest exposure to loans for commercial real estate, Mayo said today at a conference hosted by his company in Hong Kong. The global economic slowdown may still cause another corporate failure in the vein of Enron Corp. or WorldCom Inc., he said.
Officials may soon ask banks to bail out the government, The New York Times reported. Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.
The biggest rally in U.S. stocks since the Great Depression will end within six months because the economy isn’t improving fast enough to justify prices, said David Tice, Federated Investors Inc.’s chief portfolio strategist for bear markets.
“The economy is in really, really bad shape,” Tice said in an interview with Bloomberg Television. “So many people are trying to be optimistic. We’ve gone from oversold to overbought.”
Tice said the S&P 500 will fall below 400 points within 18 months and he feels “bloodied, but unbowed” after the index rallied as much as 58 percent from a 12-year low on March 9.
To contact the reporters on this story: Adam Haigh in London at ahaigh1@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net.
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