U.S. Stocks Gain as Manufacturing Beats Estimates, Exxon Rises

By Nikolaj Gammeltoft and Rita Nazareth

Feb. 1 (Bloomberg) -- U.S. stocks rose, driving a rebound in the Standard & Poor’s 500 Index from a three-month low, after measures of manufacturing and income increased more than economists estimated and Exxon Mobil Corp. beat forecasts.

Exxon gained 2.7 percent as profit fell less than estimated because of higher oil prices and output, giving energy companies the second-biggest rally in the S&P 500 behind commodity producers. Coal company Consol Energy Inc. climbed more than 7 percent after the Commerce Department said income advanced 0.4 percent in December and factory output expanded at the fastest rate since 2004. Banks pared gains after demand for business and household loans slipped over the past three months.

The S&P 500 rose 1.4 percent to 1,089.19 at 4 p.m. in New York. The Dow Jones Industrial Average rallied 118.20 points, or 1.2 percent, to 10,185.53. The advance reversed a decline in the MSCI World Index of equities in 23 developed markets, which added 1 percent to break an eight-day losing streak.

“The trend of the market is up,” said David Dreman, chairman and chief investment officer at Dreman Value Management LLC, which has about $5 billion under management. “There’s still good value to be picked up and we’re getting close to 100 percent invested in stocks.”

While the S&P has surged 61 percent since March 9, it completed a third straight weekly loss on Jan. 29 after Qualcomm Inc., Motorola Inc. and Microsoft Corp. tempered enthusiasm about an earning-reporting season in which 80 percent of index members have topped the average analyst profit estimate since Jan. 11, according to Bloomberg data.

“Phenomenal corporate profits are driving stocks up,” said Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas in Norfolk, Virginia, which manages $1.4 billion. “That’s why we won’t get more than a 10 percent correction because the corporate earnings numbers are simply too good.”

Most Since 2004

Manufacturing expanded in January at the fastest pace since August 2004. The Institute for Supply Management’s factory index rose to 58.4, higher than the median economist forecast of 55.5, figures from the group showed. Readings greater than 50 signal expansion. Orders, production and employment increased.

The U.S. factories report followed surveys showing China, the world’s third-biggest economy, sustained its manufacturing expansion in January as export orders jumped and inflation pressures grew.

U.S. Commerce Department data showed U.S. personal income rose 0.4 percent in December, more than the 0.3 percent economist forecast. U.S. gross domestic product grew 5.7 percent at an annual rate in the fourth quarter, the government said on Jan. 29.

“I like the manufacturing number -- it stops the near-term sell-off in the market and it supports Friday’s GDP data,” said Scott Armiger, who helps manage about $2 billion at Christiana Bank & Trust in Greenville, Delaware. “We’re optimistic companies will do better earnings-wise this year, but the question is still whether we’re going to get stronger growth from the U.S. consumer.”

Producers of metals, chemicals and agricultural commodities climbed 3.7 percent for the biggest gain among 10 industries. Energy companies in the S&P 500 rose 3 percent as Exxon rallied.

Higher Output

Exxon added 2.7 percent to $66.18. The largest U.S. company by market value posted a smaller decline in fourth-quarter profit than analysts estimated as gains in oil prices and output cushioned the impact of slumping demand for diesel and gasoline.

Chevron Corp. added 2 percent to $73.58.

The data on manufacturing also boosted coal companies. Massey Energy Co. climbed 7.9 percent to $41.58 for the biggest gain in the S&P 500. Consol Energy Inc. rose 7.2 percent to $49.97. Peabody Energy Corp. advanced 4.9 percent to $44.19.

Cliffs Natural Resources Inc. advanced 7.8 percent to $43.07 for the second-biggest gain in the benchmark index for U.S. equities. North America’s largest iron-ore producer had its fourth-quarter earnings estimate raised to 39 cents a share, from 17 cents, by FBR Capital Markets.

CME Group Inc. added 1.5 percent to $291.22. The world’s largest futures market is in talks to buy the News Corp. stock- index business that owns the Dow Jones Industrial Average for up to $700 million, according to two people familiar with the matter.

Falling Revenue

Financial institutions climbed 1.6 percent, paring an earlier gain of 1.9 percent. The Federal Reserve said loan demand slipped last quarter, according to a quarterly survey of Senior Loan Officers, while fewer banks tightened standards.

Gannett Co. posted the biggest decline in the S&P 500, falling 7 percent to $15.02. The largest U.S. newspaper publisher reported declining revenue and a fourth-quarter profit that was helped by job cuts. New York Times Co. fell 3.3 percent to $12.49.

Amazon.com Inc. had the second-biggest decline in the S&P 500, slipping 5.2 percent to $118.87. The world’s largest Internet retailer said it will start selling Macmillan books on its Web site again and give in to the publisher’s demands to charge more for titles on the Kindle digital reader.

To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net.