U.S. Stocks Advance as Oil Retreats; Sprint, Bank of America Shares Rise

Sprint Nextel rallied 7.1 percent after Bloomberg News reported that people with knowledge of the matter said Deutsche Telekom AG has held talks to sell its T-Mobile USA unit. Photographer: Jacob Kepler/Bloomberg

U.S. stocks advanced, snapping a two-day decline for benchmark indexes, as crude oil retreated and Bank of America Corp. (BAC) sparked a rally in financial shares after saying its home-loan business is in “recovery mode.”

Bank of America jumped 4.7 percent, leading a gauge of financial shares to the biggest gain among 10 Standard & Poor’s 500 Index industries. Sprint Nextel Corp. (S) climbed 4.9 percent after people with knowledge of the matter told Bloomberg News that Deutsche Telekom AG held talks to sell its T-Mobile USA unit to the company. PulteGroup Inc. climbed 8.4 percent after the homebuilder reported “good traffic and sign-up rates.”

The S&P 500 increased 0.9 percent to 1,321.82 at 4 p.m. in New York. The benchmark gauge had fallen 1.6 percent over the previous two trading days. The Dow Jones Industrial Average advanced 124.35 points, or 1 percent, to 12,214.38. Crude oil declined 0.4 percent to $105.02 a barrel in New York.

“We’re in an economic recovery and the stock market is reflecting that,” said John Carey, a Boston-based money manager at Pioneer Investments, which oversees about $250 billion. “Companies are flush with cash and there’s been a pick-up in M&A activity, which is an indication of corporate confidence. In addition to that, crude oil prices are down and people can relax a bit about energy costs not going through the roof.”

The S&P 500 yesterday erased last week’s gain as oil reached a 29-month high. The gauge rallied 5.1 percent this year as companies reported earnings that topped analysts’ estimates for the eighth straight quarter and the Federal Reserve kept interest rates at a record low.

‘Urgent Meeting’

Crude oil fell as members of the Organization of Petroleum Exporting Countries discussed whether to hold a special meeting and Libyan rebels prepared an offensive to regain a town. Kuwait’s oil minister said OPEC members are considering whether to convene an “urgent meeting.”

Nouriel Roubini, who predicted the global financial crisis, said an increase in oil prices to $140 a barrel will cause some advanced economies to slide back into recession. Underlying how fragile the recovery is, Roubini said the European Central Bank may be making a mistake by raising interest rates “too soon” when debt-ridden countries on the euro region’s periphery struggle to restore the competitiveness of exports.

Stock-index futures erased gains before the open of exchanges as European Central Bank Governing Council member Axel Weber said he doesn’t want to correct market expectations for as many as three quarter-point increases in the bank’s benchmark interest rate this year.

‘Zero Rate Trap’

“One of the biggest fears is that the developed nations have gotten themselves into a zero rate trap,” said Peter Sorrentino, who helps oversee $14.4 billion at Huntington Asset Advisors in Cincinnati. “So, if they start to raise rates, the market will begin to move beyond their control.”

Financial shares in the S&P 500 rose 2.2 percent, collectively, the biggest gain within 10 groups. The KBW Bank Index added 2.7 percent, as all of its 24 stocks gained.

Bank of America jumped 4.7 percent, the most in the Dow, to $14.69. The largest U.S. lender said its commercial- and investment-banking businesses are already transitioning this year and may post what the company considers normalized earnings in 2012 and 2013.

Chief Executive Officer Brian T. Moynihan, hosting the lender’s first investor day since 2007, is seeking to assure investors the bank will return to profitability as the economy stabilizes and the company recovers from disputes with investors over soured mortgages. The company’s net loss last year was driven by writedowns at credit-card and home-lending units acquired by Moynihan’s predecessor, Kenneth D. Lewis.

‘Growth Company’

“We are changing the culture of the company from a company that was built upon acquisitions and consolidation,” Moynihan said today in New York. “We are again a growth company.”

Sprint gained 4.9 percent to $4.70. Deutsche Telekom has held talks to sell its T-Mobile USA unit to Sprint in exchange for a major stake in the combined entity, said people with knowledge of the matter. Talks have been on and off, and a deal may not be reached, said the people, who spoke on the condition of anonymity because the talks are private.

“In general, all options are open in the U.S. -- the sale of the whole business or of parts,” Deutsche Telekom Chief Financial Officer Timotheus Hoettges said in an e-mail today. He said the company could also find a partner, sell shares in the market or form a network agreement.

Bill White, a spokesman for Overland Park, Kansas-based Sprint, declined to comment.

M&A Scorecard

Announced takeovers of U.S. companies have totaled $186.4 billion so far in 2011, 21 percent more than in the same period last year, according to data compiled by Bloomberg.

A gauge of homebuilders in S&P indexes rallied 4.8 percent. PulteGroup jumped 8.4 percent, the most in the S&P 500, to $7.09. The largest U.S. homebuilder by revenue said it signed up 2,674 homes for sale in the first two months of the year. The orders showed “demand continues to stabilize and slightly improve entering the current spring selling season,” JPMorgan Chase & Co. said in a note.

The Bloomberg U.S. Airlines Index of 12 stocks jumped 7.3 percent, as the retreat in crude oil prices eased concern about higher energy costs. US Airways Group Inc. (LCC) climbed 12 percent to $9.28. Delta Air Lines Inc. (DAL) added 9.7 percent to $11.07.

Energy shares had the only decline in the S&P 500 among 10 industries, falling 0.6 percent, collectively. Occidental Petroleum Corp. (OXY) slumped 2.1 percent to $100.92. ConocoPhillips (COP) decreased 1.1 percent to $78.32.

McDonald’s Slumps

McDonald’s Corp. (MCD) fell 1 percent, the most in the Dow, to $75.54. The world’s biggest restaurant chain reported sales rose 2.7 percent at stores open at least 13 months in the U.S. last month, missing analysts’ estimates. Analysts had projected a gain of 4 percent, according to the average of three estimates compiled by Bloomberg.

Urban Outfitters Inc. (URBN) had the biggest decline in the S&P 500, tumbling 17 percent to $31.66. The operator of the namesake and Anthropologie clothing chains said profit margins shrank last quarter. Gross margin, or the percentage of sales after the cost of goods sold, narrowed 2 percentage points to 39.7 percent in the quarter ended Jan. 31, the Philadelphia-based company said yesterday. Profit amounted to 45 cents a share, trailing the 52-cent average of estimates compiled by Bloomberg.

The past two years have shown that stock investors need to focus on “the beaten-up areas of the market” when prices rebound, according to Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist.

More than Quintupled

Auto stocks set the S&P 500’s pace since March 9, 2009, according to data compiled by Bloomberg, as the industry-group index more than quintupled in the period through yesterday. Grocery and drugstore stocks had the smallest gain, at 34 percent. The two industries’ rankings were almost exactly the opposite in the preceding bear market, which lasted 17 months. The S&P 500 Automobiles and Components Index tumbled 84 percent, more than any other industry except banks. The S&P 500 Food and Staples Retailing Index did best by losing only 26 percent.

“Fears of a Great Depression reenactment provided investors with a powerful trading opportunity over the past two years,” Levkovich wrote today. The auto industry is among those most closely linked to the economy’s performance, while food and drug retailers had less to gain from economic growth.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net