S&P 500 Caps Best Weekly Gain Since July 2009

By Rita Nazareth - Oct 15, 2011 4:14 AM GMT+0700

U.S. stocks advanced, giving the Standard & Poor’s 500 Index its biggest weekly gain since July 2009, as retail sales beat economists’ estimates and the Group of 20 nations began discussions on Europe’s debt crisis.

Google Inc. (GOOG), the world’s biggest Internet-search company, jumped 5.9 percent after sales topped projections. Apple Inc. (AAPL) gained 3.3 percent as the company is poised to sell as many as 4 million units of its new iPhone 4S this weekend after customers lined up to buy one of the last products developed under Steve Jobs. Amazon.com Inc. (AMZN) and Caterpillar Inc. (CAT) added at least 3.2 percent, pacing gains among companies most-tied to the economy.

The S&P 500 rose 1.7 percent to 1,224.58 at 4 p.m. New York time, extending its weekly gain to 6 percent. The Dow Jones Industrial Average added 166.36 points, or 1.5 percent, to 11,644.49, erasing its 2011 loss. The Nasdaq Composite Index rallied 1.8 percent, also wiping out this year’s decline. More than 6.7 billion shares changed hands on U.S. exchanges at 4:32 p.m., the slowest volume since Aug. 29.

“There’s a good a chance we’ve made a bottom in stocks,” Mark Bronzo, who helps manage $26 billion at Security Global Investors in Irvington, New York, said in a telephone interview. “The economy is not as weak some people expected. You’re going to see some earnings estimates come down, but maybe not as much as feared.”

Today’s rally sent the benchmark gauge to the highest close since Aug. 3, two days before S&P stripped the U.S. of its AAA credit rating. It has surged 11 percent since Oct. 3, its lowest close in more than a year. The rebound brought the gauge close to the top of a price range where it’s traded for more than two months of between 1,074.77 and 1,230.71.

‘Next Stop’

“It would be pretty important to break that trading range,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. “Even as we had this robust rally, it hasn’t drawn the technicians to have conviction in buying. If we crack through this 1,230 area, then they are going to say -- it’s clear that hurdle, we’re into the next stop.”

The Citigroup Economic Surprise Index for the U.S. turned positive for the first time since April 29, the day the S&P 500 peaked at an almost three-year high. It climbed to 2.2, up from minus 117.20 on June 3. The reading four months ago showed reports were missing the median economist projection in Bloomberg surveys by the most since January 2009.

U.S. equities gained as retail sales in the U.S. rose more than forecast in September, easing concern slumping confidence and scant hiring will derail the biggest part of the economy.

Group of 20

U.S. stocks also followed a rally in European shares as finance ministers and central bankers from the Group of 20 began talks in Paris. Nations from China to Brazil are considering increasing the International Monetary Fund’s lending resources to help stem the European debt crisis, Group of 20 and IMF officials said. European officials are considering writedowns of as much as 50 percent on Greek bonds, according to people familiar with the discussion.

Google jumped 5.9 percent to $591.68. The shares rallied 19 percent in nine days, the biggest gain since February 2009. Chief Executive Officer Larry Page, who succeeded Eric Schmidt in April, is benefiting from Google’s leadership in search advertising, even as the company pushes into new markets such as mobile, display and social networking.

Earnings Season

Profit for S&P 500 companies will climb 17 percent in the third quarter and rise 18 percent to a record $99.77 for all of 2011, according to analyst estimates compiled by Bloomberg. The S&P 500 is trading for 11.1 times forecast earnings for 2012, compared with its five-decade average of 16.4 times reported income, according to data compiled by Bloomberg.

“Investor sentiment might be recalibrated,” Keith Wirtz, who oversees $16.7 billion as chief investment officer at Fifth Third Asset Management in Cincinnati, said in a telephone interview. “We’re expecting this rally in stocks to be indicative of the whole quarter. There has been so much negative sentiment that the simple fact that we’re now in earnings season and we have a new type of information hitting the market, that might be a catalyst.”

Apple gained 3.3 percent to $422, a record. It added 14 percent in five days, the most since March 2009. The iPhone 4S, available today in the U.S., Australia, Canada, France, Germany, Japan and the U.K., is projected to outperform last year’s introduction of the iPhone 4, which topped 1.7 million units in its first weekend.

Most-Tied

The Morgan Stanley Cyclical Index of companies most-tied to economic growth, added 2.3 percent. Amazon.com, the world’s largest online retailer, increased 4.5 percent to $246.71. Caterpillar climbed 3.3 percent to $84.09.

The Dow Jones Transportation Average, a proxy for the economy, gained 2.2 percent. J.B. Hunt Transport Services Inc. jumped 8.7 percent to $42.28 after the trucking company reported third-quarter earnings of 57 cents a share, beating the average analyst estimate of 56 cents.

Energy and raw-material producers rose the most among 10 industry groups in the S&P 500, adding at least 2.5 percent. Exxon Mobil Corp. (XOM) climbed 2.3 percent to $78.11. Chevron Corp. (CVX) added 2.7 percent to $100.47.

Freeport-McMoRan Copper & Gold Inc. (FCX) gained 4.3 percent to $36.77. Stabilizing copper inventory worldwide and rising demand from China are “favorable” for the world’s largest publicly traded copper producer, Morgan Stanley said in a note.

The KBW Bank Index (BKX) rose 0.6 percent, reversing an earlier decline of 1.6 percent. Wells Fargo & Co. (WFC) rallied 2.1 percent to $26.67. JPMorgan Chase & Co. (JPM) advanced 0.9 percent to $31.89.

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