By Nikolaj Gammeltoft - Nov 29, 2011 4:48 AM GMT+0700
Nov. 28 (Bloomberg) -- Jeffrey Davis, chief investment officer at Lee Munder Capital Group, talks about AT&T Inc.'s possible plan to propose bigger asset sales to save its T-Mobile USA takeover. Davis, speaking with Erik Schatzker on Bloomberg Television's "InsideTrack," also discusses the potential effects of a euro zone collapse. (Source: Bloomberg)
Nov. 28 (Bloomberg) -- Michael Nelson, analyst at Mizuho Securities USA Inc., discusses AT&T Inc.’s proposed purchase of T-Mobile USA Inc. AT&T, with its T-Mobile USA takeover facing regulatory opposition, is preparing the biggest remedy proposal yet to the Justice Department to salvage the $39 billion deal, according to a person familiar with the plan. Nelson speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
U.S. stocks rose, snapping a seven- day decline in the Standard & Poor’s 500 Index, after Thanksgiving retail sales climbed to a record amid speculation European leaders will boost efforts to end the debt crisis.
Alcoa Inc. (AA) and Caterpillar Inc. (CAT) led gains in all 30 stocks in the Dow Jones Industrial Average. JPMorgan Chase & Co. (JPM) advanced 2.4 percent, tracking European banking shares. Energy companies in the S&P 500 soared 3.6 percent as oil rallied above $100 a barrel. AT&T Inc. (T) added 2 percent after it was said to consider larger asset sales to salvage its takeover of T-Mobile USA. Amazon.com Inc. (AMZN) jumped 6.4 percent on record Black Friday sales of its Kindle products.
The S&P 500 advanced 2.9 percent to 1,192.55 at 4 p.m. New York time as all except six stocks in the index rose. The benchmark equity gauge fell 7.9 percent from Nov. 15 through Nov. 25, including the worst Thanksgiving-week drop since 1932. The Dow rose 291.23 points, or 2.6 percent, to 11,523.01.
“The market is reflecting that the U.S. retail sales were just colossal and some movement forward in Europe,” Tom Mangan, who helps oversee about $2.8 billion at James Investment Research Inc. in Xenia, Ohio, said in a telephone interview. “There’s a sense of urgency developing among European leaders as well as a recognition that the stakes are extremely high now,” he said. “The volatility is still with us to a major extent, we’re not out of the woods.”
Stock Valuations
The S&P 500 is trading for 10.9 times analysts’ forecast for earnings in 2012, compared with its five-decade average of 16.4 times reported profits, data compiled by Bloomberg show. Companies in the benchmark gauge for American common equity are projected to increase earnings 10 percent next year, extending a streak of gains to 13 quarters, the data show.
U.S. retail sales during the Thanksgiving weekend increased 16 percent to $52.4 billion, the National Retail Federation said, citing a survey conducted by BIGresearch. The average shopper spent $398.62, up from $365.34 a year earlier. Consumer spending, which accounts for about 70 percent of the economy, grew at a 2.3 percent annual rate in the third quarter, the fastest pace in 2011, the Commerce Department said Nov. 22.
U.S. stocks maintained gains after a report showed fewer new homes were purchased in October than forecast. Sales increased 1.3 percent to a 307,000 annual pace, the Commerce Department reported today in Washington. The median estimate of economists surveyed by Bloomberg News projected a 315,000 rate.
Caterpillar Climbs
Companies most-tied to the economy rose, sending the Morgan Stanley Cyclical Index up 3.8 percent after a 6.2 percent decline last week. Caterpillar, the world’s largest construction and mining-equipment maker, increased 5.5 percent to $91.48 for the second-biggest gain in the Dow.
Energy and raw-material producers in the S&P 500 rallied at least 3.5 percent, as crude oil rose above $100 a barrel for the first time in more than a week on signs of economic recovery in the U.S., while sanctions on Syria stoked concern Middle East crude supplies may be threatened.
Alcoa gained 5.7 percent to $9.46. The largest U.S. aluminum producer rose the most in the Dow as copper, lead, nickel and zinc advanced on the London Metal Exchange. Freeport- McMoRan Copper & Gold Inc., the world’s biggest publicly traded copper producer, surged 6.3 percent to $35.94. Molycorp Inc. (MCP) climbed 14 percent to $30.65.
Energy Companies
Suncor Energy Inc. (SU) gained 3.4 percent to $27.98. Marathon Oil Corp. (MRO) increased 5.4 percent to $25.98. Halliburton Co. (HAL) advanced 3.1 percent to $32.77.
JPMorgan jumped 2.4 percent to $29.16. Goldman Sachs Group Inc. (GS) surged 2.3 percent to $90.78. A gauge of European banking shares climbed 5.7 percent, among the best performances in the benchmark Stoxx Europe 600 Index.
“It’s a sea of green and nothing is being left behind in this rally,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. “Equity prices are being powered higher by the quite good Black Friday sales in the U.S. and reports that European officials are rallying around some form of political cohesion to solve the debt crisis.”
In Europe, German newspaper Welt am Sonntag reported German Chancellor Angela Merkel and French President Nicolas Sarkozy are discussing an agreement under which member states will commit to tighter budget discipline without waiting for treaty changes. The newspaper did not say where it got the information.
Treaty Changes
German Finance Minister Wolfgang Schaeuble called for fast- track treaty changes to tighten budget discipline among member states of the euro area. He spoke in an interview with ARD television in Berlin yesterday. The European Financial Stability Facility may insure the bonds of debt-stricken countries with guarantees of 20 percent to 30 percent of each issue, depending on market circumstances, according to EFSF guidelines that finance ministers will discuss this week.
Euro-area finance ministers meet in Brussels tomorrow as governments bid to regain the confidence of financial markets.
The increased severity of the debt crisis is threatening the credit standing of the region’s countries, Moody’s Investors Service said in a report today. More than $1.2 trillion has been erased from U.S. stocks since Nov. 15 on mounting concern that the crisis will spread and American policy makers failed to reach agreement on reducing the federal budget.
After financial markets closed in New York, Fitch Ratings affirmed the U.S.’s AAA long-term foreign and local currency issuer default ratings. The outlook on the long-term rating was revised to negative from stable, with Fitch saying that a failure to reach a “credible deficit reduction plan” in 2013 and a worsening economy could lead to a downgrade.
Antitrust Remedy
AT&T climbed 2 percent to $27.95. The company, which faces regulatory opposition to its acquisition of Deutsche Telekom AG’s U.S. unit, is preparing its biggest antitrust remedy proposal to salvage the deal, according to a person familiar with the plan. AT&T may offer to divest a significantly larger portion of assets than it had planned. That could be as much as 40 percent of T-Mobile USA’s assets, the person said.
Amazon.com rose 6.4 percent to $194.15. The world’s largest Internet retailer said it sold four times more Kindle products on Black Friday compared with last year.
Corning Inc. (GLW) rallied 6 percent to $14.78. Demand for televisions on Black Friday was better than expected, boding well for the maker of glass for flat-panel TVs, Goldman Sachs said, citing in-store and online checks.
Genworth Financial Inc. (GNW) posted the biggest gain in the S&P 500, climbing 13 percent to $6.07. Citigroup Inc. upgraded the insurer for the second time this month on the prospect that the company can withstand mortgage-related losses.
Netflix Inc. (NFLX) surged 9.5 percent to $69.95. The video- streaming and DVD subscription service was raised to “neutral” from “negative” at Susquehanna Financial Group, which said “a significantly lower stock price largely offset the downside potential.”
To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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