U.S. Stocks Advance as Consumer Confidence Exceeds Estimates

By Rita Nazareth - Nov 30, 2011 4:31 AM GMT+0700

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Nov. 29 (Bloomberg) -- David Gaud, a Hong Kong-based senior portfolio manager of Edmond de Rothschild Asset Management, talks about Asian stocks and investment strategy. Gaud also discusses Europe's sovereign debt crisis. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

U.S. stocks rose, after the biggest gain in a month for the Standard & Poor’s 500 Index, as consumer confidence increased by the most since 2003 and European finance ministers discussed efforts to tame the debt crisis.

Exxon Mobil Corp. (XOM) added 1.4 percent, pacing an advance in energy shares, as oil rallied. Yahoo! Inc. jumped 2.3 percent as Thomas H. Lee Partners is said to be considering a bid. Hewlett- Packard Co. gained 1.4 percent after RBC Capital Markets raised its rating for the shares. Gauges of technology and financial stocks in the S&P 500 fell. Bank of America Corp. (BAC) sank 3.2 percent. AMR (AMR) Corp. lost 84 percent after filing for bankruptcy.

The S&P 500 rose 0.2 percent to 1,195.19 at 4 p.m. New York time, rallying 3.2 percent in two days. The Dow Jones Industrial Average added 32.62 points, or 0.3 percent, to 11,555.63. The Nasdaq Composite Index retreated 0.5 percent to 2,515.51. The Russell 2000 Index of smaller companies, which gained 4.8 percent yesterday, declined 0.3 percent to 696.10 today.

“Consumer confidence will be critical to how we weather the next few months,” Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private- banking unit of KeyCorp in Cleveland, said in a telephone interview. “Everybody is still on the edge of their chair about whether or not you get the financial crisis solved in Europe.”

The S&P 500 yesterday snapped a seven-day decline after Thanksgiving-weekend sales rose to a record and amid speculation European leaders will boost efforts to end the debt crisis. The benchmark gauge (SPX) is still down 4.6 percent in November as a measure of financial shares tumbled 11 percent.

Consumer Confidence

Stocks extended gains today after a report showed that consumer confidence snapped back more than forecast in November as Americans turned less pessimistic on the outlook for jobs. Federal Reserve Vice Chairman Janet Yellen said the central bank has leeway to spur the U.S. recovery by purchasing more assets. Federal Reserve Bank of Atlanta President Dennis Lockhart said in a separate speech that expanding securities purchases is unlikely to give a sufficient boost to U.S. growth.

Europe’s effort to expand its bailout fund is falling short, forcing euro-area finance ministers to consider greater roles for the International Monetary Fund and the European Central Bank to insulate Spain and Italy from the debt crisis. A plan hammered out last month to expand the European Financial Stability Facility’s firepower to 1 trillion euros ($1.3 trillion) with leveraging will be “very difficult to reach,” Luxembourg Finance Minister Luc Frieden told reporters today.

Energy shares had the biggest gain in the S&P 500 among 10 industries, rising 1.5 percent as a group. Exxon Mobil advanced 1.4 percent to $76.93. The Dow Jones Transportation Average added 0.6 percent amid optimism about economic growth.

Yahoo Rallies

Yahoo gained 2.3 percent to $15.70. Thomas H. Lee Partners joins a list of companies that are sizing up offers for Yahoo. Private-equity firm Silver Lake is working with Microsoft Corp. (MSFT) to bid for a minority stake in Yahoo, two other people familiar with the matter said. Andreessen Horowitz, a venture-capital firm, may join the Silver Lake-led group, another person said.

Hewlett-Packard added 1.4 percent to $26.90. The company was raised to “outperform” from “sector perform” at RBC Capital Markets. The 12-month share-price estimate is $32.

An index of technology shares in the S&P 500 lost 0.7 percent as Corning Inc. (GLW) sank 11 percent, the most in the S&P 500, to $13.19. The world’s largest maker of glass for flat- panel televisions cut its fourth-quarter earnings forecast because of the loss of a contract and price declines for glass.

Banks Slump

Some of the biggest financial companies retreated. Bank of America lost 3.2 percent, the most in the Dow, to $5.08. Morgan Stanley (MS) declined 3.6 percent to $13.31. JPMorgan Chase & Co. slid 2.1 percent to $28.56.

AMR tumbled 84 percent to 26 cents. With the filing, American became the last of the so-called U.S. legacy airlines to seek court protection from creditors. The company, which traces its roots to 1920s air-mail operations in the Midwest, listed $24.7 billion in assets and $29.6 billion in debt in Chapter 11 papers filed today in U.S. Bankruptcy Court in Manhattan.

Rivals gained. United Continental Holdings Inc. (UAL) surged 6.3 percent to $17.63 and Delta Air Lines Inc. (DAL) rallied 5 percent to $7.80. The two largest U.S. carriers stand to benefit from AMR’s bankruptcy, analysts said.

Tiffany & Co. (TIF) slid 8.7 percent to $67.22. The second- largest luxury jewelry retailer cited “weaknesses” in sales in Europe and the eastern U.S. as the holiday season began.

Facebook Inc.

Facebook Inc. is considering raising about $10 billion in an initial public offering that would value the world’s largest social-networking site at more than $100 billion, a person with knowledge of the matter said. The company may file for the IPO before the end of the year, said the person, who asked not to be identified because the deliberations are private.

The S&P 500 will probably be stuck in a 250-point range next year as Europe’s debt crisis offsets optimism about U.S. earnings, according to JPMorgan Chase & Co. (JPM)

The benchmark index for U.S. equities will most likely fluctuate between 1,100 and 1,350, forming an “inside-range year” by staying roughly within the band seen this year, said Michael Krauss, JPMorgan’s New York-based head of technical research. He sees a 12 percent chance of an economic recession that would push the S&P 500 as low as 800. The odds of the index rising to 1,500 because of progress on the crisis or stimulus from central banks are 8 percent, Krauss said.

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

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