Stocks in U.S. Advance as Banks Rally Amid Italy’s Move to Reduce Its Debt

By Rita Nazareth - Dec 5, 2011 9:44 PM GMT+0700

U.S. stocks rose, after the biggest weekly rally since March 2009 for the Standard & Poor’s 500 Index, as Italian Prime Minister Mario Monti proposed budget cuts and leaders prepared to meet on Europe’s debt crisis.

All 10 groups in the S&P 500 gained, led by financial shares. Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) climbed at least 4.3 percent. MetLife Inc. (MET), the largest U.S. life insurer, rallied 3.5 percent after saying earnings will probably increase in 2012. Dollar General (DG) Corp. advanced 2 percent after the dollar store chain raised its annual earnings forecast and said it will buy back as much as $500 million in shares.

The S&P 500 advanced 1.3 percent to 1,260.09 at 9:40 a.m. New York time. The benchmark measure for American equities surged 7.4 percent last week. (SPX) The Dow Jones Industrial Average climbed 134.57 points, or 1.1 percent, to 12,153.99 today.

“It’s a week of Europe,” James Paulsen, who helps oversee about $333 billion as chief investment strategist at Minneapolis-based Wells Capital Management, said in a telephone interview. “There’s some expectation you could have surprisingly good news coming out of Europe, a bigger-than- expected approach to solving this thing. If the bids for European bonds don’t fade away, that might get people more excited about this.”

Italian borrowing costs dropped as Monti will lobby parliament to support a 30 billion-euro ($40 billion) package of austerity and growth measures. France and Germany want a new European Union treaty to set out rules for euro area governments, President Nicolas Sarkozy said after meeting with Chancellor Angela Merkel.

Crisis-Fighting Funds

Merkel’s government won’t stand in the way of Bundesbank help to fight the crisis by means of loans channeled through the International Monetary Fund, a senior Merkel ally said.

Financial stocks had the biggest gain in the S&P 500 among 10 industries, rising 2.4 percent as a group. Bank of America added 4.3 percent to $5.88. JPMorgan increased 4.9 percent to $33.92. Morgan Stanley (MS) jumped 6 percent to $16.46.

Service industries in the U.S. probably expanded in November at the fastest pace in six months, a sign the economy is accelerating in the final months of 2011, economists said before a report today.

MetLife rallied 3.5 percent to $32.86. Next year’s operating profit, which excludes some investment results, will be $4.80 to $5.20 a share, the New York-based company said today in a statement. That compares with the average $5.08 estimate of 20 analysts surveyed by Bloomberg.

Dollar General

Dollar General added 2 percent to $40.75. The company raised its 2012 adjusted earnings forecast to as much as $2.32 a share. On average, the analysts surveyed by Bloomberg estimated profit of $2.29 a share.

SuccessFactors Inc. (SFSF) surged 51 percent to $39.70. SAP AG, the largest maker of business-management software, agreed to buy the company for $3.4 billion in cash to keep pace with rival Oracle Corp. in the cloud-computing market.

Entergy Corp. (ETR) jumped 5.2 percent to $73.28. ITC Holdings Corp. (ITC) will acquire the company’s power-line business for $1.78 billion in assumed debt, making it one of the largest U.S. owners of transmission lines. ITC gained 8.6 percent to $80.10.

Chesapeake Energy Corp. (CHK) added 1.7 percent to $25.86. The company which agreed last month to sell part of its Utica Shale holdings sold to a group of private investors $750 million worth of preferred shares in a subsidiary created to help fund development of the oil and natural-gas field.

The S&P 500 may jump 6.9 percent by the end of this month as the benchmark measure completes a year-end rally, according to Peter Beuttell, a technical analyst at MTS Research Ltd. in Bath, England.

‘Under Way’

“If you look around the world, certain indexes didn’t look like they recovered enough, so there is a chance that the initial rallies could repeat,” Beuttell said in a telephone interview today. “That supports the case for another rally pattern, which is under way now.”

The “double zigzag” that began in October will continue this month, with the S&P 500 climbing to a resistance level of 1,330 by the end of the year, Beuttell said. The gauge slipped less than 0.1 percent to 1,244.28 on Dec. 2. The S&P 500 will not drop to its support level of 1,120 to 1,160 until next year. The S&P 500 has rebounded 15 percent from its October low of 1,099.23.

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