U.S. Stocks Advance Before Fed Statement

By Rita Nazareth - Dec 13, 2011 11:03 PM GMT+0700

U.S. stocks pared gains following a report that German Chancellor Angela Merkel is rejecting an increase in the upper limit of funding for Europe’s permanent bailout mechanism.

Financial shares in the Standard & Poor’s 500 Index rose 0.5 percent, trimming an earlier advance of 1.2 percent. Chevron Corp. (CVX) rose 1.8 percent as energy companies had the biggest gain in the S&P 500. DuPont Co. added 0.5 percent as it predicted profit will rise as much as 12 percent in 2012. Best Buy Co. tumbled 12 percent as the largest consumer-electronics retailer’s profit trailed estimates.

The S&P 500 increased 0.4 percent to 1,241.20 at 11 a.m. New York time, after rising as much as 1.1 percent earlier. The Dow Jones Industrial Average advanced 45.45 points, or 0.4 percent, to 12,066.84 ahead of the Federal Reserve’s meeting statement.

“The Fed is going to say the economy is in relatively sluggish state and that they stand ready to do whatever is needed in order to make sure that we don’t fall back into recession,” Michael Mullaney, who helps manage $9.5 billion at Fiduciary Trust in Boston, said in a telephone interview. “The market wants to do better. The only thing that’s holding back the market is obviously the daily news coming out of Europe.”

Stocks pared gains as Reuters reported that Merkel has rejected raising the upper limit of funding for the European Stability Mechanism. Equities advanced earlier even after U.S. retail sales increased in November at the slowest pace in five months. In Europe, data showed that German investor confidence unexpectedly increased. Spain sold 4.94 billion euros ($6.5 billion) of bills, more than the maximum target.

Federal Reserve Meeting

The Federal Open Market Committee is set to release a statement at around 2:15 p.m. Washington time, following its last scheduled meeting of the year.

American equities joined a global selloff yesterday as Moody’s Investors Service and Fitch Ratings said last week’s summit did little to ease pressure on Europe’s struggling governments and Intel Corp. (INTC) cut its revenue forecast.

U.S. stocks can avoid the effects of Europe’s intensifying sovereign-debt crisis, leading ABN Amro Private Banking to remain positive on the world’s largest economy, according to Chief Investment Officer Didier Duret.

‘Overweight’

The bank that manages 164 billion euros ($217 billion) for clients cut its overall allocation to equities to an “underweight” stance on Nov. 11, taking advantage of its positive stance from the middle of August. The wealth manager has maintained its “overweight” allocation in U.S. stocks, citing the prospects for corporate profit growth (SPX) and faster job creation in the country.

“The job machine is probably back in the U.S.,” Duret said in a phone interview from Amsterdam yesterday. “There is more resilience in the U.S. market from an earnings perspective. In Europe, you are seeing earnings being downgraded, but in the U.S. this is not the case.”

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