Bernanke Urges `Backstop' for Mortgage-Bond Market

By Craig Torres

Oct. 31 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said the market for mortgage-backed bonds will require some form of government support through either guarantees or insurance programs to weather times of heightened stress.

The Fed chief also said Fannie Mae and Freddie Mac, the largest sources of money for U.S. home loans, should retain some form of government support and oversight even if the companies are transformed from their current federal conservatorship to become private companies.

Bernanke's comments suggest he sees a permanent role for government support of homeownership through mortgage finance. Those views contrast with such free-market advocates as Alan Greenspan, who has urged an end to official support for Fannie and Freddie. Bernanke said the current crisis shows there wouldn't be a mortgage securities market without some government backing.

``The U.S. government's strong and effective guarantee of the obligations issued under the current government-sponsored enterprise structure must be maintained,'' Bernanke said today in remarks to a conference in Berkeley, California. ``If the GSEs were privatized, it would seem advisable to retain some means of providing government support to the mortgage securitization process during times of turmoil.''

Government Takeover

Treasury Secretary Henry Paulson engineered the seizure of Fannie Mae and Freddie Mac on the weekend of Sept. 7 after the biggest surge in mortgage defaults in at least three decades threatened to topple the companies. Bernanke raised a number of scenarios for the future of the companies, without stating which option he prefers.

Securitization, the process where home loans are packaged together into a bond and sold to investors, is important because it allows banks to distribute risk and provides a wider pool of capital to finance mortgages, Bernanke said.

One approach would be to create a government bond insurer which would allow issuers to obtain a government guarantee for their bonds for a fee, the Fed chief said.

``This new agency would offer, for a premium, government- backed insurance for any form of bond financing used to provide funding to mortgage markets,'' Bernanke said. Mortgage securities ``issued by the privatized GSEs as well as mortgage- backed bonds issued by banks would be eligible.''

The Fed chairman's comments suggest he believes that a market based on borrowers with anything but high credit ratings would remain fragile and in need of some government support, investors said.

`Perpetual' Backstop

``To require a perpetual government backstop is to say we are going to have perpetually inadequate underwriting standards,'' said Julian Mann, who helps manage about $10 billion as vice president at First Pacific Advisors LLC in Los Angeles.

Bernanke also discussed the option of covered bonds, while noting that they might be less competitive with existing finance options. Covered bonds offer banks a way to raise money for new mortgages without either selling the loans or packaging them into securities. Instead, a bank issues bonds that are backed by a dedicated and regularly updated pool of loans, which stay on the bank's balance sheet.

Another alternative for Fannie Mae and Freddie Mac would be a public-utility model, where the two remain as shareholder- owned corporations and are overseen by public boards, Bernanke said.

Folded Into FHA

``Beyond simply monitoring safety and soundness, the regulator would also establish pricing and other rules consistent with a promised rate of return to shareholders,'' he said. The two companies could be folded into the Federal Housing Administration and become full government agencies that securitize mortgages, such as the Government National Mortgage Association, he said.

The Fed chairman didn't discuss interest rates or the economy in the text of his remarks.

The Fed cut the main interest rate this week to a half- century low of 1 percent to limit damage from the collapse of the U.S. mortgage market and avert what may be the worst recession in a quarter century.

Washington-based Fannie and McLean, Virginia-based Freddie own or guarantee nearly half the $12 trillion in U.S. residential mortgage debt outstanding.

The Treasury agreed last month to inject up to $100 billion apiece in Fannie and Freddie to keep their net worth positive. Freddie's book value stood at $12.9 billion at the end of June, while Fannie's stood at $41.2 billion.

Potential Writedowns

Eliminating Freddie's $18.4 billion in deferred tax credits would leave it with a book value of negative $6 billion and would cut Fannie's net worth in half, before factoring in other potential writedowns, analysts said.

Bernanke noted that markets for GSE debt and mortgages have come under stress in recent days ``because of widespread dislocations in financial markets generally.''

Yields on Fannie Mae and Freddie Mac corporate debt fell relative to benchmarks following Bernanke's remarks.

The difference between yields on Washington-based Fannie's 10-year debt and similar-maturity Treasuries fell 6.9 basis points to 121 basis points as of 2:30 p.m. in New York, after earlier falling as low as 119 basis points, according to data complied by Bloomberg.

Richmond Fed President Jeffrey Lacker has endorsed the view of former Fed Chairman Greenspan that the government should nationalize Fannie Mae and Freddie Mac before splitting them up and selling them off.

`Credibly' Privatized

``I would prefer to see them credibly and demonstrably privatized,'' Lacker said in an Aug. 20 interview with Bloomberg Television.

Bernanke said it's an ``open question'' whether the GSE model ``is viable without at least implicit government support.''

``Private-label securitization has largely stopped,'' Bernanke said. The fact that GSE issuance continued suggests ``at least under the most stressed conditions, some form of government backstop may be necessary to ensure continued securitization of mortgages,'' he said.

Paulson hasn't taken a position on the future of the two mortgage finance companies beyond their current status under federal conservatorship, where they are overseen by the government while remaining shareholder-owned.

Economy Worsens

U.S. foreclosure filings rose to a record in the third quarter, and will probably increase as the economy worsens and the availability of financing shrinks, RealtyTrac Inc., a seller of default data, reported on Oct. 22.

Almost 20 percent of U.S. mortgage borrowers owed more on their loans during the third quarter than their house was worth as foreclosures depressed prices and the economy weakened, according to First American CoreLogic, a Santa Ana, California- based seller of economic and real estate data.

Borrowing costs have remained high. U.S. 30-year mortgage rates tracked by Freddie Mac rose to 6.46 percent this week, up from 6.04 percent the previous week and 6.07 percent on Jan. 3. Banks are unlikely to compete for new loans and offer lower rates so long as the outlook for the economy remains dim, economists said.

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net

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Natural Gas Futures May Gain on Lower Temperatures, Survey Says

By Reg Curren

Oct. 31 (Bloomberg) -- Natural gas prices may gain in the days ahead on speculation lower temperatures forecast for the Midwest may lift demand for the heating and power-plant fuel.

Six of 14 analysts in the survey, or 43 percent, said U.S. prices would rise through Nov. 7. Four, or 29 percent, said futures would fall. Four others predicted little change in prices. Last week, 60 percent of participants expected gas futures to increase.

``Colder temperatures are anticipated in the late 11-to 15- day period,'' said Guy Gleichmann, president of United Strategic Investors Group in Hollywood, Florida. Natural gas prices should ``easily challenge resistance at $6.80 to $7'' per million British thermal units.

Heating requirements tend to rise in late October and early November with cooler weather. Lower temperatures in the Midwest can be particularly significant for gas demand because 72 percent of households in the region rely on the fuel for heating.

Natural gas for December delivery gained 5 percent this week to settle at $6.783 per million Btu on the New York Mercantile Exchange.

The natural gas survey has correctly forecast the direction of prices 49 percent of the time since its June 2004 introduction.

     Bloomberg's survey of natural-gas analysts and
traders, conducted on Fridays, asks for an assessment of
whether Nymex natural-gas futures will probably rise, fall
or remain neutral in the coming week. This week's results
were:

                  RISE   FALL   NEUTRAL
                    6      4       4

To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net

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Chevron Profit Doubles After Oil Tops $147 a Barrel

By Joe Carroll

Oct. 31 (Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, said third-quarter profit doubled after crude surged to a record above $147 a barrel.

Net income climbed to $7.89 billion, or $3.85 a share, from $3.72 billion, or $1.75, a year earlier, San Ramon, California- based Chevron said today in a statement. Per-share profit excluding such items as divestiture gains and damage from hurricanes in the Gulf of Mexico was $3.94, 67 cents higher than the average of 12 analyst estimates compiled by Bloomberg.

Oil futures in New York averaged more than $118 a barrel, up 57 percent from a year earlier, the biggest third-quarter increase since the contracts began trading in 1983. The world's four largest investor-owned oil companies, which netted $426 million a day in the latest quarter, have seen crude drop $80 a barrel from the record set in July.

``The fourth quarter does not look pretty at all,'' said Justin Perucki, an analyst at Morningstar Investment Services Inc. in Chicago who rates Chevron shares ``buy'' and doesn't own any. ``It's not looking very positive, given the weak economic outlook.''

Worldwide demand for petroleum-based fuels such as gasoline and jet fuel will grow this year at the slowest pace since 1993, the International Energy Agency said in an Oct. 10 report. The Paris-based group pegged 2008 demand growth at 0.5 percent, one- fourth the average annual rate of the past five years.

Revenue Rises

Chevron's third-quarter revenue jumped 42 percent to $76.2 billion. Profit from oil and natural-gas sales climbed 80 percent to $6.18 billion, even as production declined for an eighth straight quarter. Refining earnings surged almost fivefold to $1.83 billion as profit margins widened and the company's largest plant returned to full output after repairs.

Chevron rose 42 cents to $74.60 in New York Stock Exchange composite trading. The shares had fallen 21 percent this year before today.

Chevron expects to pump 2.62 million barrels of oil equivalent a day in the current quarter, said George Kirkland, executive vice president for exploration and production. That would be up 0.3 percent from last year's fourth quarter and would mark the company's first increase since 2006.

The $2.8 billion Frade project off the coast of Brazil will start pumping oil in the second quarter of 2009, rather than in March as previously estimated, Kirkland told investors and analysts on a conference call.

Spending Outlook

Capital spending probably will be about the same in 2009 as this year's $22.9 billion, Kirkland said.

Irving, Texas-based Exxon Mobil Corp., the world's largest oil company, reported yesterday that its third-quarter profit rose 58 percent to $14.8 billion. Europe's Royal Dutch Shell Plc posted a 22 percent gain to $8.45 billion.

Both companies exceeded analyst earnings estimates, as did London-based BP Plc and U.S. producers Marathon Oil Corp. and Occidental Petroleum Corp. when they reported profit increases this week. ConocoPhillips, the No. 3 U.S. oil company, posted a 41 percent gain in net income to $5.19 billion last week.

Chevron's petroleum production dropped 5.7 percent to the equivalent of 2.44 million barrels of oil a day, the lowest since the first quarter of 2005.

Gustav and Ike

Output fell partly because of contracts with oil-rich nations that inversely link the company's share of output to energy prices, said Tina Vital, an analyst at Standard & Poor's in New York. Hurricanes Gustav and Ike, which struck the U.S. in September, idled wells and toppled platforms in the Gulf of Mexico.

Chevron said Gulf storms reduced its daily production average in September by about 150,000 barrels of oil equivalent.

Declining prices may force producers to trim drilling budgets or delay some wells, said John Escario of Rydex Investments in Rockville, Maryland.

``Oil's been on a tremendous run, but it's given up more than 50 percent of its value since the summer,'' said Escario, who helps manage $13 billion at Rydex. ``In the next year it's hard to see demand picking up because we'll still be trying to put the economy back together.''

To contact the reporter on this story: Joe Carroll in Houston at jcarroll8@bloomberg.net.

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Commodities Post Biggest Monthly Drop in 52 Years on Economy

By Chanyaporn Chanjaroen and Grant Smith

Oct. 31 (Bloomberg) -- Commodities had the biggest monthly drop since at least 1956 on concern that a slump in global economic growth will sap demand for raw materials.

In October, the Reuters/Jefferies CRB Index of 19 raw materials plunged 22 percent. Crude oil plummeted by a third, the most ever. Copper fell a record 36 percent, and gold dropped the most in 26 years.

``October is at last ending, the worst month in commodity history,'' said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. ``Investors are expecting lower growth for the longer term, and that is putting prices under pressure.''

The world's central banks are cutting borrowing costs as the financial crisis that started with the U.S. housing slump threatens to tip the global economy into recession. UBS AG cut its forecast for global growth next year to 1.3 percent, from 2.2 percent, prompting a reduction of as much as 48 percent in its 2009 forecasts for commodities such as copper.

The CRB index closed today at 268.39, down from 345.50 on Sept. 30. Crude-oil futures for December delivery closed at $67.81 a barrel on the New York Mercantile Exchange, down from $100.64 at the end of September.

``The outlook for demand remains weak while we wait for economic rescue measures to feed their way through the system,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London. ``Even in emerging markets, the growth is likely to be lower than was previously expected.''

Borrowing Costs

The U.S. government on Oct. 29 lowered its benchmark lending rate by a half-percentage point to 1 percent in an attempt to reverse the economy's freefall. European Central Bank President Jean-Claude Trichet said it's ``a possibility'' that the institution's governing council would again cut rates at its next meeting.

``It is not a certainty, it is a possibility,'' Trichet said on Oct. 27. ``If we do so, and I repeat if, it would be because we would have judged that a further alleviation of inflation risks and further improvement of inflation expectations fully justified the move.''

Gross domestic product contracted in the third quarter at the fastest annual pace since 2001, the U.S. Commerce Department said yesterday. The U.S. is the world's biggest energy consumer.

The weak economy has weighing on the election prospects of President George W. Bush's Republican party. With four days until Election Day, national polls show Barack Obama, the Democratic presidential candidate, leading Republican John McCain by an average of 6 percentage points.

Copper Tumbles

On the London Metal Exchange, copper for delivery in three months fell $101, or 2.4 percent, to $4,099 a metric ton today. The implied volatility of the metal climbed to 91 percent this week, the highest since at least 2004.

Natural-gas company EnCana Corp. and Canadian Natural Resources Ltd. helped push Canadian stocks down 17 percent in the month, the most in a decade. Goldcorp Inc. plunged 8.1 percent today, leading mining shares lower.

Gold futures for December delivery fell $20.30, or 2.7 percent, to $718.20 an ounce on the Comex division of the Nymex. This month, the price dropped 18 percent, the most since March 1980.

The dollar jumped 7.8 percent this month against a basket of six major currencies. The gain was the biggest since October 1992.

``The dollar is definitely driving the gold market lower,'' said Robert Martin, chief executive officer of Dubai-based GTL Trading Ltd., which trades gold and currencies for 4,000 clients.

Goldenport Holdings Plc, a U.K-listed shipowner, fell by a record amount in London trading after saying trade in commodity shipping has ``virtually halted.''

Wheat had the biggest monthly drop in 22 years on speculation the economic slump will cut demand. Corn and soybeans declined for the fourth month in a row.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net

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Pemex Training Faulted in Accident That Killed 22

By Andres R. Martinez and Hugh Collins

Oct. 31 (Bloomberg) -- Petroleos Mexicanos, the state- owned oil company, needs better training for offshore workers and improved weather forecasts to prevent accidents such as the one that killed 22 production platform workers last year, according to an independent report.

Panic and disorder led to the death of the workers on the Usumacinta platform in the Gulf of Mexico, Mario Molina said today at a press conference in Mexico City. Molina, a Nobel Prize-winning chemist, was hired by the state oil company known as Pemex to study the Gulf's deadliest offshore oil accident.

Twenty-two people were killed after a drilling rig hit a floating oil production platform on Oct. 23, 2007. Pemex ended its contracts with the platform operator Compania Perforadora la Central after the accident and initiated its own investigation.

``The weather bulletins lacked the details necessary to develop the risk model, which was equivalent to a Category 1 hurricane,'' the report said. ``All of the personnel in Bay of Campeche must be trained immediately to survive at sea.''

Eighty-six employees had been working on the platform when waves as high 26 feet (8 meters) and wind gusts of 81 miles (130 kilometers) hit. A Category 1 hurricane on the Saffir-Sampson starts at 75 miles-per-hour.

The platform and rig were located 47 miles from Ciudad del Carmen in Mexico's Campeche state.

Multiple Reports

Molina's report is the first of three to be released. The government has yet to release a report from its own investigation. Pemex plans to issue its report at 4 p.m. local time today.

``We can't place the blame with anyone in particular,'' Molina said. ``It was a failure of the system, of the way the protocols were written.''

Pemex offshore and Gulf port operations often close during the winter for short periods of time as so-called ``nortes'' storms roll through, bringing intense rain and waves. A week after last year's accident, Pemex shut in 600,000 barrels of oil in the Gulf because of a similar weather situation.

Mexico pumps about 80 percent of its oil from the Gulf of Mexico.

Pemex made undisclosed payments to the families of the dead as a settlement to the accident.

To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net

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Brazilian Real Drops For Third Month On Global Economic Slump

By Jamie McGee and Adriana Brasileiro

Oct. 31 (Bloomberg) -- Brazil's real posted its third consecutive monthly decline, the longest stretch of losses in six years, on speculation the global economic slowdown will reduce demand for emerging-market products and assets.

Commodities, which account for two-thirds of Brazil's exports, had their worst month since at least 1956 on concern that a slump in global economic growth will sap demand for raw materials. Brazil's Bovespa index of stocks plunged 25 percent in October.

``All the countries that were growing and were to some extent based on commodities will face a significant slowdown next year,'' said Pedro Tuesta, an economist in New York at research firm 4Cast Inc. in New York. ``That puts more pressure on the current account and therefore on the currencies.''

The real dropped 2.5 percent to 2.1590 per dollar today, from 2.1050 yesterday. The currency dropped 12 percent in October. The last time the real fell three straight months was in 2002.

The Federal Reserve agreed this week to provide $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore, expanding its effort to revive global bank lending. The International Monetary Fund approved an emergency loan program that almost doubles borrowing limits for developing countries and waives demands for economic austerity measures.

``The Fed acknowledged Brazil is systemically important for the whole system,'' said Bartosz Pawlowski, a strategist in London at TD Securities Ltd. ``Such an assurance should help the real. As of yet, it's not enough to completely reverse the situation.'' The real will not appreciate beyond 2 against the dollar until 2009, he said.

Currency Swaps

Banco Central do Brasil has announced measures to unlock credit markets, such as imposing a limit of 30 percent on the amount of time-deposit reserves banks can use to buy government bonds. The move is aimed at boosting purchases of loan portfolios from faltering lenders. The government also freed more funds for farm lending.

The central bank has also offered currency swaps daily to add liquidity to the local currency market and bought reais through repurchase agreements. The bank placed 8,950 currency swap contracts of 57,500 offered at two auctions today to help shore up the real.

Brazilian stocks fell today after banks and retailers missed analysts' profit estimates and commodity producers dropped. The Bovespa index dropped 0.7 percent, deepening its monthly decline.

Emerging Market Risk

``Most investors are not yet ready to recommit to emerging- market risk,'' wrote Nick Chamie, global head of emerging- markets research in Toronto at RBC Capital Markets, in a research note today.

The Reuters/Jefferies CRB Index of 19 raw materials has plunged 22 percent this month, the steepest decline in at least a half-century. Brazil is the world's biggest exporter of beef, orange juice, sugar and coffee.

The cost of borrowing dollars for three months in London fell today, capping the first monthly decline since May, after central banks provided cash and cut interest rates to unlock the supply of credit.

``The recent falling of global money markets will reduce pressure on some emerging-market currencies, especially Brazil, which has strong fundamentals,'' Pawlowski said.

The yield on Brazil's zero-coupon bond due in January 2010 rose 9 basis points, or 0.09 percentage point, to 15.71 percent, according to Banco Votorantim. The yield on Brazil's overnight futures contract for January 2009 delivery fell 7 basis points to 13.76 percent.

To contact the reporters on this story: Jamie McGee in New York at jmcgee8@bloomberg.net; Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net

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Yen, Dollar Post Record Monthly Gains on Global Economic Slump

By Ye Xie and Daniel Kruger

Oct. 31 (Bloomberg) -- The yen and the dollar rose against the euro and posted record monthly gains as signs of a global recession led investors to seek safety.

The euro also weakened as inflation in the 15 nations that share the currency slowed to the lowest since January, making room for the European Central Bank to lower borrowing costs. The Bank of Japan cut its target lending rate to 0.3 percent.

``The yen should remain relatively firm on global economic worries,'' said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. ``The convergence of interest rates should play in favor of the dollar.''

The yen climbed 1.5 percent to 125.53 per euro at 4:01 p.m. in New York, from 127.31 yesterday. The yen traded at 98.51 against the dollar, compared with 98.61. The dollar rose 1.4 percent to $1.2739 versus the euro from $1.2915.

Japan's currency appreciated 19 percent against the euro in October on speculation the global economic slump will encourage investors to sell higher-yielding assets and pay back low-cost loans in the yen. It was the currency's biggest monthly gain since the euro's introduction in 1999.

The dollar increased a record 10.6 percent this month against the euro and dropped 7.2 percent against the yen, the biggest decline since 1998, when hedge fund Long-Term Capital Management LP collapsed.

Honda Earnings

The strength in the yen has eroded Japanese exporters' overseas income. Honda Motor Co., Japan's second-largest automaker, cut its operating profit forecast for the year ended in March 2009 by 13 percent to 550 billion yen ($5.6 billion) this week. Japan's Economic and Fiscal Policy Minister Kaoru Yosano said in Tokyo that abrupt increases in currency volatility are ``undesirable.''

The yen increased 3 percent to 65.29 against the Australian dollar today and 1.7 percent to 58.20 versus the New Zealand currency on speculation carry trades will unwind. The Aussie dropped 22 percent against the yen this month, while the kiwi, as New Zealand's currency is known, decreased 19 percent. The target lending rates are 6 percent in Australia and 6.5 percent in New Zealand.

Japanese individual investors purchased 632 billion yen ($6.38 billion) this week, the fourth consecutive week of net buying, Junya Tanase, a currency strategist at JPMorgan Chase & Co. in Tokyo, wrote in a research note. The outstanding bets on a decline in the yen dropped to 1.1 trillion yen, the smallest since October 2006, according to the report.

Currency Volatility

Volatility implied by dollar-yen options expiring in one month, a measure of expectations for future currency moves, rose to 31.63 percent from 31.16 percent yesterday. It reached 41.79 percent on Oct. 24, the highest since Bloomberg began compiling data in December 1995. Higher volatility can discourage carry trades by making profits harder to predict.

``I like the yen,'' said Chirag Gandhi, a portfolio manager of a $2.5 billion global fixed-income fund for the state of Wisconsin in Madison. ``The unwinding of structural carry trades and lower interest-rate spreads between Japan and other countries are supporting the yen.''

The euro weakened as the European Union statistics office reported that inflation in the countries sharing the currency eased to 3.2 percent in October, encouraging speculation that the ECB will cut interest rates for the second time in less than a month in response to the financial and economic crisis.

Coordinated Cuts

The central bank participated in a coordinated interest- rate reduction by global central banks on Oct. 8 to prevent the international financial system from collapsing, reducing its benchmark rate by a half-percentage point to 3.75 percent. Policy makers will probably cut the region's main refinancing rate to 3.25 percent when they next meet Nov. 6, according to the median forecast of 50 economists surveyed by Bloomberg News.

The pound weakened 2.2 percent to $1.6087 after London- based market researcher GfK NOP said U.K. consumer confidence in October fell to the lowest since at least 1974. Sterling has dropped 10 percent this month, the biggest decline since investor George Soros drove the currency out of Europe's system of linked exchange rates in 1992.

The Bank of England will lower its main rate by a half- percentage point to 4 percent when it announces its next decision on Nov. 6, according to the median forecast of 30 economists surveyed by Bloomberg News.

Currencies of developing countries tumbled this month on concern a global economic slump will sap demand for emerging- market assets.

South Africa's rand dropped 15 percent to 9.7725 per dollar, the most since 1985. Mexico's peso lost 15 percent to 12.8890 per dollar, the biggest decrease since 1994, when Mexico abandoned its peg to the dollar and devalued the currency. Russia's ruble weakened 5.2 percent to 27.0633.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net

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Cattle Prices Rise on Signs of Falling Animal Supply; Hogs Drop

By Whitney McFerron

Oct. 31 (Bloomberg) -- Cattle rose for a fifth day, posting the biggest weekly gain since 2004, on speculation that the supply of fattened animals to U.S. slaughterhouses is shrinking. Hog futures fell to an 11-month low.

U.S. meatpackers will process 638,000 head of cattle this week through tomorrow, down 1.4 percent from the previous week and down 3.5 percent from the same week a year earlier, the Department of Agriculture said today. The country's feedlot herd on Oct. 1 was the smallest for that date since 2003, the USDA said earlier this month.

``Our numbers of fed cattle coming off the feedlots are going to be the tightest for the whole entire year here in the next 30 days,'' said Troy Vetterkind, owner of Vetterkind Cattle Brokerage in Chicago. ``It's just the lack of placements from the previous five or six months, because of higher corn.''

Cattle futures for December delivery advanced 1.25 cents, or 1.4 percent, to 92.7 cents a pound on the Chicago Mercantile Exchange. That gain for the week was 5.9 percent, the largest jump since November 2004. Still, futures are down 7.6 percent this month, the biggest monthly loss since March 2006.

Futures may reach 94 cents a pound for the December contract and 97 cents for the February contract in the next 30 days, Vetterkind said.

Feeder-cattle futures for January delivery rose for a third day, gaining 0.8 cent, or 0.8 percent, to 98.05 cents a pound. The price dropped 5.5 percent for October.

Smaller Feedlot Herd

The feedlot herd fell to 10.415 million head of cattle as of Oct. 1 from 10.967 million animals a year earlier, the USDA said on Oct. 17. Cattle producers lost money for the 16th straight month in September after corn prices jumped, reaching a record $7.9925 a bushel on June 27, according to Ron Plain, an economist at the University of Missouri in Columbia.

Wholesale choice beef fell 0.4 cent to $1.4221 a pound today, USDA data show. The price has declined 8.5 percent in October, the biggest monthly drop since June 2007.

In another livestock market, hog futures fell for a fourth day on speculation that the slumping global economy is curbing overseas demand for U.S. pork.

The price of wholesale pork fell for the fifth time in six sessions yesterday to the lowest since April 10, according to the USDA. The MSCI World Index of equities has lost 20 percent in October, the most in its 38-year history.

Exports `Dragging'

``Hog exports have been dragging,'' said Dick Quiter, an account executive at FuturesOne in Chicago. ``That's directly related to some of the influences of the outside markets and the economy in general. It's just uncertainty everywhere, and it's probably tight credit.''

Hog futures for December settlement fell 1.2 cents, or 2.1 percent, to 54.8 cents a pound in Chicago. Earlier, the price touched 54.7 cents, the lowest since Nov. 12, 2007. Hogs dropped 15 percent in October, the biggest monthly decline since July 2003.

Wholesale pork fell 0.2 cent, or 0.3 percent, to 62.17 cents a pound, the USDA said, dropping 16 percent this month.

U.S. pork exports fell for the third straight month in August to 377.1 million pounds, down 7.9 percent from the previous month, according to the most recent USDA data. The U.S. still sent 3.279 billion pounds of pork abroad in the eight months ended Aug. 31, up 69 percent from a year earlier.

To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net.

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Copper Falls, Capping Record Monthly Slide, as Demand Slumps

By Millie Munshi

Oct. 31 (Bloomberg) -- Copper prices fell, capping the biggest monthly drop ever, on speculation that a deepening economic slump will reduce global demand for metals.

Spending by U.S. consumers fell the most in four years in September, concluding the weakest quarter in three decades, Commerce Department data showed today. More than $9.5 trillion has been wiped out from the value of stocks worldwide this month. In October, copper plunged 36 percent, the most since New York futures debuted in 1988.

``There are some headwinds in the economy that will continue to pressure copper,'' said Donald Selkin, the chief market strategist at National Securities Corp. in New York. ``It will keep trading around these lower levels.''

Copper futures for December delivery fell 6.15 cents, or 3.3 percent, to $1.829 a pound on the Comex division of the New York Mercantile Exchange. The metal, used in appliances, electronics and cars, has slumped 40 percent this year.

``There continues to be legitimate concern about a U.S.-led global recession, a fear that has dominated sentiment for much of this month and which is impacting metals again,'' Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said in a report.

The metal also fell as inventories gained, Selkin said. Stockpiles monitored by the London Metal Exchange jumped 3 percent today to 230,650 metric tons, the highest since March 17, 2004.

Recession Concerns

The prospect of ``severe'' recession has increased concern that demand will dwindle for industrial commodities, Citigroup Inc. said this week.

The Institute for Supply Management-Chicago said today its measure of business decreased in October by the most since the index started in 1968.

Citigroup slashed its 2009 copper-price forecast by 45 percent. The metal will average $2 a pound next year, the bank said on Oct. 27. That compares with a previous forecast of $3.65 a pound.

The Reuters/Jefferies CRB Index of 19 raw materials is heading for the steepest monthly decline since at least 1956 on concern that a slump in global economic growth will sap demand.

On the LME, copper for delivery in three months dropped $101, or 2.4 percent, to $4,099 a metric ton ($1.86 a pound).

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.

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Corn, Soybeans Decline as Slowing World Economy Cuts Grain Use

By Jeff Wilson

Oct. 31 (Bloomberg) -- Corn and soybeans fell, capping their fourth straight monthly declines, on speculation the deepening economic slump is reducing global demand for food, animal feed and fuel made from the crops.

The U.S. said today that consumer spending tumbled in September by the most in four years, after yesterday reporting the biggest contraction in the economy since 2001. A rally in the dollar also made commodities more expensive for importers using other currencies. Corn fell 18 percent this month and soybeans dropped 11 percent.

``Now the worry is that the U.S. problems will become a global recession,'' said Jim Riley, a broker and analyst at the Linn Group in Chicago. ``Confidence has been shaken and the demand is declining'' for agricultural commodities.

Corn futures for December delivery fell 8 cents, or 2 percent, to $4.015 a bushel on the Chicago Board of Trade. The most-active contract has tumbled 50 percent from an all-time high of $7.9925 on June 27.

Soybean futures for January delivery fell 10 cents, or 1.1 percent, to $9.33 a bushel in Chicago. The price has dropped 43 percent from a record $16.3675 on July 3.

Still, corn rose 7.7 percent this week and soybeans gained 7.6 percent, the first such gains in five weeks.

The biggest monthly rally by the dollar in 16 years eroded the appeal of U.S. commodities, Riley said. Crude oil fell 33 percent in October, a record monthly drop, signaling waning demand for fuel additives such as ethanol and biodiesel made from crops, he said.

Dollar Rally

``The dollar's rally has been the driver for falling grain prices,'' Riley said. ``Corn has been following crude oil lower.''

The Reuters/Jefferies CRB Index of 19 raw materials fell 22 percent in October, the largest monthly drop in five decades. All 19 commodities fell, led by a 42 percent plunge in gasoline and a 35 percent drop in copper.

Spending by U.S. consumers in September slipped 0.3 percent, more than forecast, capping the weakest quarter in three decades and indicating the economic slump is deepening, the Commerce Department said today in Washington.

``It's going to take a while before confidence returns,'' said Greg Wagner, senior market analyst for AgResource Co. in Chicago. ``I question whether there will be a renewed appetite for agricultural commodities in the near future because so many consumers were burned by high prices earlier this year.''

U.S. exporters sold 413,100 metric tons of corn in the week ended Oct. 24, down 50 percent from the previous four-week average, the Department of Agriculture said yesterday. Sales for delivery in the year ending Aug. 31 are 40 percent below the same period a year earlier.

Declining Demand

Corn demand is declining as buyers substitute cheaper wheat and supplies from other exporters, said Jeff Hainline, president of Advance Trading Inc. in Bloomington, Illinois. U.S. corn offered for sale to buyers in the Middle East is 90 cents a bushel over futures, 10 cents higher than quotes from Brazil and 40 cents over supplies from Ukraine, Hainline said.

World wheat production will rise 12 percent to a record 683 million metric tons in the year ending June 2009, up from 610 million tons this past year, the International Grains Council said yesterday in a report. World exports are forecast to rise 6.4 percent to 117 million tons.

Global corn production will fall 1.8 percent to 773 million tons, the Council said. Exports will drop 14 percent to 86 million tons. World inventories on June 30 will total 111 million tons, down 13 percent from a year earlier, the IGC said.

``The U.S. is the third-cheapest corn supplier to the world market,'' Hainline said. ``Demand going forward is likely to continue to decline.''

Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, followed by soybeans at $26.8 billion, government figures show.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net

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Gold Posts Biggest Monthly Drop in 28 Years as Dollar Climbs

By Pham-Duy Nguyen

Oct. 31 (Bloomberg) -- Gold futures fell, posting the biggest monthly decline in 28 years, as the dollar climbed, reducing the appeal of the precious metal as an alternative investment. Silver also fell.

The dollar rebounded against a weighted basket of six major currencies after dropping 2.8 percent in the previous two days. Equities worldwide were poised for the biggest monthly decline ever. Gold has dropped 14 percent this year, while the dollar index gained 13 percent.

``Global liquidation means more money from foreign assets are going into the dollar,'' said Adrian Day, the president of Adrian Day's Asset Management in Annapolis, Maryland. ``The dollar is seen as a safe haven. There's also liquidation of gold itself, which is easily sold.''

Gold futures for December delivery fell $20.30, or 2.7 percent, to $718.20 an ounce on the Comex division of the New York Mercantile Exchange. This month, the price dropped 18 percent, the most since March 1980.

Silver futures for December delivery fell 5.5 cents, or 0.6 percent, to $9.73 an ounce. The metal declined 21 percent this month and is down 35 percent this year.

The euro traded as low as $1.2668 today. It reached a record $1.6038 on July 15.

Gold may fall to $620 should the dollar strengthen to $1.20 against the euro, said Joel Crane, a metals strategist at Deutsche Bank AG in New York. ``Cash is just more predictable than gold now,'' he said.

`Central-Bank Intervention'

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged for a fourth day at 749.2 metric tons. It reached a record 770.6 on Oct. 10.

``The dollar is in a short squeeze that won't last much longer,'' said James Turk, the founder of Goldmoney.com, which held $405 million of gold and silver in storage for investors at the end of September. ``Gold is dropping in dollar terms because of central-bank intervention and the massive deleveraging of dollar debt.''

Since the second quarter of 2007, banks worldwide have posted $684.5 billion in writedowns and losses related to investments in subprime mortgages.

Commodities were headed for the biggest monthly decline since at least 1956 as the global economic slump slows demand for energy, industrial metals and crops.

``There's significant pressure on all metals and commodities,'' said Paul Sutherland, the chief investment officer at Financial & Investment Group in Traverse City, Michigan. ``Gold is not acting like a currency. It's acting like a commodity. People are selling gold and gold shares because it's something you can sell to raise cash.''

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

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Crude Oil Rises as Traders Are Caught in End-of-Month Squeeze

By Mark Shenk

Oct. 31 (Bloomberg) -- Crude oil rose in the last 10 minutes of trading as market participants scrambled to unwind positions on the final day of transactions for the November gasoline and heating-oil contracts.

Prices climbed as traders who sold the November contracts this week, when gasoline dipped to a 21-month low, had to buy the futures back. In a squeeze, a trader goes short by selling oil, hoping the price will decline. The trader must buy back the futures in the last days before the contract expires or be forced to deliver the underlying product.

``There were a lot of traders who were squaring their books and couldn't wait,'' said Steve Bellino, senior vice president of energy risk management at MF Global Ltd. in New York. ``I wouldn't read a lot into it because we've been seeing huge movements on expiration recently.''

Crude oil for December delivery rose $1.85, or 2.8 percent, to settle at $67.81 a barrel at 2:52 p.m. on the New York Mercantile Exchange. Futures dropped as much as $2.84, or 4.3 percent, during today's session. Prices, which have tumbled 54 percent since reaching a record $147.27 on July 11, gained 5.7 percent this week.

The October crude-oil contract rose by a record $16.37 a barrel when it expired on Sept. 22, as traders unwound positions.

``There were people short and in the last few minutes they were forced to pay up,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut.

Gasoline for November delivery declined 2.57 cents, or 1.8 percent, to settle at $1.4413 a gallon in New York. The November contract climbed as much as 6.3 cents, or 4.3 percent, in the last five minutes of floor trading. Heating oil rose 2.22 cents, or 1.1 percent, to settle at $2.0063.

Record Decline

Oil fell 33 percent in October, a record monthly decline, on signs that the economic slowdown in the U.S. and Europe will spread to emerging markets, curbing fuel consumption. The previous record price decline occurred in February 1986, when crude oil slipped 30 percent to $13.26 a barrel. Oil trading in New York began on March 30, 1983

Rate cuts this week by the three biggest oil users, the U.S., China and Japan, failed to inspire confidence that a recession can be avoided.

``There was no news, we just had a rush of late buying because of the product expiration,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York. ``The underlying story hasn't changed.''

Brent crude oil for December settlement rose $1.61, or 2.5 percent, to settle at $65.32 a barrel on London's ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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Canada Stocks Cap Worst Month Since 1998; Goldcorp, EnCana Drop

By John Kipphoff

Oct. 31 (Bloomberg) -- Canadian stocks fell, capping their worst monthly slide in a decade, as commodity and finance companies dropped on lower gold and oil prices and concern that profits will be hurt by a recession.

Goldcorp Inc. led mining shares' largest monthly slide on record after the company's profit missed estimates. EnCana Corp. led energy producers' retreat. Manulife Financial Corp. fell after being downgraded at UBS AG. Research In Motion Ltd. rose.

``The month has been awful,'' said John Stephenson, who helps to oversee about $1.5 billion at First Asset Investment Management Inc. in Toronto. ``We got whipsawed by the currency and the commodities -- that hurt our equity valuations. I think the trend is up from here, but the path will be rocky.''

Reports showed Canada's economy shrank 0.3 percent in August and U.S. consumer spending slid more than forecast last month. October was the worst month in almost six decades for the Canadian dollar, and a commodities gauge is headed for its biggest monthly retreat in 52 years. The Standard & Poor's/TSX Composite Index fell 1 percent to 9,762.76 today in Toronto.

Canada's main stock benchmark, which derives three-quarters of its value from resource and finance shares, rallied 15 percent in the previous three days after stock valuations fell to the lowest on record on Oct. 27 and central banks around the world cut borrowing costs to unlock credit, seeking to avert a recession. The S&P/TSX still fell 17 percent in October, the most since a 20 percent drop in August 1998.

Misses Estimates

Goldcorp retreated 8.1 percent to C$23.04 and slid 33 percent in October. The world's second-largest gold producer by market value said third-quarter profit rose almost fourfold to $297.2 million (C$363.22 million). The company said that it earned 9 cents a share excluding certain items. That missed the 14 cents average estimate of 19 analysts in a Bloomberg survey.

Larger rival Barrick Gold Corp. dropped 7.8 percent to C$27.56, taking its drop in October to 29 percent, the biggest such slide since the October 1987 stock market crash. Potash Corp. of Saskatchewan Inc., the biggest maker of crop nutrients, fell 0.9 percent to C$102.60 today and lost more than a quarter of its value this month.

Gold futures fell to $718.20 an ounce in New York today after the U.S. dollar rose, reducing the investment appeal of the metal and other commodities. Gold extended its decline this month to 18 percent, the worst in 28 years, while wheat prices slid the most since 1980.

Commodities Slump

The Reuters/Jefferies CRB Index of 19 raw materials headed for its worst month since at least 1956 on concern a slump in global growth will sap commodity demand. Crude oil futures surged in the last minutes of the floor-trading session in New York as traders unwind positions on the final day of transactions for the November gasoline and heating-oil contracts. Oil still fell a record 33 percent in October.

EnCana, the nation's largest energy company by market value, dropped 2.2 percent to C$61.23. Canadian Natural Resources Ltd. fell 2.4 percent to C$60.82.

ARC Energy Trust jumped 13 percent to C$18.28 for its steepest climb since Oct. 14. The oil and gas income trust reported third-quarter earnings that exceeded analysts' forecasts and said that valuations and gas reserve estimates for its land in the Montney region of British Columbia increased. ARC had its share-price target raised to C$20.50 from C$19 by UBS AG analyst Grant Hofer in Toronto.

A measure of energy shares fell 0.5 percent after dropping as much as 4 percent earlier. The group slid 18 percent in October. A gauge of raw-materials stocks slipped 5.1 percent today and fell a record 31 percent this month even after climbing 29 percent in the previous three days.

Historic Swings

``The swings that we're seeing are historic, and people just don't know what to make of it,'' said Patricia Lovett-Reid, a senior vice president at TD Waterhouse in Toronto. ``It's the volatility that's driving the fear.''

Manulife slid 3.5 percent to C$24.12 and took its monthly loss to 37 percent, the worst ever. North America's biggest insurance company by assets was downgraded to ``neutral'' from ``buy'' by Andrew Kligerman at UBS, who revised his valuations for U.S. life insurers, citing ``sharp equity market declines, credit market dislocation and a global recessionary outlook.''

Royal Bank of Canada, the nation's biggest lender by assets, fell 1.6 percent to C$46.84.

An index of computer-related stocks added 4.7 percent on speculation that demand for mobile phones may withstand an economic slowdown better than other electronic products.

Research In Motion, the maker of the Blackberry e-mail phones, rose for the first time in three days, adding 6.4 percent to C$61.02.

To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.

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Brazilian Stocks Fall on Profit Concern; Mexico's Bolsa Gains

By Alexander Ragir and William Freebairn

Oct. 31 (Bloomberg) -- Brazilian stocks fell for the first time in four days after banks and retailers missed analysts' profit estimates and the nation's biggest homebuilder said it slowed its expansion last quarter.

Lojas Renner SA, Brazil's biggest publicly traded clothing retailer, slid the most in four weeks after third-quarter profit trailed estimates. Banco Nossa Caixa SA paced declines for banks on speculation it'll face more obstacles in its proposed purchase by Banco do Brasil SA. Cyrela Brazil Realty SA Empreendimentos & Participacoes plunged 12 percent after the expected sales value of the projects it started last quarter dropped 33 percent.

``We're pricing in a slower growth environment and commodities are falling steadily,'' said Felipe Casotti, economist at Maxima Asset Management in Rio de Janeiro, which manages the equivalent of $245 million in assets. ``But it looks like volatility is falling so there may be some support as we look forward.''

The Bovespa dropped 0.5 percent to 37,256.84. Mexico's Bolsa rose 1.2 percent. The MSCI Emerging Markets Index gained 1.6 percent.

Even with today's decline, the Bovespa index has gained more than 18 percent this week, its biggest advance in almost 10 years, after the central bank halted six months of interest-rate increases. Gafisa SA led advances for Brazilian homebuilders this week, rising 27 percent after the government said it would provide low-cost loans to the industry and the Federal Reserve said it would provide Brazil with a $30 billion credit line to ease the credit crisis. The Bovespa plunged 25 percent in October, the worst month since August 1998.

Vale Drops

Lojas Renner led the declines in today's market, dropping 15 percent today to 15.70 reais. The company said third-quarter net income fell to 31.5 million reais ($15 million), less than the median estimate of 37.1 million reais from four analysts surveyed by Bloomberg News.

Banco Daycoval SA, a Brazilian bank that specializes in loans to small and mid-size companies, fell 1.9 percent to 5.05 reais. Third-quarter earnings per share was 17 percent less than the median of four estimates compiled by Bloomberg. Itau Corretora said the results were ``weak,'' citing a weakening in asset quality and losses related the drop in the real currency.

Banco Nossa Caixa SA sank 6.5 percent to 32.30 reais, the most since Oct. 15. O Estado de S. Paulo newspaper reported Banco do Brasil SA may not be able to buy the state-controlled bank without a competitive bidding process.

Aracruz Gains

Cyrela, the largest real-estate developer, plunged 12 percent to 10.60 reais. Cyrela and its partners started developments worth as much as 1.05 billion reais ($502 million) in the third quarter, compared with 1.57 billion reais in the year ago period.

Mexico's Bolsa index rose for a fourth day and had its biggest weekly gain in 20 years as companies that depend on financing climbed on bets central bank moves will ease credit.

``The catalyst for this rally has been the announcement by the Fed,'' said Jose Arturo Tobias, head of equity research at Bulltick Capital in Mexico City. The Fed cut interest rates this week and provided Mexico with a $30 billion credit line.

Mexichem SAB, the plastics maker that said last year it would spend $1 billion on acquisitions by 2012, rose the most in the Bolsa index on speculation its access to credit may increase, Tobias said. Mexichem gained 14 percent to 12.73 pesos.

An index of Mexican homebuilders rose to the highest in almost two weeks.

In other Latin America markets, Argentina's Merval rose 3.8 percent even after Standard & Poor's cut the nation's debt rating. Peru's Lima General climbed 3.7 percent and Colombia's IGBC gained 0.7 percent. Chilean markets were shut for holiday.

-- Editor: Allen Wan

To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; William Freebairn in Mexico City at wfreebairn@bloomberg.net

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Carnival, Electronic Arts, Monster, Wynn: U.S. Equity Movers

By Elizabeth Campbell and Whitney Kisling

Oct. 31 (Bloomberg) -- The following companies had unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 4 p.m. in New York.

Airlines climbed as crude oil slid, heading for its biggest monthly slump since New York trading began in 1983.

Delta Air Lines Inc. (DAL US) advanced 15 percent to $10.98. Continental Airlines Inc. (CAL US) added 12 percent to $18.92. AMR Corp. (AMR US), which owns American Airlines, gained 11 percent to $10.22. UAL Corp. (UAUA US) increased 10 percent to $14.56. US Airways Group Inc. (LCC US) rose 8.7 percent to $10.14.

Akamai Technologies Inc. (AKAM US) gained 4.2 percent to $14.38, the highest since Oct. 21. The largest supplier of software and services to speed the delivery of Web sites reported third-quarter profit rose 37 percent on increased sales.

Aon Corp. (AOC US) climbed the most since August 2005, rising 11 percent to $42.29. The world's biggest insurance broker reported third-quarter profit, excluding some items, of 69 cents a share, beating the average analyst estimate by 5 cents, according to Bloomberg data.

B&G Foods Inc. (BGS US) rallied 31 percent to $3.73 for the biggest climb since May 2007. The maker of Ortega taco shells and Cream of Wheat cereal was raised to ``neutral'' at Credit Suisse Group AG. The company also said it may buy back as much as $10 million in shares.

Bare Escentuals Inc. (BARE US) fell the most since shares began trading two years ago, losing 39 percent to $4.18. The maker of mineral-based cosmetics forecast full-year sales growth of 10 percent, less than a July projection of 15 percent to 20 percent.

Carnival Corp. (CCL US) lost 12 percent to $25.40 for the biggest plunge since September 2001. The world's biggest cruise- line company said it will suspend its quarterly dividend. Carnival also said profit may decline in 2009 as bookings slow.

CommScope Inc. (CTV US) declined 27 percent to $14.71, the lowest since May 2005. The Hickory, North Carolina-based maker of communications equipment for AT&T Inc. (T US) forecast 2008 sales of $4.03 billion to $4.08 billion, less than the $4.13 billion average estimate of analysts surveyed by Bloomberg. The stock was cut to ``neutral'' from ``overweight'' at JPMorgan Chase & Co.

Cummins Inc. (CMI US) fell the most in a decade, sliding 17 percent to $26.15. The maker of more than a third of North America's heavy-duty truck engines cut its full-year sales forecast because of falling demand in some markets.

Electronic Arts Inc. (ERTS US) slid the most since December 1999, plunging 17 percent to $22.78. The world's second-largest video-game maker lowered its fiscal-year earnings forecast after reporting a wider second-quarter loss. The company also said it plans to cut 6 percent of its jobs.

Express Scripts Inc. (ESRX US) climbed 5.3 percent to $60.61, the highest since Oct. 20. The third-largest U.S. manager of drug benefits raised its 2008 forecast and predicted higher earnings in 2009, noting the increased use of cheap generic drugs, which leads to higher profits for benefit managers.

Medco Health Solutions Inc. (MHS US), the largest U.S. drug benefits manager, added 3.3 percent to $37.95. CVS Caremark Corp. (CVS US), the second-biggest, advanced 4.5 percent to $30.65.

Huntsman Corp. (HUN US) lost 26 percent to $10.10 for the biggest slide since June 19. Hexion Specialty Chemicals Inc. lost a bid in New York court to force Credit Suisse Group AG and Deutsche Bank AG to reconsider financing the takeover of Huntsman, the biggest maker of epoxy adhesives.

JPMorgan Chase & Co. (JPM US) rose the most in the Dow Jones Industrial Average, adding 9.7 percent to $41.25. The largest U.S. bank by market value said it issued $25 billion of preferred stock and warrants to the U.S. Treasury as part of the government's plan to shore up lenders and thaw credit markets. The company said none of its customers will face foreclosure in the next 90 days while it finds ways to make payments easier on $110 billion of problem mortgages.

KLA-Tencor Corp. (KLAC US) rallied 9 percent to $23.25, the highest since Oct. 14. Bookings at the second-largest U.S. maker of semiconductor equipment may rebound, FBR Capital Markets Corp. analysts said. KLA-Tencor also beat FBR's estimates for revenue in the fiscal first quarter.

Massey Energy Co. (MEE US) rose 13 percent, the most since Oct. 13, to $23.09. The fourth-largest U.S. coal-producer reported third-quarter profit excluding some costs that beat the average analyst estimate by 17 percent on greater sales of the power-plant and steelmaking fuel at higher prices.

McAfee Inc. (MFE US) rose the most since February 2006, climbing 17 percent to $32.55. The second-biggest maker of security software reported profit and revenue that beat analysts' estimates on an increase in orders for programs that protect computers and information.

Monster Worldwide Inc. (MNST US) gained 11 percent to $14.24, the highest since Oct. 13. The operator of the world's biggest online job-search Web site reported third-quarter profit, excluding some items, that topped analysts' average estimate by 19 percent as the company cut costs and squeezed more revenue from the slumping employment market.

Morningstar Inc. (MORN US) slumped 5.9 percent to $37.44, the lowest since November 2005. The company best known for its five-star mutual-fund ratings reported third-quarter sales growth at the slowest rate since it went public as the customers delayed purchases of financial data and investment-advisory services.

Powerwave Technologies Inc. (PWAV US) slid the most since shares began trading in 1996, dropping 47 percent to 95 cents. The maker of wireless communications products for Alcatel-Lucent (ALU US) cut its 2008 sales forecast, saying customers have canceled or delayed orders for equipment because of the global credit crisis.

Principal Financial Group Inc. (PFG US) declined 5.4 percent to $18.99. The Des Moines, Iowa-based seller of retirement savings plans was cut to ``sell'' from ``neutral'' at UBS AG, which said the company has ``limited excess capital.''

Protective Life Corp. (PL US) slid 16 percent to $8.35, the lowest since May 1993. The Alabama-based insurer was lowered to ``sell'' from ``buy'' at UBS AG on losses in its investment portfolio. Analyst Andrew Kligerman also cut the insurer's price target by 74 percent to $6.50 a share.

Sun Microsystems Inc. (JAVA US) slumped 13 percent, the most since Oct. 21, to $4.60. The world's fourth-largest maker of server computers posted its second loss in three quarters as corporate customers cut back spending amid the global credit crunch.

Sunrise Senior Living Inc. (SRZ US) lost 31 percent to $3.02, the lowest since shares went public in 1996. Health Care REIT Inc. terminated an agreement to buy a 90 percent stake in 29 senior housing properties managed by the Mclean, Virginia-based company because of ``uncertainty in the capital markets.'' Sunrise manages more than 450 retirement communities.

Town Sports International Holdings Inc. (CLUB US) fell 28 percent to $2.49 for the biggest drop since the shares began trading in June 2006. The owner of New York Sports Clubs lowered its fourth quarter and 2008 earnings forecast because of the ``worsening consumer spending environment.''

Wynn Resorts Ltd. (WYNN US) rallied the most since share began trading six years ago, surging 30 percent to $60.40. The biggest U.S. casino company by market value said third-quarter profit rose 14 percent as increased gambling in Macau made up for declines in Las Vegas. Earnings before certain costs beat the average analyst estimate by 4.4 percent, according to Bloomberg data.

Other casino operators also advanced. Las Vegas Sands Corp. (LVS US) increased 37 percent to $14.19. MGM Mirage (MGM US) climbed 7.1 percent to $16.46. Boyd Gaming Corp. (BYD US) rose 18 percent to $6.80.

International Game Technology (IGT US), the world's largest maker of slot machines, added 17 percent to $14.

To contact the reporters on this story: Elizabeth Campbell in New York at ecampbell11@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net.

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U.S. Stocks Advance After JPMorgan Takes Steps to Ease Crisis

By Lynn Thomasson

Oct. 31 (Bloomberg) -- U.S. stocks rose, capping the biggest weekly gain since 1974, after JPMorgan Chase & Co. took steps to end the housing crisis, bank lending rates declined and earnings from companies outside the financial industry expanded four times faster than the previous quarter.

JPMorgan added 9.7 percent after saying it will modify terms on $110 billion of mortgages and delay foreclosures. Morgan Stanley climbed 8.6 percent after the cost of borrowing dollars for three months fell. Wynn Resorts Ltd., the biggest U.S. casino company, soared 30 percent after increased gambling in Macau boosted profit.

``It's nice to see more of a treat than a trick on the last day of October,'' said James Dunigan, who helps oversee $66 billion as managing executive of investments at PNC Wealth Management in Philadelphia. ``The sooner we can get to a place where housing has bottomed and put some fence around the mortgage problem, the sooner we'll be heading in the right direction.''

The Standard & Poor's 500 Index advanced 1.5 percent to 968.75, rallying on consecutive days for the first time in five weeks. The Dow Jones Industrial Average added 1.6 percent to 9,325.01. The MSCI World Index of 23 developed markets rose 0.6 percent.

The S&P 500's 10 percent increase this week wasn't enough to overcome losses from earlier this month caused by evidence of a worsening global slowdown and credit freeze. The U.S. stock benchmark index slid 17 percent in October, the most for a month since 1987.

$9.5 Trillion Lost

Eight out of 10 industries in the S&P 500 climbed today. Financial stocks led the advance after losing 49 percent this year. The group gained 12 percent this week, the most since JPMorgan bought Bear Stearns Cos. in March.

This month's sell-off erased more than $9.5 trillion from the value of stocks worldwide, almost one-third of the total value erased this year, as credit-related losses and writedowns by financial firms approached $700 billion. The S&P 500 has slumped 34 percent in 2008.

All but one of the 68 markets tracked by MSCI Inc. declined in October, with 37 losing at least 20 percent. Bulgaria, Peru and Argentina did the worst, plunging more than 36 percent. Pakistan gained less than 0.1 percent.

Before today, U.S. stocks failed to rise on consecutive days for five weeks, the longest period since 2001, as the most volatile trading since the 1930s sapped investor confidence.

Cash Infusion

JPMorgan, the largest U.S. bank by market value, gained 9.7 percent to $41.25. The lender, which two weeks ago accepted a $25 billion cash infusion from the government, said it will examine home loans and may agree to reduce interest rates or principal amounts. It will also open 24 centers to provide counseling in areas with high delinquency rates.

``We're actually getting to the meat and bones of the bailout package. Hopefully that will get the wheels of credit turning again,'' said Robert Stimpson, a money manager at Oak Associates Ltd. in Akron, Ohio, which oversees $900 million.

A measure of borrowing costs between banks dropped, capping the first monthly decline since May, after central banks provided cash and cut interest rates to unlock the supply of credit. The London interbank offered rate, or Libor, for three month loans in dollars slid 0.16 point to 3.03 percent, the 15th consecutive drop, according to the British Bankers' Association.

Morgan Stanley rose 8.6 percent to $17.47. American Express Co., the largest U.S. credit-card company by purchases, increased 5.5 percent to $27.50. Financial companies in the S&P 500 added 5.5 percent as a group.

`Hopeful'

The Federal Reserve Bank of New York said it's ``hopeful'' that one or more credit-default swap clearinghouses will begin guaranteeing trades in November or December as it pushes dealers to reduce market risks.

Express Scripts Inc., the third-largest manager of pharmacy benefits, added 5.3 percent to $60.61 after boosting its 2008 forecast to a range of $3.07 to $3.10 a share.

Medco Health Solutions Inc., the biggest U.S. manager of drug plans, rose 3.3 percent to $37.95, completing the steepest weekly advance since July.

Wynn Resorts, whose shares jumped 65 percent this week, climbed 30 percent to $60.40. Third-quarter profit rose 14 percent as more gambling in Macau made up for declines in Las Vegas, the company said. Revenue gained 18 percent to $769.2 million, beating the average estimate from analysts surveyed by Bloomberg.

S&P 500 companies, excluding financial institutions, reported a 13 percent increase in third-quarter profit, according to Bloomberg data. The more than 400 companies in the group grew earnings by 4 percent the previous quarter.

Burt's Bees

Clorox Co. rose 2.7 percent to $60.81. The maker of Glad trash bags and its namesake bleach reported profit and sales that rose more than analysts estimated, helped by purchases of Burt's Bees lotions and Green Works biodegradable cleaning products.

Monster Worldwide Inc. climbed for a fourth day, adding 11 percent to $14.24. The operator of the world's biggest online job-search Web site said third-quarter profit increased 28 percent as the company cut costs and squeezed more revenue from the slumping employment market.

General Motors Corp. dropped 4.6 percent to $5.79, the most in the Dow average. The nation's largest automaker told its U.S. dealers that the company was only halfway to its October goal for sales to consumers, with just one day left in the month.

American Electric Power Co., the biggest U.S. producer of electricity from coal, slid 1.7 percent to $32.63. Progress Energy Inc., the owner of utilities in three states in the U.S. Southeast, fell 3.7 percent to $39.37. Both companies said third- quarter profit fell as mild weather cut power demand for cooling.

Utility stocks in the S&P 500 slumped 1.6 percent, the most among 10 industries.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

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