Oct. 18 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks gained, sending the Standard & Poor’s 500 Index to the highest level since August, as Bank of America Corp. paced a rally in financial shares and optimism grew over progress on expanding Europe’s rescue fund. (Source: Bloomberg)
Oct. 18 (Bloomberg) -- Jack Ablin, chief investment officer at Harris Private Bank in Chicago, talks about the performance of the U.S. stock market and corporate earnings, investment strategy and copper and gold prices as a barometer of investor sentiment. Ablin speaks with Adam Johnson and Lisa Murphy on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Oct. 18 (Bloomberg) -- Anthony Dwyer, chief equity strategist at Collins Stewart, talks about the outlook for U.S. stocks and the economy. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
Oct. 18 (Bloomberg) -- Thomas Brown, chief executive officer of Second Curve Capital LLC and a Bloomberg contributing editor, discusses third-quarter results for Bank of America Corp. and Goldman Sachs Group Inc. Goldman reported its second quarterly loss in 12 years as the firm lost money on investments and revenue declined from trading, asset management and securities underwriting. Bank of America Corp. reported a third-quarter profit. The company said total revenue rose 6 percent to $28.7 billion. Trading revenue fell 71 percent. Brown speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
U.S. stocks gained, sending the Standard & Poor’s 500 Index to the highest level since August, as Bank of America Corp. (BAC) paced a rally in financial shares and optimism grew over progress on expanding Europe’s rescue fund.
Bank of America climbed 10 percent after it swung to a profit as credit quality improved. A gauge of homebuilders in S&P indexes jumped 9.6 percent, the most since March 2009, as data showed that industry sentiment increased more than forecast. Caterpillar Inc. (CAT) and Alcoa Inc. (AA) added at least 3.9 percent, pacing gains among companies most-tied to the economy. Apple Inc. (AAPL) tumbled 5.9 percent after the close of regular trading after profit and sales missed analysts’ expectations.
The S&P 500 added 2 percent to 1,225.38 at 4 p.m. New York time, erasing yesterday’s drop. The benchmark gauge rose to the highest level since Aug. 3, two days before S&P stripped the U.S. of its AAA credit rating. The Dow Jones Industrial Average gained 180.05 points, or 1.6 percent, to 11,577.05 today.
“We could be into one of those buying stampedes,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, said in a telephone interview. His firm manages $300 billion. “It feels that the worst is in the rear-view mirror. Housing is not going to be a thing that sucks you down into a recession. Earnings are still going to look pretty good. Something has to happen in Europe.”
The S&P 500 rose from the threshold of a bear market early this month amid optimism over corporate earnings and steps by European leaders to support banks. The rebound brought the gauge close to the top of a price range between 1,074.77 and 1,230.71, where it’s traded for more than two months. The S&P 500 briefly rose above that range, reaching 1,233.10 today.
Earnings Estimates
Profit for S&P 500 companies will climb 17 percent in the third quarter and rise 18 percent to a record $99.76 for all of 2011, according to analyst estimates compiled by Bloomberg. The S&P 500 is trading for 11.1 times forecast earnings for 2012, compared with its five-decade average of 16.4 times reported income, according to data compiled by Bloomberg.
Global stocks rallied. France and Germany are engaged in “intensive talks” on bolstering the European Financial Stability Facility, Steffen Seibert, German Chancellor Angela Merkel’s chief spokesman, said today. He declined in an interview to comment on a report in the Guardian that they reached agreement on increasing the size of the fund, saying he won’t comment on intermediate results of the negotiations.
In the U.S., data showed that homebuilders were less pessimistic than forecast in October, as near record-low borrowing costs and price decreases raised hopes the market will turn for the better over the next six months.
Most-Tied
The Morgan Stanley Cyclical Index of companies most-tied to the economy added 3.3 percent. The Dow Jones Transportation Average advanced 3.1 percent. Alcoa gained 5.9 percent to $10.14. Caterpillar climbed 3.9 percent to $84.72. PulteGroup Inc., the largest U.S. homebuilder by revenue, rallied 11 percent to $4.46.
“It’s reality beating investors’ poor expectations,” Jack Ablin, who helps oversee $55 billion as chief investment officer for Chicago-based Harris Private Bank, said in a telephone interview. “That happens particularly with Bank of America, given that everyone assumed for the worst. It’s not a matter of if, it’s just a matter of when the industry recovers.”
The KBW Bank Index rallied 6.1 percent as all of its 24 stocks advanced. The gauge slumped 3.9 percent yesterday.
Bank of America
Bank of America rose 10 percent to $6.64. The provision for loan losses dropped to $3.4 billion from $5.4 billion a year earlier as credit improved in the card unit and commercial lending, the bank said. The card unit swung to a profit in the quarter, while income rose at the deposit unit, global wealth and investment management, and global commercial banking.
State Street Corp. (STT) gained 11 percent to $37.49. The custody bank under pressure from activist investor Nelson Peltz to increase profitability said third-quarter profit rose a stronger-than-expected 11 percent as custody assets increased.
Goldman Sachs Group Inc. added 5.5 percent to $102.25 even after reporting its second quarterly loss in 12 years as the firm lost money on investments and revenue declined from trading, asset management and securities underwriting.
“It’s time to get less bearish,” David Kelly, chief market strategist for JPMorgan Funds in New York, said in a telephone interview. “Investors ought to be able to look forward and recognize that the economy does muddle through. There’s a better underlying story for banks and also there’s housing. There’s a realization that at some stage this thing is going to turn.”
IBM Tumbles
International Business Machines Corp. (IBM) tumbled 4.1 percent to $178.90. The biggest computer-services company missed sales estimates for the first time in five quarters. Revenue showed slowing growth in IBM’s software, hardware and services businesses.
Nasdaq-100 Index futures lost 0.9 percent to 2,342.50 at 5:05 p.m. after the close of regular trading. Apple retreated 5.9 percent to $397.15 as profit missed estimates as the company sold fewer iPhones than analysts’ projected.
Intel Corp. (INTC) also reported results after the market close. The shares gained 4.4 percent to $24.43, after rising 0.5 percent in regular trading. The chipmaker forecast fourth- quarter sales that exceeded some analysts’ estimates, citing strong demand for laptop computers in emerging markets.
The S&P 500 may rise about 4 percent this week before the gain ends, according to Tom DeMark, the creator of indicators meant to identify turning points in the price of securities.
DeMark, whose prediction last month that the S&P 500’s decline would stop at 1,076 proved prescient when the index bottomed at 1,074.77, said the rally that lifted the benchmark as much as 14 percent since then will fizzle. The S&P 500 will rise as high as 1,254 before falling at least 5.6 percent, he wrote in an e-mail today.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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