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U.S. Stocks Rise, S&P 500 Tops 1,000 for First Time Since Nov.
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By Matt Townsend

Aug. 3 (Bloomberg) -- U.S. stocks rose, sending the Standard & Poor’s 500 Index above 1,000 for the first time since November, on growing speculation the recession is ending and an unexpected profit at Europe’s biggest bank. Oil and metals advanced, while Treasuries fell.

Equities extended gains as reports on manufacturing and construction spending topped forecasts. Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. rallied after HSBC Holdings Plc reported first-half net income of $3.35 billion as earnings from its securities unit doubled. Ford Motor Co. jumped 6.4 percent after a government incentive program helped it achieve its first monthly U.S. sales increase since 2007.

The S&P 500 added 1 percent to 996.91 at 11:43 a.m. in New York and climbed as high as 1,001.78. The Dow Jones Industrial Average rallied 77.24 points, or 0.8 percent, to 9,248.85 and the Nasdaq Composite Index increased 0.7 percent to 1,991.83.

“The housing data looks to be near bottoming out,” said Eric Teal, who oversees $5 billion as chief investment officer at First Citizens Bank in Raleigh, North Carolina. “That’s such a key psychological factor for the market that can drive consumer psychology and the market higher.”

The S&P 500 topped 1,000 for the first time in nine months after better-than-expected profits helped restore $3.7 trillion to U.S. stock markets since March.

Office Depot Inc., Genworth Financial Inc. and Fifth Third Bancorp rallied sevenfold or more since the benchmark index for American equities fell to a 12-year low of 676.53 on March 9. They were among 16 companies that lost more than 90 percent after the gauge last closed above 1,000 on Nov. 4.

Earnings-Fueled Rally

The S&P 500 remains 36 percent below its all-time high of 1,565.15 on Oct. 9, 2007. Before November, the index traded above 1,000 for five years.

Profits that surpassed analysts’ estimates at a record percentage of S&P 500 companies helped push the index to its fifth consecutive monthly gain in July. The index has risen 48 percent since March 9, its steepest advance since the 1930s, according to data compiled by Bloomberg.

Former Federal Reserve Chairman Alan Greenspan said in an interview yesterday on ABC’s “This Week” program that U.S. economic growth may resume at a rate faster than most economists forecast.

“We may very well have 2.5 percent in the current quarter,” Greenspan said in the interview. “The reason is there has been such an extraordinarily high rate of inventory liquidation that the production levels are well under consumption.”

Banks Gain

Bank of America, the largest U.S. lender, gained 5 percent to $15.53. New York-based Citigroup advanced 1.6 percent to $3.22. Barclays Plc joined HSBC in rallying in London after reporting earnings. Barclays said earnings at its investment bank increased to 1.05 billion pounds ($1.8 billion), helped by the thaw in credit markets since its September purchase of Lehman Brothers Holdings Inc.’s North American unit.

Ford gained 6.4 percent to $8.51, the highest since May 2008, after monthly sales rose 2.3 percent in July for the first gain in two years as the “cash-for-clunkers” incentives boosted industrywide deliveries of new vehicles to the highest levels of this year.

The Bloomberg Michigan Auto Group Index rallied 3.5 percent to the highest level since October as U.S. shares of Daimler AG, the world’s second-biggest maker of luxury cars, gained 4.2 percent to $48.41.

“It’s very important to get autos moving again,” Teal said. “If you put these kinds of economic incentives in place, it can help the wounded heal.”

ISM, Construction Spending

Stocks extended early gains as the Institute for Supply Management’s factory gauge rose to an 11-month high in July. The Commerce Department also reported that spending on U.S. construction projects unexpectedly rose 0.3 percent in June, led by an improvement in residential real estate and gains in government projects. Centex Corp. added 3.1 percent to $11.25 to lead an advance in the S&P 500’s Homebuilding Index.

Crude oil rose above $71 a barrel for the first time in a month on signs that industrial activity is picking up, while tin and copper led a rally in industrial metals. Natural gas and gold also advanced.

National-Oilwell Varco Inc., the world’s largest maker of oilfield equipment, surged 3.6 percent to $37.24 to help lead a gauge of energy shares in the S&P 500 higher. Natural gas pipeline owner El Paso Corp. added 3.1 percent to $10.37. Freeport-McMoRan Copper & Gold Inc., which operates the world’s biggest gold mine, rallied 7.6 percent to $64.91.

Roubini Says Commodities May Gain

Nouriel Roubini, the New York University economist who predicted the financial crisis, said at the Diggers and Dealers mining conference in Australia that commodity prices may extend their advance in 2010 as the global recession abates.

“As the global economy goes toward growth as opposed to a recession, you are going to see further increases in commodity prices especially next year,” Roubini said. “There is now potentially light at the end of the tunnel.”

China’s manufacturing expanded in July as record lending and a 4 trillion yuan ($585 billion) stimulus package stoked a recovery in the world’s fastest-growing major economy. The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 52.8, the highest level in a year, from 51.8 in June, CLSA Asia- Pacific Markets said today.

Per-share earnings have beaten estimates at 78 percent of the 359 companies in the S&P 500 that released second-quarter results since June 17, according to data compiled by Bloomberg.

Earnings Watch

Companies in the S&P 500 are still headed for a record eighth consecutive decline in quarterly profits. Per-share earnings have tumbled 32 percent on average. Analyst estimates compiled by Bloomberg predict a 31 percent drop in the second quarter and a 22 percent third-quarter decline. While earnings are falling, results have surpassed projections by an average 10 percent.

Loews Corp. advanced 5.2 percent to $31.59 after the holding company run by New York’s Tisch family reported second- quarter operating income, excluding some items, of $1.19 a share, beating the average analyst estimate by 33 percent.

3M Co., the maker of 55,000 products from Post-It notes to electronic road signs, rose 2 percent to $71.96. The shares were raised to “buy” from “neutral” by Goldman Sachs Group Inc., which said the company may beat analysts’ earnings estimates in the second half of this year.