Nov. 17 (Bloomberg) -- U.S. stocks gained for a third day as a rebound in metal prices boosted commodity producers, overshadowing a smaller-than-forecast increase in industrial production. The Dollar Index rose for the first time in three days and Treasury 30-year bonds climbed for a fourth.
Wal-Mart Stores Inc. and Exxon Mobil Corp. gained at least 0.8 percent after Warren Buffett disclosed buying their shares. Sprint Nextel Corp. rallied for a second day after saying it paid down $1 billion in debt. Caterpillar Inc. and ITT Corp. declined as the Federal Reserve said industrial output was restrained in October by less auto manufacturing and demand for business equipment.
The S&P 500 added 0.1 percent to 1,110.32 at 4:06 p.m. in New York, its highest close since Oct. 2, 2008. The Dow Jones Industrial Average advanced 30.46 points, or 0.3 percent, to 10,437.42, also a 13-month high. The Dollar Index, which tracks the currency against those of six U.S. trading partners, added 0.6 percent to 75.310.
“We feel like this market still has some room to move higher,” said Burt White, chief investment officer at LPL Financial in Boston, which oversees $259 billion. “We’re still at levels that are lower than we were before Lehman Brothers. We are vastly better off than we were then.”
50% Retracement
Today’s advance brought the S&P 500 within 1 percent of recouping half the plunge that followed its October 2007 record. Passing the so-called 50 percent retracement level would send a signal to some technical analysts that the steepest rally since the 1930s will continue. The index has jumped 64 percent from a 12-year low in March as a four-quarter contraction in the world’s largest economy ended.
The S&P 500 still needs to rise 13 percent to surpass its level on Sept. 12, 2008, the last trading session before Lehman Brothers Holdings Inc. filed the world’s largest bankruptcy and deepened the worst financial crisis since the Great Depression.
Walmart, the world’s largest retailer, added 0.9 percent to $53.66. Exxon Mobil, the biggest oil company, increased 0.8 percent to $75.03.
Buffett’s Berkshire Hathaway Inc. held about 1.28 million Exxon shares at the end of the third quarter, the Omaha, Nebraska-based company said in a regulatory filing yesterday. The stake in Exxon was worth about $95 million, based on yesterday’s stock price. Berkshire raised its stake in Walmart by 90 percent, now owning $2 billion worth of the stock, according to the same filing.
Freeport Gains
Freeport-McMoRan Copper & Gold Inc. added 1 percent to $85.36 as copper rose on speculation demand will remain robust in China. Producers of raw materials climbed 0.9 percent as a group for the steepest gain among 10 industries in the S&P 500. Gold prices rose on bets that central banks and investors will increase demand for the precious metal as an alternative asset.
Sprint Nextel rose 5.7 percent to $3.70. The third-largest U.S. mobile-phone carrier added to a 13 percent gain yesterday, when it said it paid off $1 billion of debt, cleaning up its balance sheet as revenue declines.
Assured Guaranty Ltd. soared 20 percent to $25.53. The municipal-bond insurer backed by Wilbur Ross reported third- quarter operating earnings of 44 cents a share, 16 percent better than the average analyst estimate in a Bloomberg survey.
MBIA Inc., the world’s largest bond insurer, also gained, rising 6.1 percent to $3.47 for the second-biggest advance in the S&P 500.
Earnings Season
“Earnings season has come in the best that it has in a very long time,” said David Katz, who oversees $1.2 billion at Matrix Asset Advisors in New York. “You are getting a very significant pickup in earnings with cost-cutting and management. The economy that was in freefall a year ago is definitely on the mend.”
About 80 percent of S&P 500 companies that have reported third-quarter results beat analysts’ predictions. That exceeds the record pace of 72.3 percent for the period ended in June, data compiled by Bloomberg show.
Massey Energy Co. advanced 5.7 percent to $40.39. The fifth-largest U.S. coal producer said it acquired metallurgical and steam coal reserves from the now-bankrupt Appalachian Fuels LLC and its affiliates.
Caterpillar, the largest maker of earthmoving equipment, dropped 0.9 percent to $59.88 after the Fed said industrial production increased 0.1 percent in October. Economists forecast a 0.4 percent rise, according to the median estimate in a Bloomberg survey. ITT, which makes water pumps and military systems, lost 1.3 percent to $53.06.
‘Wet Blanket’
“This industrial production number is pointing to weak manufacturing in the United States as well as weak demand,” said Chad Morganlander, a money manager in Florham Park, New Jersey, at Stifel Nicolaus & Co., which oversees about $98 billion in client assets. “This could put a wet blanket on the optimists for a day or two.”
Target Corp. dropped 3 percent to $48.77, the biggest slide since July. The second-largest U.S. discount chain said average transaction sizes shrank in November and it’s planning for a decrease in fourth-quarter comparable-store sales.
Home Depot Inc. fell 2.4 percent to $26.99. The biggest U.S. home-improvement retailer posted third-quarter profit that fell 8.9 percent as customers spent less and made fewer purchases. The average transaction dropped 7.1 percent to $51.89 from $55.86.
Lowe’s Cos., the Home Depot competitor that cut its full- year profit forecast yesterday, lost 1.2 percent to $21.48.
Companies that make or sell consumer products that are purchased with discretionary income dropped the most of 10 industry groups in the S&P 500, losing 0.7 percent.
Dollar Rebounds
The Dollar Index rebounded after two days of declines. The gauge has dropped 15 percent since rising to a three-year high in March.
“The relation has been with the dollar going down, equities have been going up,” said Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, which manages $224 billion. The rise in the dollar today “probably puts pressure on the equity markets as well as the commodity markets.”
Jacobs Engineering Group Inc. lost 15 percent to $38.88 for the biggest drop in the S&P 500. The construction and engineering company forecast fiscal 2010 profit that lagged analysts’ estimates.
Smith International Tumbles
Smith International Inc. fell 13 percent to $26.86 for the second-biggest decline in the S&P 500. The oilfield contractor said it will sell 28 million shares to repay debt and fund potential acquisitions. The creation of additional stock may dilute earnings for existing shareholders.
SunPower Corp. slid 19 percent to $22.19. The manufacturer of solar power modules reported that a review of some accounting entries appeared to contain errors that understated production costs. Its ratings were cut by Piper Jaffray Cos., FBR Capital Markets Corp., Caris & Co. and Merriman Curhan Ford.
The Federal Reserve said it will reduce the maximum maturity on discount-window loans to 28 days from 90 days as it moves to unwind some of the emergency measures introduced to fight the credit crisis. The discount window, used for direct loans to banks, was one of the first tools that Fed Chairman Ben S. Bernanke deployed to thaw credit markets as the crisis began to unfold in August 2007.
“This is one of the many measures that the Fed put in place last year and this is one of the pipes where they were able to pump liquidity to the banks,” said Michael Cheah, who manages $2 billion in bonds at SunAmerica Asset Management in Jersey City, New Jersey. “The Federal Reserve is dismantling a lot of the emergency measures they put in place. The bottom line is they’re taking liquidity away from this market.”
The 30-year bond yield fell two basis points, or 0.02 percentage point, to 4.26 percent, as a report showed producer prices increased less than forecast in October, confirming the Fed’s outlook for subdued inflation.
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