Friday, December 25, 2009

U.S. Stocks Rise, S&P 500 Reaches 15-Month High on Commodities

U.S. stocks rose, pushing the Standard & Poor’s 500 Index to a 15-month high, as higher commodity prices boosted metal producers and reports showed the economy is improving.

Alcoa Inc. and U.S. Steel Corp. helped lead a measure of raw-material producers in the S&P 500 up 4.2 percent, the biggest gain in six weeks. American International Group Inc. added 6.9 percent, the most since September, after people familiar with the matter said the insurer halted an initial public offering of its Chartis property-casualty unit.

The S&P 500 rallied 2.2 percent to 1,126.48 this week, surpassing 1,120.84 to recover half its loss from the 17-month bear market that ended in March. The Dow Jones Industrial Average advanced 1.9 percent to 10,520.10. U.S. exchanges closed three hours early yesterday and are shut today Christmas. Trading at the New York Stock Exchange yesterday was the slowest since Dec. 24, 1998, with 319.3 million shares changing hands.

“I’m optimistic on the market, at least for the first half of the year,” said Ethan Anderson, who helps oversee $900 million as a senior money manager for Rehmann in Grand Rapids, Michigan. “Investors and the stock market are making up.”

The S&P 500 has risen five straight days, the longest winning streak in almost two months, after sales of existing homes topped forecasts and consumer spending rose. It has added 67 percent since March after governments around the world enacted stimulus measures and the U.S. lent, spent or guaranteed more than $11 trillion to end the recession. The S&P 500 is up 25 percent this year, the largest annual gain since 2003.

Economic Barometer

The Treasury yield curve, a barometer of the health of the U.S. economy, widened to a record this week as investors bet an accelerating recovery will fuel inflation and hurt demand for unprecedented sales of government debt. The difference between 2- and 10-year Treasury note yields increased to 285 basis points on Dec. 22.

Alcoa soared 12 percent to $16.34 for the biggest gain in the Dow average. Morgan Stanley lifted the largest U.S. aluminum producer to “overweight” on speculation metal prices will keep rallying. U.S. Steel increased 16 percent to $56.86. Copper and oil prices climbed, helping send the Reuters/Jefferies CRB Index of 19 raw materials up 1.7 percent.

“There’s still a lot of buying power out there,” said Peter Sorrentino, who helps manage $13.8 billion at Huntington Asset Management in Cincinnati. “It’s a market that’s transitioning from being liquidity-driven to being earnings- driven, and the big search now is for who has got that earnings power.”


AIG gained 6.9 percent to $30.12. The company stopped preparations for an IPO of Chartis after Robert Benmosche, who started as AIG’s chief executive officer in August, told employees that he considers the business a core holding, according to two people who declined to be identified because an announcement hasn’t been made.

Economic growth in the U.S. is accelerating even more than previously anticipated as business investment picks up and stockpiles fall at a slower pace, according to economists at Morgan Stanley in New York. The economy is poised to grow at a 5.1 percent annual rate from October through December, according to a revised forecast by Morgan Stanley following the Commerce Department’s report on durable goods yesterday. The new estimate is a percentage point higher than their earlier projection.

Excluding demand for transportation equipment, which is often volatile, bookings for long-lasting goods climbed a greater-than-forecast 2 percent in November, figures from the showed yesterday. Initial jobless claims also fell by 28,000 to 452,000 in the week ended Dec. 19, the fewest since September 2008, according to the Labor Department.

Cintas Corp. tumbled 11 percent to $26.37 for the biggest decline in the S&P 500. The largest U.S. supplier of uniforms reported quarterly earnings that missed the average analyst estimate by 8.7 percent.

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