(From BusinessWeek.Com, By Rita Nazareth and Tara Lachapelle)
Source link: http://www.businessweek.com/news/2010-12-01/u-s-stocks-rally-dow-rises-most-in-three-months-on-adp-china.html
(Bloomberg) -- U.S. stocks rose, sending benchmark indexes toward their biggest rallies in three months, as speculation of a larger European financial rescue and growth in jobs and manufacturing bolstered optimism in the economy.
Schlumberger Ltd. and Dow Chemical Co. rallied more than 3.4 percent as commodity prices gained. United Technologies Corp. and General Electric Co. rose at least 2.8 percent as Deutsche Bank AG said they may benefit from Airbus SAS’s plan to develop A320 aircrafts with new engines.
Motorola Inc. jumped 6.9 percent after detailing plans to split into two companies in January. Microsoft Corp. climbed 3.1 percent after forecasting 2011 may be “biggest year ever” for its Xbox division.
The Standard & Poor’s 500 Index rallied the most since Sept. 1 on a closing basis, adding 2.1 percent to 1,205.74 at 12:57 p.m. in New York. The Dow Jones Industrial Average rose 244.31 points, or 2.2 percent, to 11,250.33 as all 30 stocks gained.
“The recovery is unfolding,” said John Praveen, the Newark, New Jersey-based chief investment strategist at Prudential International Investments Advisers LLC, which oversees $690 billion. “The quality of the economic data has been improving. There’s a strong bid for commodities as China is growing at a strong pace. There’s some easing of concerns about Europe. Those are all catalysts for a stock rally.”
December Rally
The Dow average has rallied in December more than in any other month over the last century, according to data compiled by Bespoke Investment Group. On average, the 30-stock gauge has risen 1.3 percent in the month during the past 100 years, while gaining 1.5 percent and 1.7 percent over the last 50 and 20 years, respectively, the data show.
The S&P 500 dropped 0.6 percent yesterday to extend its retreat from a two-year high on Nov. 5 to 3.7 percent, as concern mounted that Europe’s government debt crisis will worsen and as Google Inc. faced a European antitrust probe. The index is still up 18 percent from this year’s low in July as companies reported better-than-estimated earnings and the Federal Reserve increased its program of asset purchases to stimulate growth.
Stocks extended gains today after Reuters reported that the U.S. would be ready to support an extension of the European Financial Stability Facility, the fund used to bail out Greece and Ireland, by having the International Monetary Fund contribute more money. The news service cited an unnamed U.S. official.
Jobs Data
Earlier gains came after a report showed U.S. companies boosted payrolls more than forecast last month, propelled by small businesses. Employment increased by 93,000, the most since November 2007, after a revised 82,000 rise in October that was almost double the initial estimate, ADP Employer Services said. The median projection of economists in a Bloomberg survey called for a 70,000 gain last month. The data bolstered optimism in the job market two days before the government’s employment report.
Another report showed that manufacturing in the U.S. expanded for a 16th consecutive month in November. The Institute for Supply Management’s factory index was little changed at 56.6 after 56.9 in October. The figure compared with a median estimate of 56.5 in a Bloomberg News survey and highlights global industrial strength that extends to China and Europe.
The central bank’s report on regional economic activity, known as the Beige Book, will be released today at 2 p.m. New York time. The anecdotal information will help policy makers frame the discussion of the economy when the central bank next meets on Dec. 14.
‘Relief Rally’
U.S. stocks also followed Asian and European stocks higher earlier after China’s logistics federation reported that manufacturing grew at a faster pace for a fourth straight month in November. Europe’s manufacturing industries expanded at the fastest pace in four months in November, led by Germany, the region’s largest economy, London-based Markit Economics said.
“It’s a relief rally,” said Burt White, who helps oversee $284 billion as chief investment officer at LPL Financial Corp. in Boston. “The ADP number bodes well for the jobs report we’re getting on Friday. We see a reacceleration from the soft spot we were at earlier this year. There’s strength out of China, more clarity coming out of Europe. All of that indicates that we may see a strong December for stocks.”
The Morgan Stanley Cyclical Index of economically-sensitive stocks rose 3.1 percent, the most in three months, as all of its companies rallied. Caterpillar Inc., the world’s largest maker of construction and mining equipment, gained 3.4 percent to $87.46. FedEx Corp., the second-largest U.S. package-shipping company, jumped 4.1 percent to $94.85.
Commodity Producers
Energy and raw-materials shares rallied at least 2.6 percent as the U.S. dollar fell, sending commodities prices higher. The Thomson Reuters/CRB Commodity Index of 19 raw materials advanced as much as 2.1 percent.
Schlumberger, the largest oilfield services provider, added 4.6 percent to $80.86. Dow Chemical, the world’s second-biggest chemical company, climbed 3.5 percent to $32.26.
Deere & Co. gained 1.5 percent to $75.81. The world’s largest farm-equipment maker increased the company’s dividend by 5 cents, or 17 percent, to 35 cents a share. That beat the 30- cent dividend projection from Bloomberg.
United Technologies had the third-biggest gain in the Dow average, climbing 3.2 percent to $77.70. Airbus’s announcement that it plans to develop new versions of the A320 series of aircraft with more fuel-efficient engines is “positive” for the maker of Pratt & Whitney jet engines and General Electric, Deutsche Bank AG said in a note. GE added 2.8 percent to $16.27.
Motorola rose 6.9 percent to $8.19. The U.S. maker of mobile phones and two-way radios that plans to split in two said it will complete the move on Jan. 4, issuing new shares in the two companies to current stockholders.
‘Biggest Year Ever’
Microsoft, the world’s largest software maker, rallied 3.1 percent to $26.04. Dennis Durkin, Xbox’s chief operating officer, forecast a 5 to 10-year growth spurt in games and said 2011 could be the “biggest year ever.” He made his comments during a Credit Suisse Group AG conference today.
Harman International Industries Inc. rose the most in the S&P 500, climbing 7.4 percent to $46.82. The maker of audio systems for homes and vehicles was raised to “overweight” from “neutral” at JPMorgan Chase & Co., which cited luxury car demand in the U.S. and China as well as the potential for a wider profit margin.
Goldman Sachs Group Inc. increased its forecast for U.S. gross domestic product growth next year to 2.7 percent from 2 percent. The U.S. economy will expand 3.6 percent in 2012, according to a report sent to Goldman Sachs clients today.
“You really have had very strong economic data coming from the U.S. since mid-November,” said David Kovacs, chief investment officer for quantitative strategies at Turner Investment Partners Inc. in Berwyn, Pennsylvania, which manages $18 billion. “The market is still quite reasonably priced, so the general trend should be going higher.”
--With assistance from Lu Wang and Elizabeth Stanton in New York and Francesca Cinelli in Milan. Editor: Michael P. Regan
