Enviado: 20/3/2008 21:05U.S. Stocks Rally; Fannie Mae, GE Advance on Analyst Upgrades
By Eric Martin and Michael Patterson
March 20 (Bloomberg) -- U.S. stocks rose, extending the first weekly advance in a month, after an analyst said more mortgage purchases by Fannie Mae and Freddie Mac will help stabilize the home-loan market and Merrill Lynch & Co. advised clients to buy General Electric Co.
Fannie Mae and Freddie Mac, the biggest sources of money for U.S. mortgages, boosted the Standard & Poor's 500 Index after Keefe, Bruyette & Woods upgraded the shares. GE, the second- biggest U.S. company by market value, climbed to the highest level this year after Merrill analysts said its earnings will weather a U.S. recession. Nike Inc., the world's largest athletic-shoe maker, rose the most since June on profit that topped estimates.
The S&P 500 added 29.95 points, or 2.3 percent, to 1,328.37 as of 3:21 p.m. in New York. The Dow Jones Industrial Average advanced 270.2, or 2.2 percent, to 12,369.86. The Nasdaq Composite Index rose 45.78, or 2.1 percent, to 2,255.74.
``Fannie Mae and Freddie Mac softens the blow and prevents this outcome from being worse,'' said James Swanson, the Boston- based chief investment strategist at MFS Investment Management, which oversees about $200 billion. ``The economy outside the U.S. is holding up, and you can see it in these big multinationals that continue to produce big profit gains.''
The S&P 500 has increased 3.2 percent this week and posted its steepest one-day rally in five years on March 18, fueled by speculation the Fed will revive the economy with interest-rate cuts. Economists predict U.S. growth will slow to 0.1 percent this quarter before accelerating in the next two, according to the median estimate in a Bloomberg survey between March 3 and 10.
Energy, Materials
Declines in raw-materials producers kept the S&P 500 from an even bigger rally as gold capped the biggest weekly loss since 1990. Falling commodities prices dragged down Asian stocks, while European shares retreated after Credit Suisse Group said the freeze in credit markets may force it to post a loss.
Exchanges in North and South America will be closed tomorrow for Good Friday.
Fannie Mae gained $3.58 to $34.29. Freddie Mac added $2.84 to $32.74. Keefe, Bruyette & Woods analyst Frederick Cannon upgraded the shares to ``outperform'' from ``market perform.'' The government-sponsored enterprises had their surplus capital requirement cut to 20 percent from 30 percent by the Office of Federal Housing Enterprise Oversight yesterday, which may help pump $200 billion into the mortgage-backed securities market.
`Crisis Is Over'
Other banks and brokerage firms also advanced after Punk Ziegel & Co. analyst Richard Bove wrote in a research note that ``the financial crisis is over'' and it is a ``once in a generation opportunity to buy.''
Citigroup Inc., the largest U.S. lender by assets, climbed $1.96 to $22.37. Bank of America Corp., the second-biggest, increased $2.98 to $41.54. Goldman Sachs Group Inc., the largest U.S. securities firm, rose $9.97 to $176.46.
Bove advised selling financial shares eight months ago before they extended losses. The Amex Securities Broker/Dealer Index declined 19 percent in the next four months. His recommendation to buy Citigroup in November preceded a 29 percent plunge in the company's shares.
GE rose $2 to $37.59. Merrill upgraded the shares to ``buy'' from ``neutral.'' GE, whose businesses include turbines, jet engines, medical imaging machines, security and finance, will benefit from its above-average dividend yield and growth in spending on power generation capacity and X-ray machines, analyst John G. Inch wrote in a report today.
Sales in China
Nike climbed $4.39, or 7.1 percent, to $66.22. Sales in China surged more than 50 percent as consumers bought shoes and clothing before this summer's Olympic Games, Nike said. That helped push up earnings 32 percent from a year earlier, topping analysts' estimates.
Two stocks rose for every one that dropped on the New York Stock Exchange. More than 1.89 billion shares changed hands on the Big Board, 37 percent more than the same time a week ago.
Price swings and trading volume may be larger than average today because futures and options on indexes and stocks expire at the close of trading. So-called quadruple witching occurs once every three months.
The S&P 500 has declined 15 percent since its October record. The index trades at 13.8 times its members' estimated profit, 48 percent below the average monthly price-to-earnings ratio this decade.
`Market Bottom'
``We're coming very close to a market bottom,'' Peter Sorrentino, who helps manage about $15 billion at Huntington Asset Management in Cincinnati, said in an interview on Bloomberg Radio. ``We've been developing a list of financial stocks.''
The S&P 500 extended its gain after the Federal Reserve Bank of Philadelphia said business activity fell less than forecast this month. Its general economic index rose to minus 17.4 from minus 24 in February, according to a report today. Readings less than zero signal contraction. Economists had forecast the index would rise to minus 19.0, according to the median of 53 estimates in a Bloomberg News survey.
A private report showed an index of leading U.S. economic indicators fell in February for a fifth straight month. The Conference Board's gauge, which points to the direction of the economy over the next three to six months, declined 0.3 percent after decreasing 0.4 percent in January, more than previously estimated.
Market Volatility
The U.S. stock market is the most volatile in 70 years, according to an S&P study of daily price swings in the S&P 500. The index has advanced or declined 1 percent or more on 28 days this year. That's 52 percent of the trading sessions so far, which is the highest proportion since 1938, said Howard Silverblatt, S&P's senior index analyst.
CIT Group Inc. plunged $2.15, or 18 percent, to $9.49. The largest independent U.S. commercial finance company drew on its $7.3 billion of emergency credit lines and may sell assets after being shut out of short-term debt markets.
ConocoPhillips, the third-largest U.S. oil company, lost $1.32 to $74.93. Crude oil for May delivery fell as low as $98.65 a barrel in New York on growing concern a U.S. economic slowdown will curb demand for commodities.
Newmont Mining Corp. fell $2.17 to $46.55 as gold futures declined 2.7 percent to $920 an ounce. The dollar rose as much as 1.1 percent against a basket of six major currencies.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net; Michael Patterson in New York at mpatterson10@bloomberg.net.
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