U.S. Stocks Gain on Improvement in Confidence, Manufacturing

By Rita Nazareth

May 1 (Bloomberg) -- U.S. stocks rose after consumer confidence and manufacturing jumped to their highest levels since the credit crisis intensified in September, signaling the worst of the recession may be over.
Exxon Mobil Corp. led a gauge of energy shares to the steepest increase in the Standard & Poor’s 500 Index as oil rallied. Alcoa Inc., Caterpillar Inc. and Boeing Co. climbed more than 3 percent to lead the advance in the Dow Jones Industrial Average. Gains were limited as MasterCard Inc., the world’s second-largest electronic payments network, slid 7.3 percent after a stronger dollar and a decrease in credit-card spending weighed on earnings.

“The news out of most of the economic indicators is not getting any worse,” said Charles Smith, who manages $700 million in Pittsburgh including the Fort Pitt Capital Total Return Fund, which beat 78 percent of its peers last year. “All the folks that have been heavily in cash are chasing returns at this point.”
The S&P 500 added 0.7 percent to 879.16 at 1:47 p.m. in New York after slumping 0.8 percent earlier. The Dow rose 42.85 points, or 0.5 percent, to 8,210.97. The majority of developed markets are closed today for a holiday. Japan’s Topix added 1.1 percent, while the U.K.’s FTSE 100 Index slipped less than 0.1 percent.


Losses Reversed 

Benchmark indexes recovered from early losses after the Reuters/University of Michigan final index of consumer sentiment rose to 65.1, the second straight gain, from 57.3 in March. A separate report from the Institute for Supply Management showed manufacturing in the U.S. shrank in April at the slowest pace in seven months as a collapse in inventories caused orders and production to steady.

Exxon Mobil led energy shares to the biggest gain in the S&P 500 among 10 industry groups as crude oil rose to a four- week high on speculation that the recession will end later this year.
Exxon gained 1.3 percent to $67.52. ConocoPhillips, the second-largest U.S. oil refiner, added 3.1 percent to $42.25.

Flir Systems Inc. rose 14 percent to $25.20. The maker of infrared night-vision cameras and heat-detection products reported profit of 35 cents a share in the first quarter, surpassing the average analyst estimate by 15 percent.

Expedia Inc. rose 10 percent to $14.99. Bank of America Corp. upgraded the stock to “buy” from “neutral,” saying the online travel agency has “room for material revenue acceleration.”
The S&P 500 may jump 20 percent to 1,050 over the next six to 12 months as investors buy stocks trading at low valuations, said Abby Joseph Cohen, Goldman Sachs Group Inc.’s senior investment strategist.

‘New Trading Range’ 

“You could see the market sustain at these levels,” Cohen, 57, said in a Bloomberg Radio interview. “We’re going to set a new trading range much higher than the trading range in February and March.”

The benchmark index rallied 9.4 percent in April, the steepest rally since March 2000, and only needs to rise 3.5 percent to erase its 2009 loss. The gauge has gained 29 percent from a 12-year low on March 9 as companies from American Express Co. to Ford Motor Co. reported earnings that topped analysts’ estimates.
MasterCard fell 7.3 percent to $170.01 after first-quarter net income declined 18 percent to $367.3 million, or $2.81 a share, and revenue slipped 2.2 percent to $1.2 billion, trailing analyst estimates.
Insurers Slump

MetLife led financial shares in the S&P 500 to a 1 percent drop, for the steepest decline among 10 industry groups. The biggest U.S. life insurer posted its first quarterly loss since 2001 on writedowns and lower returns from investments. Excluding some items, first-quarter profit was 20 cents a share, missing the average analyst estimate by 40 percent. MetLife slumped 9.1 percent to $27.05.

Hartford Financial Services Group Inc. slumped 8.3 percent to $10.52. The Connecticut-based insurer reported a first- quarter adjusted loss of $3.66 a share, missing the average analyst estimate by 17 percent, as the stock-market slump raised the cost of protecting customers from declines in retirement accounts.
The S&P 500 Financials Index of 80 banks, insurers and investment firms surged 78 percent through yesterday from the 17-year low reached on March 6 amid speculation the worst of the credit crisis is over.

‘Economic Recovery’ 

“The markets have been anticipating some kind of economic recovery in the last three months of the year,” said Russell Rolnick, who helps oversee about $1.2 billion at Lenox Advisors Inc. in New York. “If that doesn’t look like it will come to fruition, the market will take that as a negative signal.”

Of the S&P 500 companies that reported earnings from the close of trading yesterday through today’s open, 20 beat the average analyst estimate and 10 missed, according to Bloomberg data. Profits have surpassed consensus estimates by an average of 12 percent for the 338 companies that released results since April 7, even as average earnings declined 35 percent.

The period is projected to be the seventh straight quarter of declining earnings, the longest stretch on record.
McDonald’s Corp. fell 1.8 percent to $52.35. The world’s largest restaurant company was removed from the “conviction buy” list at Goldman Sachs Group Inc., which cited limited visibility on near-term catalysts.
Washington Post Co. tumbled 14 percent for the biggest decline in the S&P 500. The publisher of the namesake newspaper and Newsweek magazine reported a first-quarter loss because of declining advertising sales, costs to cut jobs and falling profit at its Kaplan education unit.

Dean Foods Co. slumped 9.2 percent to $18.80. The biggest U.S. dairy producer said it would sell new shares and forecast second-quarter profit that trailed analysts’ estimates.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net;
Last Updated: May 1, 2009 13:51 EDT