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Stocks rise on optimism rate hikes will end Original Source Link: (May no longer be active)
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U.S. Stocks Rise on Optimism Fed May Soon End Rate Increases
Dec. 13 (Bloomberg) -- U.S. stocks rose on optimism the Federal Reserve may soon end its string of 13 consecutive interest-rate increases.
The central bank stopped saying there is ``accommodation'' in its policy, a sign that members consider rates high enough that they're no longer spurring economic growth. Banks including Bank of America Corp., which stand to benefit from stable or lower rates, increased.
``Boy, we've been waiting for this,'' said Larry Peruzzi, senior equity trader at Boston Co. in Boston. ``The feeling is that the market does not need further rate hikes and that the Fed will react accordingly.''
The Standard & Poor's 500 Index added 7.64, or 0.6 percent, to 1268.07 as of 2:29 p.m. in New York. The Dow Jones Industrial Average climbed 76.36, or 0.7 percent, to 10,844.13. The Nasdaq Composite Index gained 5.91, or 0.3 percent, to 2266.86.
The Fed raised the overnight bank lending rate to 4.25 percent and kept a pledge to increase its main rate at a ``measured'' pace, a phrase that has been in every interest-rate statement for 18 months.
``Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained,'' the rate-setting Federal Open Market Committee said in its statement after meeting today in Washington.
Bank Stocks
A measure of bank stocks rose 0.5 percent and was the top contributor to the S&P 500's gain among 10 industry groups. Lower borrowing costs boost the value of bonds owned by banks, brokers and insurers, and increase demand for mortgages and loans.
Bank of America., the second-largest U.S. bank, added 44 cents to $46.18. Wells Fargo & Co., the No. 5 U.S. bank by assets, rose 46 cents to $62.81.
Eight stocks gained for every five that fell on the New York Stock Exchange. Some 1.15 billion shares changed hands on the Big Board, 5.5 percent more than the same time a week ago.
Wendy's International Inc. rallied $3.68 to $55.05. Billionaire Nelson Peltz bought a 5.5 percent stake in the No. 3 U.S. hamburger chain and urged the company to cut costs and sell off some businesses, including its Baja Fresh brand.
Sabre Holdings Corp. jumped $1.75, or 7.9 percent, to $23.81 for the biggest gain in the S&P 500. The owner of Travelocity.com forecast 2006 profit, excluding some costs, of more than $1.70 a share on revenue of about $3 billion. Analysts, on average, expect earnings of $1.59 on revenue of $2.82 billion, according to Thomson.
Retailers
Retailers fell as Best Buy Co. announced a disappointing profit forecast and sales for the retail industry trailed economists' estimates.
Best Buy dropped $5.86, or 12 percent, to $43.98 for the worst performance in the S&P 500. The largest U.S. electronics retailer sees earnings for fiscal 2006 ending in February of $2.05 to $2.15 a share, less than the $2.17 expected by analysts in a Thomson Financial survey. Thomson declined to disclose the parameters for the estimates in its average.
The company also said profit last quarter missed analysts' estimates as expenses jumped by $289 million. Costs may continue to rise faster than earnings growth as it remodels more stores, Best Buy said.
Retail Sales Drop
U.S. retail sales, excluding autos, fell 0.3 percent in November, the Commerce Department said. Economists expected a decline of 0.1 percent, according to a survey by Bloomberg.
A private report showed sales at U.S. retailers rose 3.2 percent in the second week of December from a year ago, according to the International Council of Shopping Centers. That's slower than the 3.5 percent gain in the previous week.
A measure of retailers slumped 0.3 percent, the second steepest loss among two dozen S&P 500 industry groups. Federated Department Stores Inc., the owner of Macy's and Bloomingdale's, slipped $1.49 to $66.21.
Not all consumer-related companies dropped. Procter & Gamble Co. rose after it boosted its earnings estimate.
P&G, the biggest U.S. household goods maker, climbed $1.34 to $58.25. The company said per-share profit in the second quarter ending in December will be 68 cents to 69 cents, up from 66 cents to 69 cents. The company cited stronger than expected sales at its P&G and Gillette businesses.
Pfizer Inc., the world's No. 1 drugmaker, gained for a second day after raising its quarterly dividend 26 percent to 24 cents a share, citing ``strong cash flow,'' and saying it plans to buy back more stock next year. The shares added 93 cents to $21.87.
Energy Shares
Energy shares advanced for a second day as ConocoPhillips offered to buy natural-gas producer Burlington Resources Inc. for $35.6 billion. The No. 3 U.S. oil and gas producer said it will pay $92 a share for Burlington in the biggest purchase for the industry since Chevron Corp. agreed to buy Texaco Inc. in 2001.
Burlington shares jumped $3.78 to $86.28. They surged 8.4 percent yesterday after the Wall Street Journal reported ConocoPhillips was considering an offer. ConocoPhillips fell $2.97 to $58.28.
A report on corporate inventories and sales helped support the market. The Commerce Department reported that business sales rose 0.8 percent in October, more than double the increase in inventories and reinforcing forecasts that companies will increase production in coming months. Inventories rose 0.3 percent in October after a 0.5 percent increase. Economists expected inventories to expand 0.5 percent.
`Awash in Cash'
The corporate sector ``is awash in cash, has confidence, is buying back stock, increasing dividends, buying other corporations, hiring,'' said James Awad, who manages $1.5 billion as chairman of Awad & Associates in New York. ``What's wrong with that picture for '06?''
General Motors Corp. dropped 65 cents to $22.40. S&P said late yesterday that the carmaker's plan to cut $7 billion in costs next year may not keep GM from bankruptcy unless it revives its U.S. auto sales. S&P yesterday lowered GM's debt rating, already non-investment grade, by two levels.
Lehman Brothers Holdings Inc. slipped 16 cents to $128.01 even as the No. 4 U.S. securities firm by market value reported fiscal fourth-quarter earnings of $2.76 a share. That was ahead of the $2.53 estimate by Merrill Lynch & Co.'s Guy Moszkowski, the No. 1 U.S. brokerage analyst in Institutional Investor magazine's annual survey. Sales fell 4 percent from the third quarter, led by a 14 percent slide in fixed-income trading.
Hewlett-Packard
Hewlett-Packard Co., the world's biggest printer maker and the No. 2 personal-computer seller, dropped even after the company said 2007 profit will be above analysts' forecasts. Profit in fiscal 2007 will be $2.12 a share. Analysts, on average, expect $2.09, according to Thomson. Hewlett-Packard lost 80 cents $29.17.
Shares of Cendant Corp. and Cooper Cos. Inc. retreated on lower profit forecasts.
Cendant, which owns the Avis rental car and Days Inn motel businesses, slid $1.83 to $16.55. The company now expects fourth-quarter per-share profit from continuing operations of 23 cents a share, compared with a previous estimate of 23 cents to 26 cents.
Cooper sank $4.03 to $45.72. The maker of surgical instruments said fiscal 2006 profit, excluding some items, will be $3.34 to $3.44 a share, compared with its previous forecast of $3.60 to $3.70 a share.
Last Updated: December 13, 2005 14:35 EST
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