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U.S. Stocks Extend Biggest Rally in Four Years; AT&T Gains
By Lynn Thomasson
Sept. 19 (Bloomberg) -- U.S. stocks extended their biggest rally in four years, buoyed by speculation Federal Reserve interest-rate cuts will help contain the housing slump and spur profit growth.
AT&T Inc., owner of the biggest U.S. mobile phone service, helped lead the Dow Jones Industrial Average to within 1.4 percent of a record after saying sales of Apple Inc.'s iPhone have increased. Freeport-McMoRan Copper & Gold Inc., the world's second-largest copper producer, climbed to a new high.
The Standard & Poor's 500 Index rose 9.25, or 0.6 percent, to 1,529.03. The Dow average increased 76.17, or 0.6 percent, to 13,815.56. The Nasdaq Composite Index added 14.82, or 0.6 percent, to 2,666.48.
All 10 S&P 500 industry groups gained for a second day after the Fed reduced its benchmark lending rate by a half percentage point and pledged to ``act as needed'' to keep the economy from slowing. Stocks rallied in Europe and Asia and emerging market shares posted their biggest advance in a month.
``This is a shot of adrenaline,'' said Scott Black, who manages $1.8 billion as president of Delphi Management Inc. in Boston. ``With foreclosures going up and the bad tailspin in the housing market, it was going to pinch the consumer as we head toward the Thanksgiving and Christmas season.''
Ten-year Treasury notes fell for a third day as investors speculated rate cuts will spur inflation, even after the government said consumer prices fell in August. The dollar rose from an all-time low against the euro and gold gained.
AT&T, Freeport
AT&T climbed 75 cents to $41.58, its highest price since July 2. Sales of the iPhone have increased since Apple cut the price by a third, said AT&T, which has exclusive U.S. rights to sell the device, at an investor conference in New York. Apple slipped 15 cents to $140.77.
Freeport-McMoRan rallied $2.20 to a record $105.50. Copper rose to a six-week high on speculation the Fed's rate cut will boost demand for metals. Raw-material producers in the S&P 500 collectively advanced 1.4 percent.
MBIA Inc., the world's biggest bond insurer, rose $2.52 to $64.16. Ambac Financial Group Inc., the second largest, gained $3.60 to $68.85.
Calyon Securities recommended investors buy shares of bond insurers and said potential losses from subprime mortgages are ``manageable.'' The companies will emerge from subprime-mortgage problems ``relatively unscathed, if not entirely unscathed,'' analysts led by Harry Fong wrote in a research note.
Financials Rally
Financial shares in the S&P 500 climbed 0.6 percent as a group and contributed the most to the benchmark's gain.
The regulator for Fannie Mae and Freddie Mac announced it will allow the government-chartered companies to increase their home-loan portfolios, a move that would improve the market for mortgage securities.
Stocks pared some of their gains after Fed Chairman Ben S. Bernanke said he opposed letting Fannie Mae and Freddie Mac buy mortgages higher than $417,000. Such congressional action may undermine momentum toward strengthening regulation of the two largest U.S. mortgage finance companies, Bernanke said in a Sept. 17 letter to Representative Barney Frank of Massachusetts, Chairman of the House Financial Services Committee.
Fannie Mae, the largest provider of money for U.S. home loans, rose $1.44 to $63.98. Freddie Mac, the second-biggest, climbed $1.64 to $61.16.
Countrywide
Countrywide Financial Corp. added 66 cents to $20.54. The lender plans to double the number of branches that offer certificates of deposit and money-market accounts as it aims to obtain more deposits to fund mortgage lending, the Wall Street Journal reported. Citigroup analyst Bradley Ball wrote in a research note that the firm will ``emerge from the crisis with its core franchise intact.''
Accredited Home Lenders Holding Co. gained $1.78 to $11.56. The subprime mortgage lender that cut its workforce and closed more than half its operations ended a two-month dispute with buyout suitor Lone Star Funds by agreeing to a lower bid. Lone Star will pay $11.75 a share, which works out to $296 million.
CIT Group Inc. advanced $1.06 to $41.89. The commercial finance company that is shutting its home-loan business found a buyer in Freddie Mac for $3.5 billion to $4.2 billion of its mortgage-backed securities.
Morgan Stanley, the world's second-biggest securities firm by market value, slipped $1.48 to $67.03. Losses on loans for leveraged buyouts and a decline in fixed-income trading revenue caused third-quarter profit from continuing operations to decline to $1.38 a share from $1.50 a year earlier, the company said. Earnings missed the $1.55 average estimate in a Bloomberg survey.
`Wildcard'
Goldman Sachs Group Inc. and Bear Stearns Cos. are scheduled to report earnings tomorrow before the open of U.S. exchanges. Goldman Sachs may post a gain from selling a company, while Bear Stearns will probably say profit declined, according to the average analyst estimates from Bloomberg surveys.
``The one wildcard out there is Bear Stearns this week and the implications that has,'' said James Smothermon, vice president of active trading at Charles Schwab & Co. in New York. ``This bull still has some legs, but there is still the credit crisis and housing bubble that everyone is paying attention to right now.''
Bear Stearns, the manager of two hedge funds that collapsed because of losses in the mortgage market, had the fourth-steepest decline in the S&P 500, falling $3.56 to $115.64. Goldman, the most profitable securities firm, gained $5 to $205.50.
A gauge of energy producers in the S&P 500 rose 0.8 percent as oil reached $82.51 a barrel, the sixth day of record highs in New York. Schlumberger Ltd., the largest oilfield-services provider, led the industry group with a gain of $2.18 to $106.97.
Economic Reports
The rate banks charge each other for overnight loans decreased, signaling lending may pick up, after the first reduction in the Fed's benchmark rate in four years.
The London interbank offered rate in dollars slipped 0.39 percentage point to 4.94 percent, the British Bankers' Association reported. The three-month rate fell 0.35 percentage point to 5.24 percent, the group said.
The 0.1 percent decrease in the consumer price index followed a 0.1 percent advance in July, the Labor Department said. Economists in a survey expected no change. Core prices, which exclude food and energy, climbed 0.2 percent as forecast.
Housing Slump
In other reports, builders in the U.S. began work on the fewest homes in 12 years in August. The 2.6 percent decrease to a lower-than-forecast annual rate of 1.331 million followed July's 1.367 million, the Commerce Department said. Building permits dropped 5.9 percent to a 1.307 million pace, also the lowest since 1995.
About eight stocks advanced for every three that fell on the New York Stock Exchange. Some 1.7 billion shares changed hands on the NYSE, 1.5 percent less than the three-month daily average.
The Russell 2000 Index, a benchmark for companies with a median market value of $644 million, climbed 1.3 percent to 817.40. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, added 0.7 percent to 15,371.29. Based on its advance, the value of stocks increased by $124.4 billion.
UBS AG, Deutsche Bank AG and Lloyds TSB Group Plc led an advance in financial shares in Europe. The Dow Jones Stoxx 600 Index of European stocks increased 2.7 percent to 377.53, the biggest advance since April 2003. The Morgan Stanley Capital International Asia-Pacific Index jumped 3.8 percent to 154.70. The MSCI Emerging Markets Index rallied 3.4 percent to 1,145.65, its steepest gain since Aug. 20.
Accredited Home Lenders Holding Co. (LEND US)Ambac Financial Group Inc. (ABK US)Apple Inc. (AAPL US)AT&T Inc. (T US)Bear Stearns Cos. (BSC US)CIT Group Inc. (CIT US)Countrywide Financial Corp. (CFC US)Fannie Mae (FNM US)Freddie Mac (FRE US)Freeport-McMoRan Copper & Gold Inc. (FCX US)Goldman Sachs Group Inc. (GS US)MBIA Inc. (MBI US)Morgan Stanley (MS US)Schlumberger Ltd. (SLB US)
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .
http://www.bloomberg.com/apps/news?pid=20601084&sid=abVov6RrtCTU&refer=stocks
By Lynn Thomasson
Sept. 19 (Bloomberg) -- U.S. stocks extended their biggest rally in four years, buoyed by speculation Federal Reserve interest-rate cuts will help contain the housing slump and spur profit growth.
AT&T Inc., owner of the biggest U.S. mobile phone service, helped lead the Dow Jones Industrial Average to within 1.4 percent of a record after saying sales of Apple Inc.'s iPhone have increased. Freeport-McMoRan Copper & Gold Inc., the world's second-largest copper producer, climbed to a new high.
The Standard & Poor's 500 Index rose 9.25, or 0.6 percent, to 1,529.03. The Dow average increased 76.17, or 0.6 percent, to 13,815.56. The Nasdaq Composite Index added 14.82, or 0.6 percent, to 2,666.48.
All 10 S&P 500 industry groups gained for a second day after the Fed reduced its benchmark lending rate by a half percentage point and pledged to ``act as needed'' to keep the economy from slowing. Stocks rallied in Europe and Asia and emerging market shares posted their biggest advance in a month.
``This is a shot of adrenaline,'' said Scott Black, who manages $1.8 billion as president of Delphi Management Inc. in Boston. ``With foreclosures going up and the bad tailspin in the housing market, it was going to pinch the consumer as we head toward the Thanksgiving and Christmas season.''
Ten-year Treasury notes fell for a third day as investors speculated rate cuts will spur inflation, even after the government said consumer prices fell in August. The dollar rose from an all-time low against the euro and gold gained.
AT&T, Freeport
AT&T climbed 75 cents to $41.58, its highest price since July 2. Sales of the iPhone have increased since Apple cut the price by a third, said AT&T, which has exclusive U.S. rights to sell the device, at an investor conference in New York. Apple slipped 15 cents to $140.77.
Freeport-McMoRan rallied $2.20 to a record $105.50. Copper rose to a six-week high on speculation the Fed's rate cut will boost demand for metals. Raw-material producers in the S&P 500 collectively advanced 1.4 percent.
MBIA Inc., the world's biggest bond insurer, rose $2.52 to $64.16. Ambac Financial Group Inc., the second largest, gained $3.60 to $68.85.
Calyon Securities recommended investors buy shares of bond insurers and said potential losses from subprime mortgages are ``manageable.'' The companies will emerge from subprime-mortgage problems ``relatively unscathed, if not entirely unscathed,'' analysts led by Harry Fong wrote in a research note.
Financials Rally
Financial shares in the S&P 500 climbed 0.6 percent as a group and contributed the most to the benchmark's gain.
The regulator for Fannie Mae and Freddie Mac announced it will allow the government-chartered companies to increase their home-loan portfolios, a move that would improve the market for mortgage securities.
Stocks pared some of their gains after Fed Chairman Ben S. Bernanke said he opposed letting Fannie Mae and Freddie Mac buy mortgages higher than $417,000. Such congressional action may undermine momentum toward strengthening regulation of the two largest U.S. mortgage finance companies, Bernanke said in a Sept. 17 letter to Representative Barney Frank of Massachusetts, Chairman of the House Financial Services Committee.
Fannie Mae, the largest provider of money for U.S. home loans, rose $1.44 to $63.98. Freddie Mac, the second-biggest, climbed $1.64 to $61.16.
Countrywide
Countrywide Financial Corp. added 66 cents to $20.54. The lender plans to double the number of branches that offer certificates of deposit and money-market accounts as it aims to obtain more deposits to fund mortgage lending, the Wall Street Journal reported. Citigroup analyst Bradley Ball wrote in a research note that the firm will ``emerge from the crisis with its core franchise intact.''
Accredited Home Lenders Holding Co. gained $1.78 to $11.56. The subprime mortgage lender that cut its workforce and closed more than half its operations ended a two-month dispute with buyout suitor Lone Star Funds by agreeing to a lower bid. Lone Star will pay $11.75 a share, which works out to $296 million.
CIT Group Inc. advanced $1.06 to $41.89. The commercial finance company that is shutting its home-loan business found a buyer in Freddie Mac for $3.5 billion to $4.2 billion of its mortgage-backed securities.
Morgan Stanley, the world's second-biggest securities firm by market value, slipped $1.48 to $67.03. Losses on loans for leveraged buyouts and a decline in fixed-income trading revenue caused third-quarter profit from continuing operations to decline to $1.38 a share from $1.50 a year earlier, the company said. Earnings missed the $1.55 average estimate in a Bloomberg survey.
`Wildcard'
Goldman Sachs Group Inc. and Bear Stearns Cos. are scheduled to report earnings tomorrow before the open of U.S. exchanges. Goldman Sachs may post a gain from selling a company, while Bear Stearns will probably say profit declined, according to the average analyst estimates from Bloomberg surveys.
``The one wildcard out there is Bear Stearns this week and the implications that has,'' said James Smothermon, vice president of active trading at Charles Schwab & Co. in New York. ``This bull still has some legs, but there is still the credit crisis and housing bubble that everyone is paying attention to right now.''
Bear Stearns, the manager of two hedge funds that collapsed because of losses in the mortgage market, had the fourth-steepest decline in the S&P 500, falling $3.56 to $115.64. Goldman, the most profitable securities firm, gained $5 to $205.50.
A gauge of energy producers in the S&P 500 rose 0.8 percent as oil reached $82.51 a barrel, the sixth day of record highs in New York. Schlumberger Ltd., the largest oilfield-services provider, led the industry group with a gain of $2.18 to $106.97.
Economic Reports
The rate banks charge each other for overnight loans decreased, signaling lending may pick up, after the first reduction in the Fed's benchmark rate in four years.
The London interbank offered rate in dollars slipped 0.39 percentage point to 4.94 percent, the British Bankers' Association reported. The three-month rate fell 0.35 percentage point to 5.24 percent, the group said.
The 0.1 percent decrease in the consumer price index followed a 0.1 percent advance in July, the Labor Department said. Economists in a survey expected no change. Core prices, which exclude food and energy, climbed 0.2 percent as forecast.
Housing Slump
In other reports, builders in the U.S. began work on the fewest homes in 12 years in August. The 2.6 percent decrease to a lower-than-forecast annual rate of 1.331 million followed July's 1.367 million, the Commerce Department said. Building permits dropped 5.9 percent to a 1.307 million pace, also the lowest since 1995.
About eight stocks advanced for every three that fell on the New York Stock Exchange. Some 1.7 billion shares changed hands on the NYSE, 1.5 percent less than the three-month daily average.
The Russell 2000 Index, a benchmark for companies with a median market value of $644 million, climbed 1.3 percent to 817.40. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, added 0.7 percent to 15,371.29. Based on its advance, the value of stocks increased by $124.4 billion.
UBS AG, Deutsche Bank AG and Lloyds TSB Group Plc led an advance in financial shares in Europe. The Dow Jones Stoxx 600 Index of European stocks increased 2.7 percent to 377.53, the biggest advance since April 2003. The Morgan Stanley Capital International Asia-Pacific Index jumped 3.8 percent to 154.70. The MSCI Emerging Markets Index rallied 3.4 percent to 1,145.65, its steepest gain since Aug. 20.
Accredited Home Lenders Holding Co. (LEND US)Ambac Financial Group Inc. (ABK US)Apple Inc. (AAPL US)AT&T Inc. (T US)Bear Stearns Cos. (BSC US)CIT Group Inc. (CIT US)Countrywide Financial Corp. (CFC US)Fannie Mae (FNM US)Freddie Mac (FRE US)Freeport-McMoRan Copper & Gold Inc. (FCX US)Goldman Sachs Group Inc. (GS US)MBIA Inc. (MBI US)Morgan Stanley (MS US)Schlumberger Ltd. (SLB US)
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .
http://www.bloomberg.com/apps/news?pid=20601084&sid=abVov6RrtCTU&refer=stocks