BLBG: U.S. Stocks Advance as GMAC’s Bank Conversion Spurs GM Rally
U.S. stocks increased, trimming the weekly decline by benchmark indexes, as General Motors Corp. rallied after the Federal Reserve allowed GMAC LLC to convert into a bank. Asian shares gained for a second day.
GM jumped 14 percent and Ford Motor Co. climbed 9.5 percent as GMAC’s shift eases the threat of a default at the automobile lender that finances GM dealers’ inventory. Exxon Mobil Corp. rose after crude oil advanced 2.5 percent to $36.22 a barrel. Macy’s Inc. lost 2.5 percent after data from SpendingPulse showed U.S. holiday spending was the lowest since at least 2002.
“The taxpayers are bailing out another financial company,” Ralph Shive, the South Bend, Indiana-based manager of the $800 million Wasatch 1st Source Income Equity Fund, said of GMAC’s conversion. “In the long run it may come back to haunt us, but in the short run it’s being viewed as a positive.”
The Standard & Poor’s 500 Index added 0.1 percent to 869.40 at 10:43 a.m. in New York after increasing as much as 0.6 percent. The Dow Jones Industrial Average climbed 32.25 points, or 0.4 percent, to 8,500.73. The MSCI Asia Pacific Index advanced 0.5 percent on speculation takeovers and higher memory-chip prices will help the technology industry overcome the economic slowdown.
Markets were closed in western Europe, Canada, Australia, Hong Kong, New Zealand and the Philippines, while yesterday and today were Japan’s two slowest full days of trading in the past five years. About 3.64 billion shares changed hands in the U.S. on Dec. 24, the least since Dec. 26, 2003, as trading on the New York Stock Exchange and Nasdaq Stock Market ended three hours early before the Christmas holiday.
GM, Ford Rise
The S&P 500 has fallen 1.9 percent during the holiday- shortened week, extending its 2008 slide to 41 percent as home prices plunged, the government confirmed the economy contracted by the most since 2001 last quarter and the outlook for corporate earnings deteriorated.
GM advanced 14 percent to $3.70. The Fed used emergency powers to grant GMAC’s bank conversion, citing turmoil in financial markets and the potential impact on GM as the biggest U.S. automaker taps emergency federal loans to stay in business.
Ford Motor Co. added 9.5 percent to $2.31.
GMAC’s shift to a bank eases the threat of a default that threatened to dry up credit for GM dealers who used the company to finance about three-quarters of their inventory. GMAC also handled loans for about 35 percent of GM’s 2007 retail buyers.
Exxon, the biggest U.S. energy company, advanced 0.8 percent to $76.38. Crude oil futures rose for the first time in three days after the U.A.E. said it would cut output to comply with OPEC’s supply curbs.
Macy’s Declines
Macy’s, the second-largest U.S. department-store company, fell 2.7 percent to $8.58. Nordstrom, which operates more than 100 department stores, lost 0.7 percent to $11.97.
Consumers spent at least 20 percent less on women’s clothing, electronics and jewelry during November and December, resulting in what may be the biggest holiday-shopping sales decline in four decades, SpendingPulse said.
Amazon.com Inc., the world’s largest Internet retailer, advanced, rose 2.4 percent to $52.66. The company said it posted its “best ever” holiday season, with a record number of orders on Dec. 15, its peak day. Amazon didn’t provide specific profit or revenue data.
The U.S. stock market historically performs better during the Christmas week, according to Bespoke Investment Group LLC. The Dow average has risen an average 0.7 percent during the holiday season, compared with a 0.1 percent advance for all 4-day periods, data since 1900 from the Harrison, New York-based research firm show.
Red Sox, Fenway
New York Times Co. fell 2.1 percent to $5.87. The newspaper publisher is “actively” seeking a buyer for its 17.5 percent stake in New England Sports Ventures, which owns the Boston Red Sox and the baseball team’s Fenway Park, the Wall Street Journal reported, citing two people familiar with the discussions. Barclays Plc estimates the stake is worth $166 million, the newspaper reported.
Jones Apparel Group Inc. surged 37 percent, the most since it began trading in 1991, to $5.31. The maker of Jones New York clothing and Nine West shoes said it reduced a line of credit to $600 million from $750 million, reflecting its “current business needs.”
In Asia, AU Optronics Corp., Taiwan’s largest liquid- crystal-display maker, climbed 2.5 percent after saying it was open to a merger. Hynix Semiconductor Inc., the world’s second- largest maker of computer memory, jumped 3.1 percent as it trimmed investment plans. Nikon Corp., Japan’s largest maker of steppers for semiconductor production, rose 7.1 percent. India’s Reliance Petroleum Ltd. surged 6.7 percent after it started processing crude oil at a new refinery.
“We’re going to see lot of merger and acquisition activities as restructuring goes on at companies that are really sensitive to the economic slowdown,” said Kim Yong Tae, who helps manage about $2.3 billion at Yurie Asset Management Co. in Seoul. “Chipmakers continue to reduce oversupply and that’s positive for the industry.”
