BLBG : U.S. Stocks Advance as Goldman Advises Buying Industrial Shares
Sept. 9 (Bloomberg) -- U.S. stocks gained for a fourth straight day after Goldman Sachs Group Inc. advised buying shares of multi-industry companies and investor Michael Price said he’s finding value in American equities.
General Electric climbed above its highest close since January and Illinois Tool Works Inc. jumped the most since June as Goldman Sachs said multi-industry companies tend to outperform the market when manufacturing returns to growth. EBay Inc. rallied 4 percent as Sanford C. Bernstein & Co. said the core online auction business is “turning around.”
The Standard & Poor’s 500 Index added 0.5 percent to 1,030.02 as of 11:10 a.m. in New York. The Dow Jones Industrial Average rose 32.2 points, or 0.3 percent, to 9,529.54. Europe’s benchmark index added 0.7 percent, climbing for a fifth straight day, while Asia’s slumped 0.3 percent.
The S&P 500 has rebounded 52 percent from a 12-year low on March 9 as reports from consumer confidence to home sales signaled the recession is easing and companies from Johnson & Johnson to Goldman Sachs posted earnings that beat analysts’ estimates. Price said the U.S. stock market resembles 1975-1982, when the S&P 500 doubled, and he’s finding value in small banks.
“We made very good returns from ‘75 to ‘82,” Price, who managed some of the best-performing mutual funds during the 1980s and 1990s and now runs New York-based MFP Investors LLC, said in an interview broadcast on Bloomberg Radio and Television. “Pick your spots, pick your stocks, do your work, and somebody’s going to be selling something too cheaply.”
Industrials Rally
General Electric added 1.7 percent to $14.74. Illinois Tool Works, the maker of Hobart food mixers and Duo-Fast nail guns, rallied 4.5 percent to $43.73 after Goldman Sachs added the company to its “conviction buy” list.
Goldman upgraded multi-industry companies to “attractive” from “neutral,” saying the stocks tend to outperform the S&P 500 when the Institute for Supply Management’s gauge of manufacturing climbs “sustainably above 50.” The index for August rose more than forecast to 52.9 on Sept. 1, with readings above 50 signaling growth. Goldman said in a note to clients that industrial momentum will continue to build, with low risk of a “mid-cycle pause.”
Industrial shares in the S&P 500 added 1.2 percent today, the steepest advance among 10 groups. The gauge of 56 companies is up 8.7 percent in 2009.
EBay, owner of the most visited U.S. e-commerce Web site, advanced 4 percent to $22.70 after Bernstein raised its rating to “outperform” from “market perform” and lifted its share- price estimate 17 percent to $28.
MasterCard, Capital One
MasterCard Inc., the second-biggest credit-card network after Visa Inc., rose 0.3 percent to $207.98. Capital One Financial Corp., the McLean, Virginia-based credit-card company, climbed 4.7 percent to $37.09. “The credit cycle has begun to recover for U.S. credit cards,” Citigroup’s Donald Fandetti wrote in a report.
Morgan Stanley climbed 1.7 percent to $28.27. The sixth- biggest U.S. bank by assets was raised to “overweight” from “neutral” by analysts at JPMorgan Chase & Co., who said they are “switching preference from investment banks to credit banks on regulatory changes.”
The six-month rally has pushed valuations for the S&P 500, the benchmark for U.S. equities, to about 18.9 times the reported earnings of its companies, near the highest level since June 2004, according to weekly data compiled by Bloomberg.
‘Be Prepared’
“Investors should be prepared for some additional near- term corrective action,” Robert Doll, the global chief investment officer at BlackRock Inc., wrote in an e-mail to journalists yesterday. “Stocks are no longer as cheap as they were several months ago. Conditions may be overbought and there is still a great deal of uncertainty over the outlook.”
Lazard Ltd. dropped 3.8 percent to $37.50 after the investment bank led by Bruce Wasserstein said some shareholders agreed to sell 5.22 million shares in an underwritten public offering. Lazard said it won’t receive any proceeds from the sale.
Vivus Inc. soared 70 percent to $11.76. The developer of treatments for sexual dysfunction and obesity said its Qnexa drug helped patients lose enough weight in studies to allow the biotechnology company to seek U.S. approval to sell the treatment this year.
