BLBG: U.S., Europe Stocks Rise on Earnings as Commodities Climb
Oct. 12 (Bloomberg) -- U.S. and European stocks rose, sending the MSCI World Index to near a one-year high, on speculation improving corporate earnings will extend a seven- month rally in equities. Oil and metal prices advanced.
General Electric Co., which will report third-quarter results on Oct. 16, climbed 1.5 percent after Royal Philips Electronics NV unexpectedly posted a profit. Freeport-McMoRan Copper & Gold Inc. added 1.5 percent as copper increased. Advanced Micro Devices Inc. rallied 4.1 percent after UBS AG recommended the shares. The Standard & Poor’s 500 Index rose for a sixth straight day, its longest streak since June 2007.
“The market will continue with a positive bias,” said Stanley Nabi, New York-based vice chairman of Silvercrest Asset Management Group, which oversees $8 billion. “The profit reports that will begin to come out this week should be very solid and the economic data that’s coming out is quite encouraging.”
The S&P 500 advanced 0.3 percent to 1,075.06 at 9:34 a.m. in New York, above its highest close since Oct. 3, 2008. The Dow Jones Industrial Average rose 32.72 points, or 0.3 percent, to 9,897.66. The MSCI World Index of 23 developed nations climbed 0.6 percent to above its highest close since Oct. 1, 2008.
The S&P 500 last week jumped 4.5 percent, its best advance since July, as Alcoa Inc. started the third-quarter earnings season with an unexpected profit and economic data signaled the U.S. recession is ending.
‘Recovery Is Under Way’
“Last week’s earnings showed that analyst expectations can be surpassed and that not everything is priced in yet,” said Gregor Mast, an equity strategist at Clariden Leu AG in Zurich, which oversees about $88 billion. “We believe that the recession is over and the recovery is under way. Equities are fairly valued but require that we see the profit side move up.”
Companies from Intel Corp. to Goldman Sachs Group Inc. are scheduled to report earnings this week. Companies on the S&P 500, which has rebounded 59 percent from a 12-year low in March, will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts’ estimates compiled by Bloomberg show.
GE gained 1.5 percent to $16.42. Philips, Europe’s biggest consumer-electronics maker, said operating earnings at its consumer unit more than doubled as it reported third-quarter net income of 174 million euros ($256 million). Analysts had predicted a loss of 44.7 million euros, the average of 13 estimates compiled by Bloomberg.
Philips helped lead the gains in Europe’s Stoxx 600, adding 6.4 percent in Amsterdam, while energy companies rose with oil. Total SA, Europe’s biggest refiner, rose 1.6 percent in Paris.
Commodity Producers
Freeport rose 1.5 percent to $75.46. Copper climbed on speculation demand for raw materials is increasing as the global economy recovers from its worst recession since World War II. Alcoa, the largest U.S. aluminum company, gained 0.8 percent to $14.35.
Chevron Corp., the second-largest U.S. oil company, increased 0.7 percent to $73.23 as crude rose above $73 a barrel for the first time in three weeks.
Advanced Micro Devices added 4.1 percent to $6.12. The second-largest maker of personal-computer processors was raised to “buy” from “neutral” at UBS.
Plum Creek Timber Co. climbed 1.9 percent to $32.45. The forest-products company was raised to “neutral” from “underweight” at JPMorgan Chase & Co.
U.S. Discount
The S&P 500 is valued at the biggest discount to the MSCI World Index of 23 developed countries since May 2003, according to monthly data compiled by Bloomberg.
There is still room for stocks to rise, according to Barclays Capital Inc.’s Larry Kantor, while David Rosenberg says investors should buy bonds or seek dividends because this isn’t a normal recovery.
Kantor, head of research at Barclays Capital in New York, was one of the first economists to call the end of the recession, in March. Barclays sees GDP expanding at a 4 percent rate now, 5 percent in the first quarter and 3.6 percent for 2010. Rosenberg, the chief economist and strategist for Toronto- based Gluskin Sheff + Associates Inc., was among the first to warn of impending recession in 2006.
Federal Reserve Bank of St. Louis President James Bullard said in a speech yesterday that U.S. jobs growth will return this year or next.
To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net
