U.S. Stocks Gain on GM Sales Report; American Express, CIT Rise
U.S. stocks rose, helping the market rebound from its worst month in six years, after better-than- forecast sales at General Motors Corp. overshadowed concern that rising energy costs will damp corporate profits.
GM, the largest U.S. automaker, jumped the most in more than two weeks and led the Dow Jones Industrial Average's rebound from an almost 167-point drop earlier in the day. American Express Co. posted its best gain since May on UBS AG's upgrade of the biggest U.S. credit-card company, while CIT Group Inc. jumped the most since March after selling its mortgage businesses to Lone Star Funds and Berkshire Hathaway Inc. Rising oil prices sent shares of FedEx Corp. to a four-year low, limiting gains in benchmark indexes.
The Dow Jones Industrial Average climbed 32.25 points, or 0.3 percent, to 11,382.26, erasing earlier declines that sent the 30-stock gauge into a bear market for a third day. The Standard & Poor's 500 Index added 4.91, or 0.4 percent, to 1,284.91. The Nasdaq Composite Index advanced 11.99, or 0.5 percent, to 2,304.97.
``The stock market is pretty oversold,'' said Mark Bronzo, a money manager at Security Global Investors, which oversees $11 billion in Irvington, New York. ``The financials bounced a bit, which was encouraging. Everything in the market is very short- term trading oriented because no one has long-term convictions.''
The Dow pared its retreat from an October record to 19.6 percent, less than the 20 percent decline that signals the start of a so-called bear market. The S&P 500 has lost 18 percent since its October peak after the biggest quarterly increase in oil prices since 1999 led analysts to cut forecasts for S&P 500 profit growth this year in half to 5.9 percent. The benchmark for U.S. equities tumbled 8.6 percent in June, its worst month since 2002.
GM Climbs
GM rose 25 cents to $11.75. The automaker reported an 8 percent sales decline, adjusted for three fewer sales days last month than in June 2007. The average estimate of five analysts surveyed by Bloomberg was for a 21 percent drop on that basis.
Ford Motor Co., the second-biggest U.S. automaker, fell 10 cents, or 2.1 percent, to $4.71 after saying June sales plunged as gasoline prices above $4 a gallon drove consumers away from fuel-thirsty trucks.
American Express rallied $2.35, or 6.2 percent, to $40.02. The biggest U.S. credit-card company by purchases and cash advances, was raised to ``neutral'' from ``sell'' at UBS, which said valuations now reflect the ``weak'' economic outlook. American Express fell to the lowest since 2003 yesterday.
CIT, Lehman
CIT Group gained the most in the S&P 500 and led financial shares to their first advance in four days, rising $2.02, or 30 percent, to $8.83. The business lender that's lost money for four straight quarters agreed to sell its manufactured housing and home-loan businesses for $1.8 billion as it exits consumer lending.
Other mortgage-related companies rallied as CIT gained the most since March. MGIC Investment Corp., the largest U.S. mortgage insurer, rose 43 cents, or 7 percent, to $6.54. Washington Mutual Inc., the biggest U.S. savings and loan, increased 32 cents, or 6.5 percent, to $5.25.
Lehman Brothers Holdings Inc. advanced $1.15, or 5.8 percent, to $20.96. Morgan Stanley said the fourth-largest U.S. securities firm has sufficient cash and rated the stock ``overweight'' in new coverage. Analysts Patrick Pinschmidt and Avi Ghosh set a $31 share-price estimate, saying ``near-term risk of incremental writedowns is balanced by solid liquidity and capital footing.''
The S&P 500 swung between gains and losses at least 25 times as a report showing unexpected growth in manufacturing was offset by a jump in oil prices of as much as $3.33 a barrel.
ISM Surprise
Stocks climbed briefly in the morning after the Institute for Supply Management's factory index rose to 50.2 from 49.6 in May, topping economists' forecasts. A reading of 50 is the dividing line between expansion and contraction.
Oil extended this year's gain to 47 percent after the International Energy Agency said supplies may not keep up with demand through 2013 and ABC News reported Israel is increasingly likely to attack Iran this year, starting a conflict that would cut crude supplies from the second-largest producer of the Organization of Petroleum Exporting Countries.
Iran's government dismissed the report as propaganda, while Israeli government officials declined to comment. Pentagon spokesmen Bryan Whitman declined to address the report and State Department spokesman Tom Casey said he had ``no information that would substantiate'' the ABC report, which cited an unidentified Pentagon official.
`Fear of Inflation'
Crude oil for August delivery rose 97 cents, or 0.7 percent, to settle at $140.97 a barrel in New York. Futures have doubled from a year ago.
``Fear of inflation is the market's biggest problem,'' Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, which manages $2.8 billion, said in an interview with Bloomberg Radio. ``The market will muddle through for awhile. The housing market isn't anywhere near bottom yet.''
Home Depot Inc., the biggest home-improvement retailer, slid 21 cents to $23.21. Lowe's Cos., the second-largest, dropped 14 cents to $20.61. Merrill recommended investors sell shares of the two chains and other retailers whose earnings are being hurt by the housing slump.
``We see the difficult housing environment worsening throughout 2008,'' Merrill analyst Alan Rifkin wrote in a note to clients. The brokerage reinstated coverage of Home Depot and Lowe's with ``underperform'' ratings and price estimates of $22 and $20, respectively.
Legg Mason Inc. slumped to a five-year low after the investment-management company said agreements to support its money funds will cut earnings. Buckingham Research Group downgraded Legg Mason to ``neutral'' from ``strong buy'' and analysts at Friedman Billings Ramsay & Co. and Jefferies & Co. lowered their share-price targets. The shares lost $2.32, or 5.3 percent, to $41.25.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
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