U.S. Stocks Rise on China Policy Outlook

By Rita Nazareth - Jan 17, 2012 9:21 AM PT .

(Bloomberg) -- Carnival Corp.'s Italian unit is rushing to prevent its crippled cruise liner from spewing 2,300 tons of fuel into Europe's biggest marine park, as the search continues for 29 missing passengers and crew members. Elliott Gotkine reports on Bloomberg Television's "The Pulse" with Maryam Nemazee. (Source: Bloomberg)

Carnival Corp. fell 15 percent as rescuers continue to search for 29 people after its Costa Concordia cruise liner ran aground off Italy’s Tuscan coast. Photograph: 2430/Gamma-Rapho via Getty Images
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U.S. stocks rose, sending the Standard & Poor’s 500 Index toward the highest level since July, as slowing Chinese growth added to speculation that monetary policy at the world’s second-largest economy will ease.

Wells Fargo & Co., the largest U.S. bank by market value, gained 1.8 percent amid record profit. Sears Holdings Corp. (SHLD) surged 8.9 percent, the most in the S&P 500, on speculation that the company may seek to go private. Citigroup Inc. (C) lost 6.4 percent after earnings unexpectedly declined 11 percent. Carnival Corp. tumbled 14 percent after the Costa Concordia cruise ship ran aground off the coast of Italy on Jan. 13.

The S&P 500 added 0.9 percent to 1,300.98 at 12:19 p.m. New York time, extending a two-week advance. The Dow Jones Industrial Average gained 130.06 points, or 1.1 percent, to 12,552.12. The market was closed yesterday for a holiday.

“The Chinese have demonstrated that they are more proactive at when to tighten and when to ease,” David Sowerby, a Bloomfield Hills, Michigan-based portfolio manager at Loomis Sayles & Co., which oversees $150 billion, said in a telephone interview. “This is a period of significant central bank liquidity. The expectation is for some easing,” he said. “In the U.S., the economic news has improved.”

Stocks joined a global rally as China’s growth slowed after Europe’s debt crisis curbed export demand and the property market weakened, sustaining pressure on Premier Wen Jiabao to ease monetary policy. Spanish borrowing costs plunged at an auction as investors ignored S&P downgrades last week. Manufacturing in the New York region grew in January at the fastest pace in nine months.

China Bets

Equities rose last week as bets China may act to spur economic growth outweighed concern about credit-rating cuts for some European nations. Stocks fell on Jan. 13, snapping a four- day rally for the S&P 500, as euro-region governments braced for S&P’s credit downgrades and after JPMorgan Chase & Co.’s profit slumped 23 percent.

At least 48 companies in the benchmark index are scheduled to report quarterly results this week. S&P 500 earnings may increase about 9 percent this year to a record $105 a share, according to more than 9,000 analysts’ projections compiled by Bloomberg. A majority have topped analysts’ profit estimates for two straight years, data compiled by Bloomberg show.

All 10 groups in the S&P 500 gained. The Morgan Stanley Cyclical Index of companies most-tied to economic growth rose 0.8 percent. Apple Inc. (AAPL) added 1.4 percent to $425.87. Halliburton Co. (HAL) climbed 1.4 percent to $34.40. Caterpillar Inc. (CAT) jumped 1.7 percent to $104.27.

Mortgage Financing

Wells Fargo jumped 1.8 percent to $30.16. Profit beat analysts’ estimates as mortgage financing improved. New mortgages rose 35 percent to $120 billion from the three months ended September at Wells Fargo, the biggest U.S. home lender, while dropping 6 percent from a year earlier.

Sears surged 8.9 percent to $36.56. Sears, working to turn around four years of declining sales, has lost ground as shoppers have flocked to such rivals as Macy’s Inc. Edward Lampert, who owns about 60 percent of Sears and serves as chairman, may seek new capital and to reorganize operations, said Paul Swinand, an analyst with Morningstar Inc. (MORN) in Chicago.

“Restructuring is often easier taken under private hands,” Swinand said today in a telephone interview. “Anything that gives you more flexibility is an advantage.”

Kraft Foods Inc. (KFT) added 1.9 percent to $38.47. The food company said it will realign its U.S. sales organization and cut 1,600 jobs in North America throughout 2012 as part of its move to divide its snacks and grocery businesses.

Under Pressure

Dish Network Corp. (DISH) rallied 2.6 percent to $29.50. AT&T Inc. (T) is under so much pressure to add wireless spectrum after its failed $39 billion bid for T-Mobile USA that it may be compelled to pay the highest premium in more than a decade to secure Dish.

With the industry facing network constraints and a scarcity of new spectrum that’s making Dish a target, President and Chief Executive Officer Joe Clayton says the company is open to future acquisitions. At $50 a share, cited as a reasonable price by Alpine Mutual Funds, AT&T would have to pay a 77 percent premium for Dish, the highest in an acquisition greater than $5 billion by a telecommunications company since 2000, according to data compiled by Bloomberg.

Citigroup lost 6.4 percent to $28.76. Trading declines mirrored results at JPMorgan, which said last week that revenue in every investment-banking business fell from a year earlier. Citigroup’s profit drop capped a year for Chief Executive Officer Vikram Pandit, 55, in which the shares slid 44 percent amid concern troubled European countries would default.

Carnival (CCL) Tumbles

Carnival tumbled 14 percent, the most on a closing basis since 2001, to $29.50. The Costa Concordia was carrying more than 4,200 people when it ran aground hours after leaving a port near Rome to continue a Mediterranean cruise. The accident has left at least 11 people dead.

Royal Caribbean Cruises Ltd. (RCL), the second-biggest cruise line, fell 3.7 percent to $27.68.

Investors began to put cash back to work in January, buying U.S. stocks, as expectations for global growth climbed to a six- month high, a Bank of America Corp. survey showed.

A net 27 percent of the 214 respondents, who together manage $655 billion in assets, said they were overweight cash. That’s down from a net 35 percent in December. Asset allocators became the most bullish on American equities since April 2010, with the U.S. replacing emerging markets as their most favored region for equities.

“We have started the new year with investors much less pessimistic on global growth,” said Gary Baker, BofA’s head of European equity strategy at a press briefing in London. “This has translated into greater risk appetite. The U.S. has shown fairly consistent improvement, largely exceeding expectations.”

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net

U.S. Stocks Rise on China Policy Outlook - Bloomberg