Most U.S. Stocks Rise, Boosted by Late Rally in Bank Shares

Nov. 8 -- Most U.S. stocks rose after banks rallied from a two-year low in the final hour of trading, overcoming a slump in technology shares led by Cisco Systems Inc.

More than three stocks gained for every two that fell on the New York Stock Exchange as the biggest drop in technology shares since February pushed down the three benchmark indexes. The Nasdaq Composite Index decreased 52.76, or 1.9 percent, to 2,696 as Cisco slid 9.5 percent. The Standard & Poor's 500 Index lost 0.85 to 1,474.77. The Dow Jones Industrial Average slipped 33.73, or 0.3 percent, to 13,266.29.

Morgan Stanley, the second-biggest U.S. securities firm, rose for the first time in six days after analysts said its losses tied to subprime assets are ``manageable.'' Coca-Cola Co., Procter & Gamble Co. and McDonald's Corp. gained on speculation that they are best positioned to withstand weaker economic growth after Federal Reserve Chairman Ben S. Bernanke said today the U.S. will probably ``slow noticeably'' this year.

``When the market is weakening across the board, people head to what they feel comfortable with, and that's defensive stocks,'' said Malcolm Polley, who helps oversee $1 billion at Stewart Capital Advisors in Pittsburgh. ``These are things that should do well regardless of the economic climate.''

Stock swings have increased in the past week, pushing an index of volatility to a three-month high during the day. The Dow average has fallen more than 360 points twice in the last five days and the S&P 500 is poised for its worst week in a month on speculation financial companies face more losses on mortgage assets.

Coca-Cola, Procter & Gamble

Coca-Cola, the biggest soft-drink maker, added $1.51 to $61.47. Procter & Gamble, the largest consumer-goods maker, climbed $1.42 to $70.84.

McDonald's rose 99 cents to $59.37. The world's largest restaurant company said October sales rose 6.9 percent, beating analysts' estimates as customers bought cinnamon rolls and coffee in the U.S. and chicken snack wraps in Europe.

A gauge of so-called consumer staples companies added 1.1 percent, its biggest gain since Sept. 18.

Morgan Stanley rose $2.49 to $53.68. Its subprime mortgage- related assets lost $3.7 billion in the two months through Oct. 31, the firm said. Citi Investment Research analysts led by Prashant Bhatia said the losses are ``very manageable'' and investors should buy the stock.

JPMorgan Chase & Co., the third-biggest U.S. bank, climbed 37 cents to $42.61. Bear Stearns Cos., the securities firm that has been the target of takeover speculation since two of its hedge funds collapsed, added 92 cents to $97.49.

The S&P 500 Financials Index, which has lost 18 percent this year as credit-market losses mount, gained 0.5 percent today.

'Start Nibbling'

``More people are going to start nibbling in the financials because they've been in a bear market more or less for the last six months,'' said Joseph Quinlan, chief market strategist for Bank of America Corp.'s Global Wealth & Investment Management unit, which oversees $710 billion. ``The correction has been severe enough that now we've gotten buyers back into the market.''

Stocks opened the day higher, boosted by takeover speculation in the metals industry, after BHP Billiton Ltd. said it bid for Rio Tinto Group in a deal that may become the biggest acquisition in history.

Rio's U.S.-traded shares rallied 23 percent to $440.20. BHP's U.S.-traded shares slipped $3.50 to $76.85.

Freeport-McMoRan Copper & Gold Inc., the world's second- largest copper producer, climbed $3.50 to $111.60. Peabody Energy Corp., the largest U.S. coal miner, rallied $1.37 to $54.65.

Volatility

The Chicago Board Options Exchange Volatility Index slipped 1.3 percent today to 26.16 after earlier climbing as much as 10 percent to the highest since Aug. 17. Higher readings in the so- called VIX, derived from prices paid for S&P 500 options, indicate traders expect bigger share-price swings in the next 30 days.

Bernanke's comments and testimony to the Joint Economic Committee of Congress helped spark a rally in Treasuries as traders increased bets the Fed will reduce borrowing costs a third time this year.

The odds of a quarter-percentage point rate cut to 4.25 percent at the central bank's Dec. 11 policy meeting are 90 percent, up from 70 percent yesterday, futures contracts show.

Cisco tumbled $3.12, or 9.5 percent, to $29.63, the biggest drop since August 2004. Orders fell from Cisco's top 25 U.S. customers, which include eight financial-services companies and two automakers, as a housing slump and tightening credit markets have forced U.S. companies to cut network spending.

Tech Slump

The S&P 500 Information Technology Index tumbled 3.9 percent after Cisco's report spurred concern that earnings at technology companies may not be exempt from the housing recession that has dragged down consumer and financial shares this year.

Oracle Corp., the third-largest software maker, dropped $1.75 to $20.35. Apple Inc., the maker of Macintosh computers and iPod music players, declined $10.83 to $175.47. Google Inc., the world's most popular Internet search engine, fell $39.10 to $693.84. EMC Corp., the largest maker of data-storage computers, dropped $1.57 to $20.67.

Technology shares, which have climbed 16 percent as a group this year, have ``really been safe havens and high growth stocks that people have been buying because they don't have exposure to subprime and real estate,'' said Marc Weinberger, head trader at W. Quillen Securities in New York. ``What changed today was when Cisco gave their commentary on the conference call and investors could see technology was also vulnerable. That was a sea- change.''

The Russell 2000 Index, a benchmark for companies with a median market value of $615.7 million, gained 0.6 percent to 780.90. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, slipped 4.51 to 14,921.71.

Apple Inc. (AAPL US)
Bear Stearns Cos. (BSC US)
BHP Billiton Ltd. (BHP US)
Cisco Systems Inc. (CSCO US)
Coca-Cola Co. (KO US)
EMC Corp. (EMC US)
Freeport-McMoRan Copper & Gold Inc. (FCX US)
Google Inc. (GOOG US)
JPMorgan Chase & Co. (JPM US)
McDonald's Corp. (MCD US)
Morgan Stanley (MS US)
Oracle Corp. (ORCL US)
Peabody Energy Corp. (BTU US)
Procter & Gamble Co. (PG US)
Rio Tinto Group (RTP US)