Saturday, November 17, 2007

U.S. Stocks Post First Weekly Gain This Month; Wal-Mart Climbs

-- U.S. stocks posted their first weekly gain this month after investors speculated that the worst of Wall Street's mortgage losses have been disclosed and Wal-Mart Stores Inc. boosted its earnings forecast.

Financial stocks rebounded from two weeks of declines after Goldman Sachs Group Inc., the biggest U.S. securities firm by market value, said it's not planning a significant writedown. Wal-Mart surged the most since March 2003 after the world's largest retailer lured customers with discounts.

``Perhaps investors are sensing a change of direction and there may be some light at the end of the tunnel,'' said Walter ``Bucky'' Hellwig, who helps oversee $30 billion as senior vice president at Morgan Asset Management in Birmingham, Alabama.

The Standard & Poor's 500 Index added 0.4 percent this week to 1,458.74. The Dow Jones Industrial Average rose 1 percent to 13,176.79, and the Nasdaq Composite Index gained 0.4 percent to 2,637.24. The Russell 2000 Index of small companies retreated for a third straight week, losing 0.4 percent to 769.50.

Yields on Treasury securities declined to the lowest since 2005. The two-year note ended the week at 3.34 percent, while the 10-year note slumped to 4.17 percent.

Wal-Mart surged 8 percent this week to $46.34, helping drive the S&P 500 Consumer Staples Index to a record and the biggest gain among 10 industries.

Wal-Mart lifted its full-year profit forecast, after cutting holiday prices earlier than last year and discounting more goods to lure customers facing higher gasoline costs and mortgage payments.

Macy's Declines

Macy's Inc., J.C. Penney Co. and other retail chains fell after they predicted slowing holiday sales. Macy's lost 0.6 percent to $28.32 after the owner of its namesake chain and Bloomingdale's said same-store sales may drop in the fourth quarter and revenue will grow less than expected.

J.C. Penney retreated 7.9 percent to $43.19 after saying profit declined for the first time in three quarters and slashing its earnings forecast.

``We've seen a couple of retailers like Wal-Mart that actually came in a little bit better,'' said Michael Strauss, who helps oversee about $43 billion as chief economist at Commonfund Wilton, Connecticut. ``But the majority are still having some problems. It looks like it is going to be a challenging Christmas.''

Retail Sales Report

The Commerce Department said department-store sales decreased 0.5 percent in October, spurring concern that higher fuel bills and slumping home values will depress consumer spending in the holiday shopping season. Excluding gasoline, retail sales rose 0.1 percent, the smallest increase in four months.

Goldman and Lehman Brothers Holdings Inc. led gains by financial firms. Even though banks have reported about $45 billion in losses from bad home loans, Goldman said it doesn't expect a large writedown. UBS AG said Lehman, the largest underwriter of mortgage-backed bonds, has ``negligible'' potential losses from collateralized debt obligations.

Goldman added 6.6 percent to $225.25. Lehman advanced 7.4 percent to $62.38.

Merrill Lynch & Co., which named NYSE Euronext's John Thain as its new chief executive officer, advanced for the first time in six weeks. The stock added 5.3 percent to $56.11.

Thain, the former Goldman president who has run the New York Stock Exchange since 2004, becomes the first outsider to lead Merrill in its 93-year history. The third-largest securities firm ousted CEO Stan O'Neal, a 21-year company veteran, on Oct. 30 after he delivered a $2.24 billion third-quarter loss.

E*Trade Bankruptcy Speculation

E*Trade Financial Corp. slumped 37 percent to $5.44 for the biggest decline in the S&P 500. The third-largest online brokerage forecast a decline in fourth-quarter earnings and a Citigroup Inc. analyst said the company may go bankrupt. E*Trade is ``well-capitalized'' and won't file for bankruptcy, Chief Executive Officer Mitchell Caplan said in an interview on CNBC.

Raw-materials and energy producers fell the most in the S&P 500, losing 3.2 percent and 2.6 percent, respectively, after metal and oil prices declined.

Crude oil lost 1.3 percent this week, only the second weekly decline since August. Gold lost 5.7 percent, the most since March, on speculation the dollar will rebound from record lows, reducing the appeal of the precious metal as an alternative investment.

National Oilwell Varco Inc., this year's biggest gainer in the S&P 500, dropped 9.4 percent to $64.44. Newmont Mining Corp., the world's second-biggest gold producer, fell 8.1 percent to $49.69.

Hewlett-Packard, Target

Companies scheduled to report earnings next week include Hewlett-Packard Co., the world's largest personal-computer maker; Freddie Mac, the second-biggest source of money for U.S. home loans, and Target Corp., the nation's No. 2 discount retailer.

Homebuilders and banks may face further declines this week. Economists expect reports to show U.S. housing starts fell to a 14-year low in October, signaling the real-estate slump will continue to weigh on growth.

Starts may fall 1.8 percent to an annual rate of 1.17 million units, according to the median forecast of economists surveyed before the government's report. Housing permits, an indicator of future activity, probably dropped 2 percent to a 1.2 million pace, economists predicted.

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