U.S. Stocks Rise, Sending S&P 500 to .......

U.S. Stocks Rise, Sending S&P 500 to Best Week Since July 2009

By Rita Nazareth

July 9 (Bloomberg) -- U.S. stocks advanced, sending the Standard & Poor’s 500 Index to the biggest weekly gain in a year, amid optimism about earnings reports and a rally in metals that drove up shares of its producers.

Alcoa Inc., the first Dow Jones Industrial Average company to post second-quarter results July 12, rose 2.1 percent. Bank of America Corp. and JPMorgan Chase & Co., which also report quarterly numbers next week, jumped more than 1.6 percent. Google Inc. rallied 2.4 percent as China renewed its Internet license, while rival Baidu Inc. slid 1.7 percent.

The S&P 500 rose 0.7 percent to 1,077.96 at 4 p.m. in New York, giving it a 5.4 percent rally in a week shortened by Monday’s Independence Day holiday. The Dow gained 59.04 points, or 0.6 percent, to 10,198.03. Both gauges had the biggest weekly rally since July 17. Fewer than 6.7 billion shares traded on U.S. exchanges today, the lowest volume of the year.

“Stocks have more room to go,” said E. William Stone, who oversees $104 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “We took the elevator to the ground floor. Hopefully, we can ride this back up with some brighter news on the earnings front. While there are questions about a slowdown and corporate outlooks, we believe we’re not in a double dip.”

Stocks advanced after a 16 percent retreat on the S&P 500 between April 23, which it reached a 19-month high, and July 2. The rally this week was spurred by higher-than-forecast sales at some retailers and a drop in jobless claims.

Slowest Pace

Profits for S&P 500 companies are projected to have increased 34 percent in the April-June period and by the same amount in 2010, according to analysts’ estimates compiled by Bloomberg. Corporate profits may grow 25 percent in the third quarter, the slowest pace of the year. Per-share earnings rose 52 percent from January through March.

“Investors are in a wait-and-see mode,” said John Praveen, the Newark, New Jersey-based chief investment strategist at Prudential International Investments Advisers LLC, which oversees $693 billion. “People are looking for data to show that we’re not having a double dip. Second-quarter earnings will come in much higher than expected. However, investors are looking for corporate outlooks. Investors are trying to gauge if the recent rally is for real.”

Alcoa

Alcoa may announce earnings of 11 cents a share, according to the average analyst estimate in a Bloomberg survey. That compares with a loss of 26 cents in the same period a year ago.

The largest U.S. aluminum producer rose 2.1 percent to $10.94, helping to lead raw-materials companies to the biggest gain among 10 S&P 500 industries. Gold rose the most in three weeks on speculation that the lowest prices since May will revive demand. Copper, silver also rallied.

Newmont Mining Corp., the largest U.S. gold producer, climbed 2.6 percent to $61.93. Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, jumped 4.5 percent to $65.98.

Monsanto Co., the world’s largest seed company, had the biggest gain in the S&P 500, rising 7.3 percent to $51.21.

Financial stocks had the second-biggest gain in the S&P 500 among 10 industries, rising 1.6 percent.

Trading of bullish options on U.S. banks and brokers rose to a two-month high before three of the five biggest financial companies report results next week.

Financial ETF

More than 287,000 calls to buy the Financial Select Sector SPDR Fund, an exchange-traded fund tracking 79 firms, changed hands, triple the four-week average and double the number of puts to sell. The ETF climbed 1.4 percent to $14.51, its highest close since June 25. The ETF’s most-active options were July $15 calls, which doubled to 9 cents and accounted for more than half of call volume.

JPMorgan Chase, which reports results July 15, rose 1.8 percent to $38.85. Bank of America gained 1.7 percent to $15.11, while Citigroup Inc. advanced 1.8 percent to $4.04. Both report second-quarter results on July 16. Profits at S&P 500 financial firms are estimated to increase 81 percent in the three-month period ending June 30 from a year earlier, according to analysts’ estimates compiled by Bloomberg.

Google climbed 2.4 percent to $467.49. The owner of the world’s largest Web search engine said the Chinese government renewed its Internet license, after the company submitted a revised application to meet regulations in the world’s biggest market by users.

Rival Baidu slid 1.7 percent to $71.20.

Visa, RIM

Visa Inc. gained 3.1 percent to $77.38. The world’s biggest payments network was added to the “Americas Conviction Buy” list at Goldman Sachs Group Inc.

Research In Motion Ltd. surged 7.8 percent to $53.33. The maker of the BlackBerry smartphone plans to start an applications store and consumer Internet services in China, according to Reuters.

The benchmark index for U.S. stock options fell for a sixth day, the longest losing streak since March. The VIX, as the Chicago Board Options Exchange Volatility Index is known, dropped 2.8 percent to 24.98. The index, which measures the cost of using options as insurance against declines in the S&P 500, is down from this year’s closing high of 45.79 on May 20.