U.S. Stocks Rally, Led by Banks; Wells Fargo, Countrywide Gain

Nov. 30 -- U.S. stocks rose, heading for their biggest weekly gain since March, on speculation the government will cut borrowing costs and stem credit-market losses by freezing interest rates on subprime mortgages.

Wells Fargo & Co. and Bank of America Corp. led financial shares to their steepest weekly advance in four years. Countrywide Financial Corp., the biggest U.S. mortgage company, rallied the most in a month on the Treasury Department's plan to reduce foreclosures. Crude oil fell below $90 a barrel for the first time in a month, while Treasuries tumbled as demand for the relative safety of government debt diminished.

The Standard and Poor's 500 Index advanced 16.95, or 1.2 percent, to 1,486.67 at 10:10 a.m. in New York, paring its biggest monthly drop in five years. The Dow Jones Industrial Average increased 143.23, or 1.1 percent, to 13,454.96. The Nasdaq Composite Index rose 13.69, or 0.5 percent, to 2,681.82. Almost six stocks gained for every one that fell on the New York Stock Exchange.

Federal Reserve Chairman Ben S. Bernanke spurred speculation the central bank will cut its benchmark rate by half a percentage point at its December meeting after saying yesterday that policy makers must decide whether ``renewed turbulence'' in financial markets has shifted the risks between growth and inflation.

``It is telling you that it's likely to cut pretty aggressively over the next six months,'' said Jason Trennert, chief investment strategist at Strategas Research Partners in New York.

Weekly Gains

For the week, the S&P 500 has added 3.2 percent and the Dow average has gained 3.6 percent, while the Nasdaq has risen 3.8 percent. On Nov. 26, the S&P 500 had dropped 10.1 percent from its Oct. 9 record. A decline of 10 percent for a benchmark is commonly considered to mark a ``correction.'' The S&P 500 has added 5.6 percent since Nov. 26.

Bernanke said in a speech in Charlotte, North Carolina, that the economic outlook has been ``importantly affected over the past month by renewed turbulence in financial markets.'' His concern was echoed today by government reports showing consumer spending rose less than forecast in October and incomes increased at the slowest pace in six months.

Banks Rally

Citigroup Inc., the largest U.S. bank, added $1.68 to $33.97. Wells Fargo, the second-biggest U.S. mortgage lender, advanced $1.76 to $32.30. Countrywide gained $2.50 to $11.80. Bank of America, the second-biggest U.S. bank, increased $1.87 to $46.50.

Credit Suisse raised its recommendation on global banks to ``benchmark'' from ``underweight.'' Global economies will avoid a hard landing, strategists including Andrew Garthwaite wrote in note published today.

The report comes after financial institutions, which have written down more than $65 billion for debt-related losses, face higher credit costs related to the collapse of the U.S. subprime mortgage market. The fall in value of subprime assets globally may reach $400 billion, Deutsche Bank AG analysts wrote Nov. 12.

U.S. Treasury Secretary Henry Paulson is negotiating an agreement with banks to stem a surge in foreclosures by fixing interest rates on loans to subprime borrowers, according to people familiar with a meeting he led yesterday.

Citigroup, Wells Fargo and Washington Mutual Inc. executives attended, said a person present, who spoke on condition of anonymity.

Morgan Stanley

Morgan Stanley rose $2.03 to $54.37 after the second- biggest U.S. securities firm ousted co-President Zoe Cruz, Wall Street's highest-paid female executive, three weeks after the firm disclosed $3.7 billion of losses on mortgage-related securities at the division she oversaw.

Financial shares in the S&P 500 climbed 3.2 percent as a group today and 6 percent over the past week.

General Motors Corp. rose 76 cents to $29.54. The largest automaker plans to boost spending on Chinese-made parts 25 percent a year until 2010 because of lower production costs and China's rising vehicle sales.

Apple Inc., the maker of the iPod music player, increased $3.21 to $187.50. China Mobile Ltd., the world's largest wireless-phone operator by subscribers, said it is still in discussions to offer Apple's iPhone handset, denying a newspaper report that talks between the two companies have ended.

Dell, Exxon

Dell Inc. retreated $3.60 to $24.54. The world's second- largest personal-computer maker reported third-quarter profit yesterday of 34 cents a share, missing the estimate of 35 cents in a Bloomberg survey of analysts. Chief Executive Officer Michael Dell said he would boost spending to expand into new countries and retailers. Goldman, Sachs & Co. removed the stock from its ``Americas conviction buy'' list, saying the improvement in the company's performance ``is smaller and more gradual than we had been expecting.''

Exxon Mobil Corp. fell 27 cents to $88.32 after crude oil futures dropped 2.4 percent to $88.80 a barrel in New York.

Bernanke's comments yesterday came after Fed Vice Chairman Donald Kohn acknowledged the threat to spending from reduced access to credit on Nov. 28. The Fed in October said growth and inflation risks were ``roughly'' balanced. Kohn's remarks stoked investors' expectation the Fed, which lowered interest rates at its past two meetings, will do so again on Dec. 11.

The 0.2 percent increase in consumer spending was less than the 0.3 percent gain forecast by economists in Bloomberg News survey. The Commerce Department said incomes also rose 0.2 percent, half the pace forecast by economists.

A gauge of business activity compiled by the National Association of Purchasing Management-Chicago rose more than forecast in November. The group's business barometer climbed to 52.9 from 49.7 in October. Readings greater than 50 signal growth. The median forecast was for a reading of 50.5.