U.S. Stocks Rise to Two-Week High After Merrill Gets Investment

Dec. 24 -- U.S. stocks gained, sending benchmark indexes to their highest levels in two weeks, after Merrill Lynch & Co. received a $6.2 billion cash infusion and lending rates declined for a fifth day.

Merrill climbed for a second day on expectations the investment from Singapore's sovereign wealth fund and New York- based Davis Selected Advisors LP will help the world's largest brokerage shore up capital. Citigroup Inc., Wells Fargo & Co. and American International Group Inc. carried financial shares to the steepest gain in the Standard & Poor's 500 Index. Target Corp. advanced the most this month after activist investor William Ackman said he held talks with management about boosting the stock price.

The S&P 500 increased 8.43, or 0.6 percent, to 1,494.1 at 11 a.m. in New York, bringing its yearly gain to 5.3 percent. The Dow Jones Industrial Average advanced 75.92, or 0.6 percent, to 13,526.57. The Nasdaq Composite Index added 15.03, or 0.6 percent, to 2,707.02. More than eight stocks gained for every three that fell on the New York Stock Exchange. Benchmarks in Asia and Europe also climbed.

``The news on Merrill this morning is positive,'' said Peter Sorrentino, who helps manage $12 billion at Huntington Asset Management in Cincinnati. ``It bodes well for the market that there's going to be consolidation and streamlining taking place among the financials.''

Euribor Falls

The decline in the cost of borrowing dollars, euros and pounds signaled that a concerted effort by central banks in North America and Europe may be boosting lending. The three-month euro interbank offered rate, or Euribor, fell 0.01 percentage point to just over 4.76 percent, the lowest since Nov. 28. The three-month rate for dollars declined 0.02 point to 4.84 percent, the British Bankers' Association said.

Trading may be slower than average today because U.S. exchanges close three hours early, at 1 p.m. in New York, and will remain shut tomorrow for Christmas. More than 245 million shares traded on the New York Stock Exchange, 32 percent less than the same time a week ago.

Markets including Germany, Italy, Spain, and Switzerland were shut, while exchanges in the U.K., Ireland, the Netherlands, Belgium and France closed early.

Merrill rose 15 cents to $55.69. The company, reeling from the biggest loss in its 93-year history, will receive up to $6.2 billion from Singapore's Temasek Holdings Pte. and Davis. Merrill also agreed today to sell its commercial finance business to General Electric Co.'s finance arm for an undisclosed price as part of a plan to free up capital after subprime losses.

Citigroup, Wells Fargo

Financial shares in the S&P 500 added 1 percent, the steepest among 10 industries. Citigroup led gains in the Dow average, advancing 57 cents, or 1.9 percent, to $30.81. Wells Fargo and AIG joined Citigroup in contributing the most to the rally by banks, brokerages and other financial institutions, climbing 2.1 percent and 1.4 percent, respectively.

The industry got an added boost after investors in C$33 billion ($33.3 billion) of Canadian asset-backed commercial paper agreed to restructure their holdings into longer-term debt, allowing the market to reopen for the first time since August.

Target added $1.10, or 2.2 percent, to $51.78. Ackman increased his stake to 10 percent, up from 9.6 percent earlier.