U.S. Stocks Rise as Inventories Point to Strengthening Economy
By Whitney Kisling
April 9 (Bloomberg) -- U.S. stocks rose, sending the Dow Jones Industrial Average briefly above 11,000 for the first time since September 2008, as growth in wholesale inventories added to signs the economy is strengthening.
Chevron Corp. led the Dow’s gain after saying its oil refineries returned to profitability. Dish Network Corp. and Abercrombie & Fitch Co. rallied at least 3.5 percent on analyst upgrades. Equities also advanced as European officials said they’re ready to bail out Greece if needed, assuaging concern a default by the nation will stifle the global economic recovery.
The S&P 500 gained 0.7 percent to an 18-month high of 1,194.37 at 4 p.m. in New York and rose 1.4 percent over the past five days for a sixth-straight weekly gain, its longest streak in a year. The Dow increased 70.28 points, or 0.6 percent, to 10,997.35 and reached as high as 11,000.98.
“We’ve seen some pretty decent strength,” said Walter Todd, who helps manage $800 million in assets at Greenwood Capital Associates in South Carolina. “Look at the cyclically strong economic growth we’re seeing, there’s no question about that, in terms of economic statistics, retail sales, earnings.”
U.S. stocks rose yesterday as retailers rallied on faster- than-estimated sales growth, helping the market recover from an early slump triggered by concern over Greece’s debt crisis. The S&P 500 has climbed 7.1 percent this year and the Dow is up 5.5 percent. This week’s gains came after the government reported the biggest growth in jobs in three years on April 2, while pending home sales unexpectedly rose.
Dow 11,000
The Dow ended less than three points below 11,000, a level it hasn’t closed above since September 2008, when Lehman Brothers Holdings Inc. filed for bankruptcy. Although the index crossed above and below 11,000 in 1999 and 2000, it didn’t “definitively” rise above it until 2006, Jeffrey Kleintop, who helps oversee about $279 billion as chief market strategist at LPL Financial in Boston, wrote in a note e-mailed today.
“The move to 11,000 is a clear sign of a well-advanced recovery,” he wrote. “The rally becomes more meaningful for some once the Dow gets back to 11,000, where it was before Lehman Brothers failed -- the event that precipitated the peak of the financial crisis and recession.”
Gains today came after the European Union agreed on a “support plan” for Greece that they are ready to put in place, French President Nicolas Sarkozy told reporters in Paris today. The European Central Bank plans to call a Governing Council teleconference this evening to discuss the latest developments, two people familiar with the matter said on condition of anonymity. An ECB spokeswoman declined to comment.
Greek Plan
The lack of detail on a rescue plan and the speed at which the situation is deteriorating mean the nation may need to seek emergency aid from the International Monetary Fund within days, UBS AG economists said. Greek stocks and bonds have plunged this year, with the premium investors demand to own the nation’s 10- year debt instead of benchmark German bonds climbing yesterday to the highest since before the euro was introduced in 1999.
“The recent market action means that an external intervention may be unavoidable and could happen very soon as the situation is untenable,” UBS economists including Stephane Deo wrote in a note to investors late yesterday. “We think an intervention over the weekend is a distinct possibility.”
A Commerce Department report showed inventories at wholesalers rose in February for the first time in three months, a sign companies are ramping up orders as sales climbed. Inventories increased 0.6 percent, more than the 0.4 percent median forecast of 35 economists in a Bloomberg survey.
Energy Leads
A gauge of energy companies had the biggest gain in the S&P 500 among 10 industries, climbing 1.1 percent. The group has had the best start to the second quarter, rallying 4.1 percent, followed by financial stocks with a 3.8 percent advance.
Today’s advance in energy equities came even as oil and gasoline retreated. Natural gas surged 4.1 percent after dropping for three days.
Chevron said its oil refineries returned to profitability during the first quarter as margins earned from processing crude into fuel widened. The second-largest U.S. energy producer advanced 2.4 percent to $79.50, its biggest gain since February.
Atlas Energy Inc. climbed 20 percent to $38.25, the most in a year, after saying it will transfer an interest in Marcellus Shale assets to a wholly owned affiliate in a transaction valued at $1.7 billion. Range Resources Corp. also advanced, adding 4 percent to $50.28.
Gold Climbs
Barrick Gold Corp., the world’s biggest producer of the precious metal, increased 0.8 percent to $41.29. Gold for June delivery climbed 0.8 percent to $1,161.90 an ounce, its highest price since December, gaining as an alternative to currencies.
DISH, the second-largest satellite TV provider, rallied 3.5 percent to $21.77 after UBS boosted its rating to “buy” from “neutral,” citing competitive and economic improvements. Abercrombie & Fitch advanced 6.6 percent to $49.98 after Bank of America Merrill Lynch upgraded the shares to “neutral” from “underperform.”
J.C. Penney Co. was added to the Goldman Sachs “conviction buy list” and had its shares raised to “buy” from “neutral.” The stock advanced 1.7 percent to $31.52.
Intel Corp. gained 1.1 percent to $22.55 after Canaccord Adams Ltd. said the chipmaker probably saw better-than-expected demand for notebooks last quarter and raised its share-price estimate to $27 from $25.
Jacobs Engineering Group Inc. surged the most in the S&P 500, as CNBC reported speculation private-equity investors may take over the engineering company. The shares climbed 7.5 percent to $47.61.
Earnings
S&P 500 companies will post a 30 percent profit growth for the first quarter, according to estimates compiled by Bloomberg. Alcoa Inc., which fell 3.2 percent for the second-biggest drop in the S&P 500 today, is scheduled to post results on April 12.
“The sellers might emerge once we get into the actual reports,” Kleintop said in an interview. “Expectations just get really high.” Kleintop wrote in a note today that he expects a 5 percent to 10 percent pullback as companies start to report earnings.
Cummins Inc. rose 1.6 percent to $66.07 as UBS upgraded its recommendation on North America’s largest maker of heavy-duty diesel truck engines to “buy” from “neutral.”
Constellation Brands Inc. dropped 2.5 percent to $16.43 after forecasting profit excluding some items that trailed the average analyst estimate.
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