U.S. Stocks Gain, Led by Energy Shares on Halliburton Earnings

Oct. 20 (Bloomberg) — U.S. stocks rose, adding to the Dow Jones Industrial Average’s best weekly gain in five years, after Halliburton Co.’s profit topped estimates and Federal Reserve Chairman Ben S. Bernanke endorsed an economic stimulus package.

Halliburton, the world’s second-largest oilfield-services provider, jumped 14 percent, while Exxon Mobil Corp. added 10 percent. NRG Energy Inc. surged 29 percent, the most since emerging from bankruptcy in 2003, on Exelon Corp.’s offer to buy the power producer for $6.2 billion. Energy companies, the industry with the highest estimated earnings growth this year, led the 30 percent drop in the Standard & Poor’s 500 Index from Aug. 31 to Oct. 10. The group rallied 11 percent today.

“You’ve got significant rebound capability on these stocks,” Wayne Wilbanks, chief investment officer at Wilbanks Smith & Thomas, said of energy shares. “They took the brunt of the forced hedge-fund selling. There’s no other way to explain Halliburton going from $33 to $16 in three weeks.” Norfolk, Virginia-based Wilbanks manages $1.2 billion.

The S&P 500 rallied 44.85, or 4.8 percent, to 985.40. The Dow surged 413.21, or 4.7 percent, to 9,265.43, with all 30 of its companies increasing. The Nasdaq Composite Index rose 58.74, or 3.4 percent, to 1,770.03. More than five stocks advanced for each that fell on the New York Stock Exchange.

Bernanke, LEI

The Dow average added to last week’s 4.8 percent advance, its best since 2003. All 10 industry groups in the S&P 500 rallied at least 2.8 percent today as a retreat in money market rates also boosted stocks. About 1.2 billion shares changed hands on the NYSE, 17 percent less than the three-month daily average.

Benchmark indexes extended gains this morning after the Conference Board’s index of leading economic indicators unexpectedly rose in September and Bernanke said lawmakers should consider new measures to improve access to credit for consumers, homebuyers and businesses.

U.S. stocks climbed last week on the government’s plan to inject $250 billion into financial companies. The Dow is still down more than 30 percent this year and the S&P 500 is off almost 33 percent as credit losses and asset writedowns stemming from the collapse of the subprime mortgage market top $660 billion at financial firms worldwide.

Europe’s Dow Jones Stoxx 600 Index added 3.6 percent, while the MSCI Asia Pacific Index rose 3.8 percent after ING Groep NV received a 10 billion-euro ($13.4 billion) lifeline from the Dutch government and South Korea guaranteed $100 billion of lenders’ foreign-currency debts.

Halliburton Earnings

Halliburton jumped $2.54 to $20.80. Excluding an acquisition charge and $693 million in costs related to redemption of convertible bonds, per-share profit was 76 cents, 2 cents higher than the average of 24 analyst estimates compiled by Bloomberg.

“Whenever somebody reports numbers that exceed expectations, that’s a positive not only for the individual stock but the broader market,” said Dean Gulis, who helps manage about $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. “In a case like Halliburton, it carries over to its sector. You have a good number of attractively valued opportunities out there.”

Exxon gained $6.95 to $74.99. Crude oil for November delivery climbed 3.3 percent to $74.25 a barrel in New York on speculation OPEC will cut production to halt a 50 percent slide in prices from July’s record.

Fadel Gheit, an analyst at Oppenheimer & Co., upgraded Exxon, ConocoPhillips and Chevron Corp., to “outperform” from “market perform” on the prospect of higher earnings and mergers that boost stock valuations.

Hedge-Fund Stocks

Goldman Sachs Group Inc.’s Hedge Fund VIP Basket, a gauge of 49 stocks with the highest ownership among hedge funds, climbed 6.1 percent today, with almost half the gains coming in the final hour of trading. More than a third of the stocks in the index are energy companies.

Investors pulled a record $43 billion from hedge funds in September, and U.S. regulators are investigating whether investors manipulated end-of-day stock prices to avoid being forced by their brokers to sell holdings.

NRG Energy soared $5.67 to $25 after Exelon offered to buy the second-biggest electricity generator in Texas. Exelon, the biggest U.S. operator of nuclear power plans, rose 0.2 percent to $54.59 for the smallest gain among the 31 utilities in the S&P 500.

Utilities Rally

Exelon followed Warren Buffett in bidding for cheapened power assets after the credit freeze dragged down stock prices. Buffett’s MidAmerican Energy Holdings Co. agreed Sept. 18 to buy Constellation Energy Group Inc. for $4.7 billion, less than half the company’s market value a week earlier.

AES Corp., a power producer with operations in more than two dozen countries, led S&P 500 utilities to an 8.1 percent gain. AES climbed 21 percent to $9.89 for the biggest gain in the S&P 500.

Financial companies in the S&P 500 rose 2.8 percent as a group, the smallest gain among its 10 main industries.

Bank of America Corp., Goldman Sachs Group Inc. and JPMorgan Chase & Co. advanced after a decrease in money market rates signaled central bank efforts to revive bank lending are succeeding. The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars fell by 36 basis points to 4.06 percent today, according to the British Bankers’ Association, the biggest drop in nine months.

KeyCorp and National City Corp. led declines in regional banks. Both were scheduled to release third-quarter results before the market opens tomorrow.

Libor Still `Elevated’

Three-month Libor is “still very elevated,” said Walter Todd, a money manager at Greenwood Capital Inc. in Greenwood, South Carolina, which oversees $1 billion. “The cost of credit to companies and individuals is permanently reset higher. We are not going back to the cheap credit days of a year ago.”

Developers Diversified Realty Corp. and General Growth Properties, real-estate companies, fell the most in the S&P 500. GGP, a mall owner, may sell up to $2 billion in preferred shares to shore up capital, the Wall Street Journal reported. The CEO of Developers Diversified, which manages shopping centers, today pledged to reduce its debt load.

Earnings Watch

At least 139 S&P 500 companies will report third-quarter earnings this week, including Apple Inc., Caterpillar Inc. and McDonald’s Corp. Wall Street analysts forecast an 11 percent drop in third-quarter earnings in a Bloomberg survey. Energy companies are forecast to show profit growth of 45 percent in the third quarter and 14 percent in the fourth quarter.

American Express Co., the biggest U.S. credit-card company by purchases, rose in trading after the official close of U.S. exchanges after third-quarter profit topped analysts’ estimates. Still, profit fell for the fourth straight quarter as more consumers defaulted on loans.

Texas Instruments Inc. slumped in after-hours trading after reporting a 27 percent drop in third-quarter profit and issuing a fourth-quarter forecast that fell short of analyst estimates.

The S&P 500 trades at about 11.9 times estimated earnings over the coming 12 months, compared with a price-to-earnings multiple of 16.6 at the end of last year.

“You don’t know if it’s cheap,” said Ralph Shive, chief investment officer at 1st Source Corp. Investment Advisors in South Bend, Indiana, which manages $3 billion. “It could be, but it’s hard to get much confidence about corporate earnings.”

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