By Rita Nazareth
Sept. 15 (Bloomberg) -- U.S. stocks advanced for the seventh time in eight days after growth in retail sales and New York manufacturing topped economists’ estimates and billionaire investor Warren Buffett said his company is buying equities.
Alcoa Inc.,General Electric Co. and Caterpillar Inc. rose at least 3.8 percent to lead the Dow Jones Industrial Average higher after the reports from the Commerce Department and Federal Reserve Bank of New York. Yahoo! Inc. and EBay Inc. rallied as analysts recommended buying the shares.
The Standard & Poor’s 500 Index rose 0.3 percent to 1,052.8 at 1:39 p.m. in New York after climbing to the highest in almost a year yesterday. The Dow Jones Industrial Average added 51.85 points, or 0.5 percent, to 9,678.65.
“Very encouraging economic data points,” said Peter Jankovskis, who helps manage $1.4 billion at Oakbrook Investments in Lisle, Illinois. “Those numbers point to strength in personal consumption and the U.S. economy. And they certainly bode well for corporate profits and the stock market.”
Equities advanced in early trading after the Commerce Department said sales at retailers surged in August by 2.7 percent, the most in three years and more than the 1.9 percent forecast by economists, as the government’s “cash- for- clunkers” program spurred auto sales and spending increased in 11 of 13 categories.
A separate report from the New York Fed showed manufacturing in that region grew in September at the fastest pace in almost two years.
Buffett Buying
Benchmark indexes extended gains after Buffett told a conference in California that his Berkshire Hathaway Inc. is “buying stocks right as we speak” and he’s getting a “lot for my money” in equities.
Fed Chairman Ben S. Bernanke said the worst U.S. recession since the 1930s has probably ended, while warning that growth may not be strong enough to quickly reduce the jobless rate.
“Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time,” Bernanke said today at the Brookings Institution in Washington, responding to questions after a speech.
Alcoa, the largest U.S. aluminum producer, added 6.7 percent to $13.80. General Electric rose 3.8 percent to $15.94. Caterpillar gained 4.5 percent to $50.99.
Yahoo, EBay
Yahoo gained 4.4 percent to $16.26. The Internet-search engine was upgraded to “outperform” from “market perform” by Sanford C. Bernstein & Co., which said the stock’s price is “too low.”
EBay added 2.2 percent to $24.34. The owner of the most visited U.S. e-commerce Web site was raised to “buy” from “neutral” at UBS AG, which said the company’s marketplaces business is “turning a corner” and lifted its share-price estimate to $28 from $24.
Health-care companies lost 0.6 percent as a group. A report from the Institute of Medicine, which advises the federal government on health care, will say the U.S. can cut health-care spending by $250 billion a year within a decade. The report will counter “stingy” estimates from the Congressional Budget Office, said Arnold Milstein, planning chairman of the institute’s working group on health costs.
Coventry Health Care Inc. fell 5.9 percent to $23.36, while UnitedHealth Group Inc. slid 3.3 percent to $27.80.
Credit-Card Concern
JPMorgan Chase & Co. led the Dow industrials lower earlier in the day. The largest U.S. credit-card lender said in a regulatory filing that write-offs for uncollectible loans rose to 8.73 percent in August from 7.92 percent a month earlier.
Discover Financial Services lost 0.2 percent to $15. Charge-offs for loans deemed uncollectible climbed to 9.16 percent in August from 8.43 percent in July, the company said.
Citigroup Inc. dropped 5.3 percent to $4.28. The Treasury Department and the third-biggest U.S. bank have begun discussing how to sell the 34 percent stake that the government acquired in the rescue of the bank, people familiar with the matter said.
Treasury spokesman Andrew Williams and Molly Meiners, a spokeswoman for Citigroup, declined to comment.
Lehman’s Legacy
Today is the one-year anniversary of Lehman Brothers Holdings Inc.’s bankruptcy filing, which exacerbated the credit crunch and helped drag the global economy into its worst slowdown since World War II. Losses at the world’s biggest financial institutions since the start of 2007 have climbed to more than $1.6 trillion.
The Libor-OIS spread, a gauge of banks’ reluctance to lend, fell to the average level in the five years before the credit crisis began after central banks and governments acted to limit the damage sparked by the failure of Lehman.
The spread narrowed 1 basis point to 11 basis points today, the average in the period leading to August 2007, when credit markets began to seize up. The London interbank offered rate, or Libor, for three-month loans in dollars declined to 0.293 percent, the British Bankers’ Association said.
“Investors are somewhat skeptical about how neat and clean things will be going ahead” said Richard Sichel, chief investment officer at Philadelphia Trust Co. in Philadelphia, which manages $1.3 billion. “Financials have done very well. No wonder they’d be giving back.”
Kroger Co. had the biggest decline in the S&P 500, slumping 8.2 percent to $20.30. The largest U.S. supermarket chain reported second-quarter profit that fell more than analysts’ estimates and cut its earnings forecast for the year.
Safeway Inc. retreated 4.3 percent to $19.33.
11-Month High
U.S. stocks rose yesterday, sending the S&P 500 to its highest level since Oct. 6, amid gains in utility, industrial and financial shares. The index has rebounded 56 percent from a 12-year low on March 9 on signs the recession is easing and as companies beat analysts’ earnings estimates.
The rally has pushed valuations in the S&P 500 to more than 19 times its companies’ reported earnings from continuing operations over the past 12 months, the highest level since June 2004, according to weekly data compiled by Bloomberg.
Investor Laszlo Birinyi said U.S. stocks are in a bull market and have “a lot of room to run.” Investors who wait to buy stocks until the National Bureau of Economic Research declares the recession over will miss out on gains, Birinyi said.
“I don’t know how you could wish for a better set of circumstances,” Birinyi, the founder of Westport, Connecticut- based research and money-management firm Birinyi Associates Inc., said in an interview with Bloomberg Television. “The economy is probably a little bit better than most people are giving credit.”
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