U.S. stocks rebounded from their worst day in two weeks after Merrill Lynch & Co. assuaged concern of a looming credit crisis and the latest government report on the economy showed growth is accelerating.
Advanced Micro Devices Inc., the second-largest maker of personal-computer processors, and Nvidia Corp., a producer of graphics chips, posted the biggest gains in the Standard & Poor's 500 Index. Exxon Mobil Corp. climbed the most in the Dow Jones Industrial Average, fueling a rally in oil and gas company shares.
Stocks advanced after the Philadelphia Federal Reserve Bank's factory index jumped to its highest in two years in June. Financial stocks recovered from early losses after a person with knowledge of Merrill Lynch's plans said the brokerage won't sell all the mortgage bonds it seized from two Bear Stearns Cos. hedge funds.
``There was a general nervousness in the market, and we seemed to have shrugged that off,'' said James W. Gaul, who helps oversee $2.4 billion at Boston Advisors LLC in Boston. ``Improvement in the tech sector can help to offset weakness in other sectors, specifically financials.''
The S&P 500 Index climbed 9.35, or 0.6 percent, to 1522.19. The Dow average increased 56.42, or 0.4 percent, to 13,545.84. The Nasdaq Composite Index added 17, or 0.7 percent, to 2616.96.
Chipmakers Rally
AMD gained $1.08 to $14.72 after Stifel, Nicolaus & Co. raised its rating on the stock to ``short-term trading buy'' from ``neutral,'' saying the company's revenues may exceed analysts' forecasts in the second quarter and it has likely retaken some market share.
Nvidia Corp. added $3.12 to $42.98, a record. Lehman Brothers upgraded the maker of computer graphics chips to ``overweight' from ``equal weight,'' citing improved demand for personal computers and the company's new Tesla chips.
Chipmakers were also boosted after prices for the benchmark 512-megabit dynamic random access memory chip soared 17 percent to $2.21 yesterday, according to Dramexchange.com, Asia's biggest spot market for chips.
Financials Rebound
An index of financial shares in the S&P 500 gained 0.2 percent, rebounding from yesterday's 1.7 percent drop.
Merrill decided to back away from a threat to dump about $850 million of securities it seized from Bear's hedge funds as collateral for loans, said the person, who declined to be identified because the decision hasn't been announced.
Merrill's move eased concern that the auction of Bear's collateralized debt obligations would lower the value of similar securities held by banks, hedge funds and other investors.
Energy companies gained 2 percent, the most among 10 industry groups in the S&P 500, after Nigerian oil workers walked out at the country's export terminals as a general strike expanded. Crude for August delivery slipped 21 cents to $68.65 a barrel on the New York Mercantile Exchange.
Exxon, the biggest oil company, climbed $1.48 to $84.20. Chevron Corp., the second largest, added $1.88 to $82.85.
``We are very bullish on energy,'' said Michael Cuggino, the San Francisco-based manager of the $1 billion Permanent Portfolio fund, which has outperformed 94 percent of its peers in the past five years. ``I like to see investments where there is pricing power involved, and you can see that with the oil companies.''
Economy Watch
Stocks got a boost after the Federal Reserve Bank of Philadelphia's general economic index jumped to 18 this month, the highest since April 2005. Economists in a Bloomberg survey expected a reading of 7.0 after a 4.2 reading in May. A positive number signals expansion. The index averaged 8.1 last year.
An index of economic gauges also strengthened last month as stock prices jumped and fewer workers applied for unemployment benefits. The Conference Board's index of leading economic indicators increased 0.3 percent after a 0.3 percent drop in April. Economists had expected a 0.2 percent gain, according to a Bloomberg survey.
More than three stocks gained for every two that fell on the New York Stock Exchange. Some 1.6 billion shares changed hands, 4.3 percent more than the three month average.
Shares of Oakley Inc. jumped $3.22, or 13 percent, to $28.45 after the maker of sunglasses agreed to be acquired by Luxottica Group SpA for $2.03 billion in cash, or $29.30 a share.
The Andersons
The Andersons Inc. increased $5.10 to $45.50. The company, which sells and stores grain, boosted its full-year forecast, saying it expects to earn $2.80 to $3.05 a share this year, topping the average estimate of $2.68 from analysts in a Bloomberg survey.
H&R Block Inc. fell 74 cents to $22.04. The largest U.S. tax preparer posted a fiscal fourth-quarter loss after reducing the value of its unprofitable mortgage unit. Profit excluding the mortgage unit was $1.81 a share, missing the $1.88 average estimate of seven analysts surveyed by Bloomberg.
Cheesecake Factory Inc. dropped $1.90 to $24.85. At least two analysts lowered their ratings on the restaurant and bakery operator after it forecast quarterly sales growth below their estimates. Downgrade reports from Bear Stearns and CIBC World Markets Inc. cited a conference presentation yesterday where Cheesecake Factory forecast second-quarter sales up as much as 15.5 percent. The average estimate of 13 analysts in a Bloomberg survey was for growth of 17.5 percent.
Starbucks Falls
Starbucks Corp. fell 3.9 percent, the steepest drop in the S&P 500, and led a gauge of consumer services companies to the biggest decline among 24 industry groups. Michael Casey, chief financial officer of the world's largest coffee-shop chain, said an increase in dairy costs and slower growth in the number of U.S. sales transactions may make meeting the higher end of the company's 2007 per-share profit estimate difficult.
In other economic reports, more Americans than forecast filed first-time claims for unemployment benefits last week, suggesting the labor market may be cooling. Initial jobless claims rose by 10,000 to 324,000 in the week ended June 16, the Labor Department said. Economists forecast claims would hold at 311,000 for a third eek, according to the median of 41 projections in a Bloomberg News survey.
The Russell 2000 Index, a benchmark for companies with a median market value of $685 million, added 0.4 percent to 839.81. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, gained 0.6 percent to 15,376.04. Based on its advance, the value of stocks increased by $106.1 billion.
source:bloomberg.com
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