Computer and consumer shares madke U.S. stocks rises

U.S. stocks rose after a rally in computer and consumer shares lifted the Dow Jones Industrial Average 150 points in the last 20 minutes of trading.

Apple Inc. and Cisco Systems Inc. climbed and computer shares added the most to the advance in the Standard & Poor's 500 Index. Merck & Co. helped carry the Dow to its largest gain since July 12 on prospects for expanded use of a vaccine.

The Dow average erased a 79-point drop spurred by concern mortgage losses are spreading after Bear Stearns Cos. suspended withdrawals from a hedge fund. The S&P 500 climbed after falling below its 200-day moving average for the first time in a year.

``At some point people finally decided unless everything in the world suddenly goes bad here, this is a good time to get in,'' Ernie Ankrim, who helps manage $200 billion at Russell Investment Group in Tacoma, Washington.

The S&P 500 increased 10.54, or 0.7 percent, to 1465.81. The Dow average added 150.38, or 1.1 percent, to 13,362.37. The Nasdaq Composite Index increased 7.6, or 0.3 percent, to 2553.87.

The S&P 500 switched between gains and losses at least 33 times. Some 2.4 billion shares changed hands on the Big Board, 49 percent more than the three-month daily average.

Apple added $3.24 to $135. Analysts at Citi Investment Research recommended investors buy the stock, saying a 6.8 percent decline yesterday was overdone. Macintosh sales should remain ``strong'' through the year, they predicted.

Cisco, the biggest maker of computer-networking equipment, climbed 86 cents to $29.77.

Merck rose $1.37 to $51.02. Vaccines made by the company and Sanofi-Aventis SA are being promoted by U.S. health officials to increase potentially life-saving immunization for preteens.

Consumer Shares Rally

A gauge of consumer shares made the second-largest contribution to the S&P 500's advance.

Whole Foods Markets Inc. climbed $2.48 to $39.52 after profit topped analysts' estimates, the second-best gain in the S&P 500.

OfficeMax Inc. jumped $2.23, or 6.8 percent, to $35.11, the steepest gain in the S&P 500. The third-largest U.S. office- supplies retailer said second-quarter profit exceeded analysts' estimates as the company sold more paper and ink to corporate clients and individual consumers.

200-Day Moving Average

The fall in the S&P 500 below its 200-day moving average was viewed as a ``buy'' signal by some analysts who base trading strategies on charts.

``People playing the odds are saying `the 200-day moving average could provide support, we're buyers in here,''' said Oscar Nelson, a trader at U.S. Global Investors Inc. in San Antonio, which manages $5 billion. ``A lot of times you will see indexes bounce off those key moving averages.''

Today's rally also came after the Chicago Board Options Exchange Volatility Index rose to 26.22, the highest since April 2003. Higher readings in the so-called VIX, derived from prices paid for S&P 500 options, indicate more risk in stocks and are sometimes read as bullish signs. The VIX ended the day at 23.67.

Devon Energy Corp. added $3.81 to $78.42. The biggest independent oil and natural-gas producer in the U.S. said second- quarter profit rose 5.2 percent, exceeding analysts' expectations, on increased production.

Pending home sales unexpectedly gained 5 percent in June, the National Association of Realtors said. Economists in a Bloomberg survey expected a drop of 0.5 percent. The Institute for Supply Management's factory index was 53.8 in July, with any number above 50 signaling expansion.

Among 375 members of the S&P 500 that have reported second- quarter results, profits have risen an average of 10.8 percent, data compiled by Bloomberg show. That's more than twice the average of analysts' forecasts on July 13.

'Numerous Positives'

``There are numerous positives in this market,'' said Eric Green, who helps manage about $5 billion at Penn Capital Management in Cherry Hill, New Jersey. ``Earnings season has not been bad at all, actually better than what people expected. The economy is doing fine.''

Aon Corp. advanced $1.95 to $41.99. The world's second- largest insurance broker said profit rose 24 percent in the second quarter as new corporate clients boosted revenue above analysts' estimates. The company also announced plans to spin off or sell a 6,800-employee accident, health, and life insurer.

Utility shares in the S&P 500 gained 2.7 percent as a group, led by Exelon Corp., the largest operator of U.S. nuclear power plants, which was raised to ``overweight'' from ``equal-weight'' by analysts at Morgan Stanley. They raised their 12-month share price expectation to $85 from $64. Exelon shares added $3.95 to $74.10.

About 18 stocks gained for every 17 that fell on the New York Stock Exchange.

Bear Stearns

Bear Stearns lost $2.92 to $118.30. The Bear Stearns Asset- Backed Securities Fund had about $900 million invested in securities that included mortgage bonds, spokesman Russell Sherman said in a telephone interview yesterday. The fund probably had losses in July, Sherman said.

Separately, Australia's Macquarie said that investors in two hedge funds that invest in corporate loans may lose 25 percent of their money. Sowood Capital Management LP said this week that it lost $1.5 billion in July after declines in the corporate bond and loan markets.

Shares of home-loan insurers MGIC Investment Corp. and Radian Group Inc. had their biggest two-day drops ever after the companies said their stakes in a subprime mortgage company may be worthless.

MGIC fell $3.90 to $34.76, bringing its two-day decline to 24 percent. Radian, the rival MGIC is acquiring, slid $6.20 to $27.51, the 14th consecutive daily decline.

A gauge of homebuilders in S&P indexes slipped 0.7 percent.

Beazer Homes USA Inc. plunged $2.51, or 18 percent, to $11.48 after earlier dropping as much as 42 percent after traders speculated it will file for bankruptcy protection. Beazer said in a statement there was no truth to the speculation.

Homebuilders Drop

Hovnanian Enterprises Inc., New Jersey's largest builder, fell $1.29, or 9.7 percent, to $11.95. Standard Pacific Corp., a California-based homebuilder, declined 82 cents to $13.99.

Jones Apparel Group Inc. dropped $3.10, or 12 percent, to $21.86, a seven-year low. The maker of Jones New York clothing and Nine West shoes reported a loss and reduced its annual profit forecast for the second time in three months. Crude oil for September delivery fell $1.74, or 2.2 percent, to $76.47 a barrel.

Time Warner Inc. lost 62 cents, or 3.2 percent, to $18.64, its lowest since October. Its AOL Internet unit said second- quarter sales fell 38 percent, the most since adopting a strategy last year to replace paid subscribers with free e-mail. Advertising sales growth for Time Warner will slow in the second half of 2007 from the first half, the company said.

MasterCard

MasterCard Inc. fell $10.80, or 6.7 percent, to $150. The second-biggest credit-card company dropped the most since last year's initial public offering on earnings that fell short of the most optimistic analyst estimates. MasterCard gets almost half its revenue from the U.S., where consumer spending grew at the slowest pace in a year during the quarter. The company said card use in the U.S. increased 9.8 percent, compared with 18 percent a year earlier.

The Russell 2000 Index, a benchmark for companies with a median market value of $643 million, gained 0.2 percent to 777.92. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, rose 0.5 percent to 14,755.40. Based on its advance, the value of stocks increased by $91 billion.

source:bloomberg.com