By Jeff Kearns
April 29 (Bloomberg) -- U.S. stocks rose, driving the Standard & Poor’s 500 Index toward a three-month high, as companies beating profit forecasts outnumbered those that trailed by 10-to-1 and investors speculated bank losses peaked.
DreamWorks Animation SKG Inc. surged 24 percent and Time Warner Inc. added 3.5 percent after topping estimates, joining 19 other S&P 500 companies that exceeded projections today. Citigroup Inc. and Bank of America Corp. advanced more than 5.1 percent after Fox-Pitt Kelton Cochran Caronia Waller upgraded its rating on banks for the first time since 2004, saying non- performing assets will peak at the end of 2009.
The S&P 500 rose 2 percent to 871.85 at 12:49 p.m. in New York as all 10 industry groups gained after government data showed consumer spending increased the most in two years. The Dow Jones Industrial Average rallied 143.37 points, or 1.8 percent to 8,160.32. Stocks in Europe and Asia climbed.
“We had some decent earnings,” said David Heupel, who helps manage $60 billion at Thrivent Financial in Minneapolis. “As we get more of that, investors will get more comfortable with the concept of a bottom being put in on the economy.”
Consumer spending, which accounts for about 70 percent of the economy, climbed at a 2.2 percent annual pace last quarter, the Commerce Department said today. The report also showed that the economy contracted again in the first quarter. Gross domestic product dropped at a 6.1 percent annual pace, more than forecast, after contracting at a 6.3 percent rate in the last three months of 2008.
‘Shrek,’ ‘Madagascar’
DreamWorks climbed 24 percent to $23.60. The maker of “Shrek” movies reported first-quarter profit excluding some items of 68 cents a share, beating the average analyst estimate by 49 percent, on theatrical and home-video sales from “Madagascar: Escape 2 Africa.” Goldman Sachs Group Inc. boosted its rating on the shares to “buy” from “neutral.”
Time Warner reported first-quarter profit excluding some items of 45 cents a share, beating the average estimate in a Bloomberg survey by 5 cents. Shares of the media company climbed 3.5 percent to $22.52.
Bank of America, the country’s biggest lender by assets, gained 5.1 percent to $8.57. Citigroup, the third-largest, added 6.2 percent to $3.07. Fox-Pitt increased its rating on U.S. banks to “marketweight” from “underweight.” Financial stocks rallied 4 percent for the biggest gain among 10 industries in the S&P 500.
“The market is saying it’s a possibility that banks will earn money and those profits will build up their balance sheets,” said Robert Lutts, who oversees $400 million as chief investment officer at Cabot Money Management Inc. in Salem, Massachusetts. “Write-offs are coming to an end.”
Swine-Flu Concern
U.S. stocks dropped yesterday for a second day as concern banks need more capital and the swine-flue outbreak will thwart an economic recovery overshadowed a bigger-than-expected jump in consumer confidence. U.S. health officials today confirmed the country’s first swine flu death.
The S&P 500 has rallied 29 percent since March 9 as companies from American Express Co. to Ford Motor Co. posted better-than-estimated earnings and investors speculated U.S. Treasury Secretary Timothy Geithner’s plan to finance the purchase of as much as $1 trillion in illiquid assets from banks will help to pull the global economy out of a recession.
While 69 percent of the 248 companies in the S&P 500 that have reported results since April 7 beat analysts’ estimates, they posted a 31 percent drop in net profit on average, according to Bloomberg data. The first three months of 2009 are poised to mark the seventh straight quarter of falling profits, the longest stretch since at least the Great Depression.
Fed Rate Decision
The Federal Reserve Open Market Committee is scheduled to announce its interest-rate decision at 2:15 p.m.
E*Trade Financial Corp. tumbled 33 percent to $1.66, the steepest slide in the S&P 500. The fourth-largest online brokerage by client assets said it may sell shares to brace its balance sheet for further losses on bad loans. More stock may dilute the value of existing equity.
Goodyear Tire & Rubber Co. and Hess Corp. climbed after posting smaller-than-expected losses. Goodyear, the largest U.S. tiremaker, added 10 percent to $11.53 after saying it cut jobs and production. Hess, the fifth-biggest U.S. oil producer, gained 4.5 percent to $57.35.
Sources: Bloomberg
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