April 15 (Bloomberg) -- U.S. stocks rose for the fourth time in five days as prospects for consumer-staples and industrial shares improved and American Express Co. triggered gains in financials after saying growth in bad loans slowed. Treasury 10-year notes advanced for a third day, while oil fell.
American Express, the biggest U.S. credit card company by purchases, rallied 12 percent. Procter & Gamble Co. rose 3.2 percent after boosting its dividend, while Dr Pepper Snapple Group Inc. climbed 2.2 percent as Goldman Sachs Group Inc. advised buying the shares. CSX Corp. rallied 7.8 percent to lead industrial shares higher after the railroad operator’s earnings topped estimates and a gauge of New York manufacturing was better than expected.
The Standard & Poor’s 500 Index added 1.3 percent to 852.06, erasing more than half of yesterday’s slump. The Dow Jones Industrial Average jumped 109.44 points, or 1.4 percent, to 8,029.62. The Nasdaq Composite rose 0.1 percent as falling profit at Intel Corp. spurred losses in technology companies.
“The end of the world is not nigh, but this is going to be a challenging environment going forward with respect to earnings, economic growth and consumption,” said Stephen Wood, who helps manage $151 billion as senior portfolio strategist at Russell Investments in New York. “We’re definitely getting mixed signals.”
Stocks extended gains after the Federal Reserve said in its regional business survey that the U.S. contraction slowed across several of the biggest regional economies last month, with some industries “stabilizing at a low level.” U.S. stocks yesterday halted a three-day advance after the government reported unexpected declines in retail sales and producer prices and Goldman Sachs Group Inc. sold shares to boost capital.
VIX Retreats
The benchmark index for U.S. stock options slid to the lowest in more than six months. The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell 4 percent to 36.17. The index, which measures the cost of using options as insurance against declines in the S&P 500, is down from a record 80.86 in November yet still almost double the 20 average over its 19-year history.
The S&P 500 has rebounded 26 percent from a 12-year low on March 9 as lenders from Citigroup to JPMorgan Chase & Co. said they made money in the first two months of 2009 and Treasury Secretary Timothy Geithner announced plans to finance as much as $1 trillion in purchases of financial firms’ distressed assets.
American Express rallied $2.19 to $20.62. Charge-offs for managed consumer accounts rose at a slower pace in March as it sold soured loans to investors. Financial stocks in the S&P 500 added 5.6 percent for the best performance among 10 industry groups.
‘Shorts Ran to Cover’
“The shorts ran to cover when the American Express numbers weren’t as bad as expected,” said Justin Wiggs, an equity trader at Stifel Nicolaus & Co. in Baltimore. “We’re seeing a bit of resiliency in the higher-end consumer.” In a short sale, investors sell borrowed securities and agree to return them at a later date, profiting from any drop in the stock.
P&G, the largest consumer-products company, added $1.50 to $48.75 after boosting its quarterly dividend by 10 percent, one of a shrinking list of S&P 500 companies that have raised their payout for at least 25 straight years.
Dr Pepper Snapple rose 42 cents to $19.78 after Goldman Sachs analysts added the shares to their “conviction buy” list and said in a report that “fundamentals are trending even more favorably than we anticipated and valuation is still undemanding.”
‘Still in the Black’
CSX climbed $2.20 to $30.59. The third-largest U.S. railroad company reported a first-quarter net profit of $246 million, or 62 cents a shares, exceeding the 51-cent average estimate of 17 analysts surveyed by Bloomberg.
“Despite all the talk about downsizing and cutbacks, companies are still in the black and making money,” said Peter Sorrentino, who helps manage $13.3 billion at Huntington Asset Management in Cincinnati. “It’s a reason to be optimistic on stocks in general.”
Intel dropped 39 cents, or 2.4 percent, to $15.62 after Chief Executive Paul Otellini said his company still faces a “fragile global economic environment.” Sales of personal- computer processors likely bottomed out in the first quarter after manufacturers worked through their stockpiles of parts, he said. While the worst of the slump is “probably now behind us,” Intel isn’t ready to predict growth this quarter, Otellini added.
Fed Purchases
Treasury 10-year notes rose for a third day as the Federal Reserve announced the government securities it plans to purchase over the next two weeks.
The benchmark notes earlier fell as the central bank paused its buybacks after purchasing $10.34 billion in U.S. debt the last two days. It will resume tomorrow with a purchase of inflation-protected securities. The U.S. contraction slowed in March, the central bank’s regional business survey showed.
“You get the Fed purchasing in a week with no supply,” said Brian Brennan, who helps oversee $13 billion in fixed- income assets at T. Rowe Price Group Inc. in Baltimore. “Fed purchases bring yields down. Supply backs up yields. It’s the ying and yang of our Federal government.”
The yield on the 10-year note fell three basis points, or 0.03 percentage point, to 2.76 percent at 3:30 p.m. in New York, according to BGCantor Market Data. The 2.75 percent security due February 2019 rose 9/32, or $2.81 per $1,000 face amount, to 99 29/32.
Inflation Protection
The Fed will buy Treasury Inflation Protected Securities maturing from January 2010 to April 2032 tomorrow. On April 21 it will buy nominal Treasuries maturing from February 2016 to February 2019; on April 23, maturities from May 2012 to August 2013; April 27, maturities from September 2013 to February 2016; and April 30, maturities from August 2019 to February 2026.
The central bank has bought $51.214 billion in U.S. debt since the program began on March 25, and plans to purchase as much as $300 billion over six months in an effort to lower consumer borrowing costs.
Ten-year yields have traded between 2.45 percent and 3.05 percent since late January as the Fed’s purchase program offset concerns about record Treasury supply. The yield averaged 4.25 percent for the past five years.
“We are in an interesting but tedious environment,” said Ian Lyngen, an interest-rate strategist in Greenwich, Connecticut at RBS Securities Inc., one of 16 primary dealers that trade with the Fed. “We are in a range, but we can’t find any compelling motivation to break the range.”
Stockpiles at 19-Year High
Crude oil fell after a government report showed that U.S. stockpiles climbed to the highest level in almost 19 years as demand dropped.
Inventories rose 5.67 million barrels to 366.7 million last week, the highest since September 1990, the Energy Department said today. Total daily fuel demand averaged over the past four weeks was 18.7 million barrels, down 5.2 percent from a year earlier, according to the department.
“Demand stinks,” said Chip Hodge, who oversees a $9 billion natural-resource-company bond portfolio as managing director at MFC Global Investment Management in Boston. “Until you see consumption increase and inventories drop, this market will remain range-bound.”
Crude oil for May delivery fell 16 cents, or 0.3 percent, to $49.25 a barrel at 2:52 p.m. on the New York Mercantile Exchange, the lowest settlement since April 7. Futures have traded between $43.62 and $54.66 a barrel over the past month. Prices are up 10 percent so far this year.
Rising Demand
Copper rose the most in more than a week as declines in inventories signaled demand is rising for the metal used in pipes and wires.
Stockpiles monitored by the London Metal Exchange tumbled 2.4 percent to 480,400 metric tons. That’s the biggest one-day drop since Oct. 21. Copper prices have surged 57 percent this year on speculation that government spending will revive global growth and spur consumption of raw materials.
“The market has strengthened on the back of the decline in LME copper inventories,” Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said today in a report.
Copper futures for July delivery climbed 8.05 cents, or 3.8 percent, to $2.209 a pound on the New York Mercantile Exchange’s Comex division.
The price of copper will continue to climb as demand increases in emerging economies including China, the world’s biggest metals user, said Michael Cuggino, the chief executive officer of Pacific Heights Asset Management LLC.
“What’s happening in copper now is a reflection of the broader global economic story,” said Cuggino, who also helps oversee $3.4 billion as a portfolio manager. “We’re still expecting to see long-term global growth that’s going to drive demand for copper and the other commodities,” he said yesterday in an interview in New York.
Cuggino recommends investors buy shares of Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, as a way to take advantage of higher metals prices. Phoenix-based Freeport rose 81 percent this year before today.
