U.S. Stocks Rise on Consumer Spending Data

U.S. Stocks Rise on Consumer Spending Data; Exxon Mobil Gains

By Rita Nazareth and Inyoung Hwang

Exxon Mobil gained 1.2 percent as earnings topped analysts' estimates. Photographer: Jeff Kowalsky/Bloomberg

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Jan. 31 (Bloomberg) -- Thomas Lee, chief U.S. equity strategist at JPMorgan Chase & Co., discusses the potential impact of protests in Egypt on financial markets. Lee talks with Betty Liu on Bloomberg Television’s “In the Loop.” (This is an excerpt of the full interview. Source: Bloomberg)

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Jan. 28 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. Stocks worldwide plunged the most since November, crude oil posted the biggest jump since 2009 and the dollar rose versus the euro after protesters posed the biggest challenge to Egyptian President Hosni Mubarak’s 30-year rule. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)

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Jan. 26 (Bloomberg) -- Ed Butowsky, managing director at Chapwood Capital Investment Management LLC, Rick Bensignor, managing director and chief market strategist at Dahlman Rose & Co., and Antione Drean, founder of Triago SA, talk about the outlook for U.S. stocks. Equities rose today, sending the Dow Jones Industrial Average above 12,000 for the first time since June 2008. Butowsky, Bensignor and Drean speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

U.S. stocks rose, extending the second straight monthly gain for the Standard & Poor’s 500 Index, as businesses expanded at the fastest pace since 1988 and consumer spending and Exxon Mobil Corp.’s profit beat estimates.

Exxon Mobil, the largest company by market value, gained 1.2 percent as earnings topped analysts’ estimates. Massey Energy Co. jumped 9.6 percent after Alpha Natural Resources Inc. agreed to buy the coal producer for $7.1 billion. Intel Corp. slumped 1.4 percent after saying a design error will cut sales and margins. Rival Advanced Micro Devices Inc. rose 5.1 percent.

The S&P 500 advanced 0.5 percent to 1,282.06 at 11:19 a.m. in New York, after falling 1.8 percent on Jan. 28 amid anti- government protests demanding the ouster of Egyptian President Hosni Mubarak. The index is up 1.8 percent in January, poised for the longest monthly stretch since October. The Dow Jones Industrial Average gained 25.32 points, or 0.2 percent, to 11,849.02.

“It’s the economic momentum versus geopolitical risk at this point,” said Eric Teal, chief investment officer at First Citizens Bancshares Inc. in Raleigh, North Carolina, which manages $5 billion. “In my view, the economy wins. There’s been steady improvement in earnings reports. There’s M&A activity going on, which is a sign of confidence in the economy. I don’t see the market as being stretched, and I believe we should continue to grind higher.”

The Dow snapped an eight-week rally on Jan. 28 as intensifying unrest in Egypt overshadowed an acceleration in American economic growth. Egyptian President Hosni Mubarak met with top military commanders as tens of thousands of protesters defied a curfew and gathered in central Cairo, chanting slogans against his new prime minister and vice president.

Egypt Debt

Moody’s Investors Service became the first ratings firm to downgrade Egyptian government debt following a week of protests.

“Things like Egypt just create opportunity to deflate the market before fundamentals slowly work to pull it back up for the next thing to sink it back down,” said billionaire investor Kenneth Fisher, 60, who oversees $41 billion at Woodside, California-based Fisher Investments Inc. “I really don’t see this having legs. But I’m not so bullish as I’ve been and see 2011 as a pretty flat year with fits and starts.”

A gauge of consumer spending in the U.S. rose more than forecast in December, capping its strongest quarter in more than four years. Purchases, which account for about 70 percent of the economy, increased 0.7 percent after climbing 0.3 percent the prior month, Commerce Department figures showed today in Washington. Incomes increased for a third month, and the Federal Reserve’s preferred measure of inflation advanced at the slowest pace on record.

Business Barometer

The Institute for Supply Management-Chicago Inc. said today its business barometer rose to 68.8 this month from December’s 66.8, reaching the highest level since October 2004. Figures greater than 50 signal expansion. Economists forecast the gauge would slip to 64.5, based on the median projection in a Bloomberg News survey.

The majority of S&P 500 companies are posting higher-than- estimated profits, with 139 of the 187 companies that reported since Jan. 10 beating estimates. Earnings for S&P 500 companies rose 30 percent in 2010, the fastest growth since 1995, and will rally 15 percent this year, according to analyst forecasts.

Energy shares had the biggest gain among 10 S&P 500 industries, rallying 1.4 percent.

Exxon, Massey

Exxon Mobil gained 1.2 percent to $79.91. The world’s largest company posted its fourth consecutive quarterly profit increase as burgeoning energy demand boosted oil and fuel prices. Fourth-quarter net income rose to $9.25 billion, or $1.85 a share, from $6.1 billion, or $1.27, a year earlier. The company was expected to earn $1.60 a share, based on the average of six analysts’ estimates compiled by Bloomberg.

Massey surged 9.6 percent to $62.72. Alpha Natural, the third-biggest U.S. coal producer, agreed to buy the Richmond, Virginia-based coal company for about $7.1 billion in a deal that values Massey at $69.33 a share, 21 percent more than its price at the close of trading Jan. 28. Massey stockholders will receive 1.025 Alpha Natural shares plus $10 cash for each share.

Intel dropped 1.4 percent to $21.16 after trading resumed. It had been halted as the world’s largest chipmaker announced it discovered a design flaw in a chip that will reduce first- quarter sales by $300 million. Gross profit margin will be reduced by 2 percentage points this quarter, the company said.

AMD, Semis ETF

AMD rose 5.1 percent to $7.87. The Semiconductor HOLDRs Trust, an exchange-traded fund of chipmakers, fell 0.3 percent.

“Intel’s a very significant portion of any semiconductor benchmark so it will weigh on industry level returns,” said Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $358 billion. “This is a supply issue, not a demand issue. It’s largely an Intel-specific problem.”

The strongest sign the U.S. economic recovery is accelerating may be coming from the stock market. Rising retail sales, consumer confidence and industrial production are helping propel investors toward U.S. value stocks and away from growth stocks, which lose favor when prospects for economic and revenue expansion are strong. The Russell 1000 Value Index, which includes companies that are cheaper than market averages, rose 7.7 percent in December, the highest relative to the Russell 1000 Growth Index since August 2009.

“Labor markets are stabilizing and even gradually improving,” and companies “will start spending more of the liquidity they have,” said Patrick Moonen, senior strategist in The Hague, Netherlands, at ING Investment Management, which oversees $511 billion. While “we were overweight growth stocks for the second part of 2010,” his team now is reversing that bet because “better economic news and strong earnings are elements that drive value outperformance.”