July 30 (Bloomberg) -- Investors are preparing to snap up shares of telephone, health-care and computer companies after last week's $2.1 trillion global stock market rout left U.S. equities the cheapest in 16 years.

``The window for buying is starting to open,'' said D.A. Davidson & Co. chief market strategist Frederic Dickson, who oversees $23 billion. His Great Falls, Montana-based firm plans to buy drug and technology stocks as long as bond market losses don't worsen.

D.A. Davidson, LPL Financial Services and Credit Suisse Group, which manage a total of $771 billion, are bullish after the biggest decline in the Standard & Poor's 500 Index since September 2002. The benchmark for American equity is valued at 15.5 times estimated profit, the lowest since January 1991, according to data compiled by Bloomberg.

Only 33 companies in the S&P 500 gained and the index slumped to a 3 1/2-month low last week. The index plunged 4.9 percent on concern mortgage defaults caused by the steepest U.S. housing slump in 16 years will reduce corporate loans and end the boom in leveraged buyouts that pushed the measure to a record high earlier this month.

Merck & Co., based in Whitehouse Station, New Jersey, and AT&T Inc., in San Antonio, were among just four Dow Jones Industrial Average members to advance last week after their earnings grew faster than the S&P 500 average. The Dow average dropped 4.2 percent last week and the Nasdaq Composite Index lost 4.7 percent.

Profit Growth

U.S. stocks paced a global rebound today after Wall Street's biggest securities firms told investors that last week's retreat made banks, homebuilders and retailers relative bargains. Shares in Europe fell for a fifth day.

Wells Fargo & Co., JPMorgan Chase & Co. and American Express Co. led U.S. financial shares to their biggest rise since July 12. KB Home advanced after Citigroup Inc. said ``hysteria'' has driven the 36 percent drop in shares of construction firms this year. JFE Holdings Inc. and Nippon Steel Corp. paced gains in Asia after the steelmakers posted higher earnings.

The S&P 500 added 14.96, or 1 percent, to 1473.91. The Dow average advanced 92.84, or 0.7 percent, to 13,358.31. The Morgan Stanley Capital International Asia Pacific Index climbed 0.4 percent to 155.16.

Europe's Dow Jones Stoxx 600 Index lost 0.2 percent to 372.03, extending its five-day decline to 5.8 percent. Financial- services companies led the drop after IKB Deutsche Industriebank AG of Germany said profit will be ``significantly'' lower than forecast amid the U.S. subprime mortgage rout.

S&P 500 Earnings

Earnings among the 313 members of the S&P 500 that reported second-quarter results through last week rose 9.7 percent, twice the average analyst estimate on July 13.

Average profit among S&P 500 members is forecast to rise 9 percent this year and 11 percent in 2008, according to analysts surveyed by Bloomberg. They estimate phone companies will grow this year by 27.8 percent, health care by 15.8 percent and technology by 10.5 percent.

``The fundamentals in my opinion are quite strong,'' said Lincoln Anderson, who helps manage $150 billion as chief investment officer of LPL Financial in Boston. ``The second-half earnings outlook is pretty doggone good. I look at this period as more of a buying opportunity.''

Anderson said he added to holdings in telephone, health- care, technology and industrial shares during the slump.

Fell the Least

Phone stocks fell the least among S&P 500 industries last week, losing 1.3 percent. AT&T, the largest U.S. telephone company, reported a 61 percent increase in second-quarter profit. Its shares trade for 14.4 times estimated earnings after rising 31 percent in a year.

Jeffrey Mortimer, who manages almost $40 billion as chief investment officer of equities at Charles Schwab Investment Management in San Francisco, bought Palo Alto, California-based Hewlett-Packard Co. and Armonk, New York-based International Business Machines Corp., whose profits have topped analysts' estimates the last six quarters.

``They are still under-owned by people who have been burned by them and their underlying fundamentals are stronger than the investment public is giving them credit for,'' Mortimer said.

Michael Cuggino, who manages $1.2 billion as president of Permanent Portfolio Funds in San Francisco, purchased shares of Santa Clara, California-based Intel Corp., the world's biggest computer-chip maker, and Symantec Corp., the No. 1 seller of security software. Symantec is based in Cupertino, California.

Worst Performers

Technology shares gained 8.1 percent from 2005 through 2006, the least among 10 industry groups in the S&P 500. They have climbed 9.7 percent this year.

Rising defaults in the housing industry prompted Kevin Caron, who helps oversee $20 billion as market strategist for Ryan Beck & Co. in Florham Park, New Jersey, to be ``defensive'' and keep 35 percent of his clients' assets in cash.

``We've had a real struggle in the last year finding things that make sense to us,'' said Caron. ``The falloff in credit, you're seeing it show up in the housing market and in the results from homebuilders and the automakers.''

The ABX-HE-BBB- 06-1 index, which measures bonds backed by mortgages with the lowest investment-grade ratings, fell more than 60 percent this year, according to London-based Markit Group Inc., which oversees the index. Banks may slow lending for debt- fueled acquisitions after they were unable to find investors for 5 billion pounds ($10.1 billion) of loans they provided to finance Kohlberg Kravis Roberts & Co.'s purchase of U.K.-based pharmacy chain Alliance Boots Plc.

Philipp Vorndran, who manages $598 billion as investment strategist at Credit Suisse Asset Management in Frankfurt, said subprime defaults won't spread to higher-rated debt and predicted credit markets will stabilize.

``There is a good opportunity to move back to a bullish equity position in a month,'' Vorndran said. ``The stability of financial markets is not at risk.''

To contact the reporters on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net.

Last Updated: July 30, 2007 17:00 EDT