Jan. 25 (Bloomberg) -- U.S. stocks staged their biggest two-day rally since November after Xerox Corp. and Lockheed Martin Corp. reported profit that topped analysts' estimates and lawmakers agreed on a plan to pay tax rebates to families. Gold topped $900 an ounce in New York for the first time in a week after the dollar dropped against the euro, boosting the appeal of the precious metal as an alternative investment.

TOP STORIES/MOST READ ON BLOOMBERG

Societe Generale Reports EU4.9 Billion Trading Loss

Societe Generale SA said unauthorized bets on stock index futures by a rogue trader caused a 4.9 billion-euro ($7.2 billion) trading loss, the largest in banking history.

Jerome Kerviel, 31, was the trader responsible, the Paris- based bank said today. Societe Generale plans to raise 5.5 billion euros from shareholders after the loss and subprime- related writedowns depleted capital. The Bank of France, the country's banking regulator, is investigating the alleged fraud.

The trading shortfall exceeds the $6.6 billion Amaranth Advisors LLC lost in 2006, and is more than four times the $1.4 billion of losses by Nick Leeson that brought down Barings Plc in 1995. An offer by Chairman Daniel Bouton to resign after the trades were discovered this past weekend was refused by Societe Generale's board, the bank said.

Morgan Stanley to Cut About 1,000 Jobs, Person Says

Morgan Stanley, the second-biggest U.S. securities firm, plans to eliminate about 1,000 jobs as economic growth slows and the profit outlook dims, according to a person familiar with the matter.

The cuts will affect asset management, retail brokerage and support areas such as technology and administration, the person said. They aren't expected to target the New York-based firm's institutional securities division, which includes trading and investment banking, the person said.

Banks and brokers have eliminated at least 19,000 jobs in the past six months as they racked up $133 billion of writedowns and credit losses tied to mortgage securities. Morgan Stanley, which reported its first-ever quarterly loss last month, cut 900 jobs last year from areas that offered mortgages, packaged and traded debt securities and provided high-yield loans.

Banks' $230 Billion Backlog of Debt Isn't Shrinking

Banks are unable to find buyers for a $230 billion backlog of high-yield, high-risk debt, freezing leveraged buyouts and raising the risk of more writedowns on Wall Street.

Lenders have about $160 billion of so-called leveraged loans and $70 billion of junk bonds that they underwrote last year for companies including casino operator Harrah's Entertainment Inc., according to Bank of America Corp. analyst Clemens Mueller in New York. They were stuck holding the debt as the collapse of the subprime mortgage market in the U.S. drove investors from all except the safest government securities.

Banks including Citigroup Inc., Goldman Sachs Group Inc., and Morgan Stanley are struggling to unload debt from last year's record $438 billion of leveraged buyouts. The market for high-yield bonds has been shut since July in Europe and sales in the U.S. slowed to $850 million this year from $6.3 billion in the same period in 2007, data compiled by Bloomberg show.

U.S. Economy: Existing Home Sales Fall, Prices Drop

Sales of existing homes in the U.S. fell more than forecast in December, capping the biggest annual slump in 25 years and the first decline in prices since the Great Depression.

Purchases fell 2.2 percent to an annual rate of 4.89 million, the National Association of Realtors said today in Washington. For all of last year, sales of single-family homes declined 13 percent and prices dropped 1.8 percent, the first decrease since records began in 1968 and probably the first since the 1930s, the group said.

Falling property values and stricter borrowing terms will lead to more foreclosures and depress housing for most of this year, economists said. Investors anticipate the Fed will cut interest rates again next week in an effort to prevent the downturn from exacerbating weakness in the broader economy.

MAIN ECONOMIC RELEASES TODAY Figures are based on Bloomberg survey of economists:

South Korea's Economy Seen Growing 1.3% in Qtr, 5.3% on Year Japan December Consumer Prices Seen Rising 0.6% Vs Year Ago Bank of Japan Releases Minutes from December Rate Meeting New Zealand Central Bank Governor Bollard Speech in Christchurch Singapore Dec. Industrial Production Seen Falling 1.3% Vs Yr Ago India's Weekly Wholesale Inflation Seen Accelerating to 3.83% Philippine Imports, Overseas Trade for November Will Be Released Conference Board Releases Australia Nov. Leading Economic Index Thailand's Central Bank Releases Economic Growth Forecasts

COMPANIES/EARNINGS

KDDI Corp., Japan's second-biggest mobile-phone carrier, may post a gain in third-quarter profit as the company added more customers.

Fonterra Cooperative Group, the world's biggest dairy exporter, may report a surge in first-half sales after prices for its butter, milk powder and cheese doubled.

Kia Motors Corp., South Korea's second-biggest automaker, may return to profit in the fourth quarter after it cut costs and sales at its Slovakian plant rose.

TVS Motor Co., India's third-largest motorcycle maker, may say profit fell in the third quarter after it spent more to buy steel and motorcycle sales declined.

Ashok Leyland Ltd., India's second-largest truckmaker, may say third-quarter net income rose after it sold more commercial vehicles and buses.

Hitachi Construction Machinery Co., the world's biggest maker of giant excavators, may post a gain in third-quarter profit, as demand from emerging markets in Asia countered a slump in housing start in the U.S.

Bharat Heavy Electricals Ltd., India's biggest power equipment maker, may say third-quarter profit rose as it boosted orders from local companies.

Yakult Honsha Co., Japan's biggest maker of fermented-milk drinks, may say third-quarter profit rose as it sold more beverages overseas and increased revenue from cancer drugs.

MAIN ANALYST UPGRADES/DOWNGRADES *PETROCHINA RAISED TO `OUTPERFORM' AT BEAR STEARNS *WOODSIDE PETROLEUM RAISED TO `BUY' FROM `NEUTRAL' AT UBS *CAWACHI RAISED TO `BUY' AT GOLDMAN SACHS *KT&G RAISED TO `BUY' FROM `HOLD' AT CITI *ALLCO FINANCE CUT TO `NEUTRAL' FROM `OUTPERFORM' AT MACQUARIE *AMOREPACIFIC RAISED TO `OVERWEIGHT' FROM `NEUTRAL' AT JPMORGAN *AXA ASIA PACIFIC RAISED TO `NEUTRAL' AT CREDIT SUISSE *YANG MING MARINE CUT TO `EQUALWEIGHT' AT MORGAN STANLEY *ORIENTAL UNION CUT TO `NEUTRAL' AT JP MORGAN *NANYA TECHNOLOGY UPGRADED TO `NEUTRAL' FROM `REDUCE' AT FUBON

ASIAN MARKETS

The Nikkei 225 futures contract due in March fell 5 to 13,045. The Hang Seng Index futures for January dropped 575 to 23,640. The S&P/ASX 200 Index futures due in March rose 76 to 5,619 at 7:59 a.m. in Sydney.

U.S. STOCKS ADVANCE ON EARNINGS, GOVERNMENT STIMULUS PACKAGE

U.S. stocks staged their biggest two-day rally since November after Xerox Corp. and Lockheed Martin Corp. reported profit that topped analysts' estimates and lawmakers agreed on a plan to pay tax rebates to families.

Xerox climbed the most in two years after the world's largest maker of high-speed color printers increased revenue by introducing new products. Lockheed Martin, the biggest defense company, posted its steepest advance since 2003 on higher sales of computer services to the government. Freeport-McMoRan Copper & Gold Inc. and Alcoa Inc. led gains in commodities producers after China's economy reported a fourth-straight quarter of growth above 11 percent.

The Standard & Poor's 500 Index climbed 13.47, or 1 percent, to 1,352.07, paring its decline this year to 7.9 percent. The Dow Jones Industrial Average, which yesterday fell 326 points before ending the day 299 points higher, added 108.44, or 0.9 percent, to 12,378.61. The 30-stock gauge is still down 6.7 percent in 2008. The Nasdaq Composite Index climbed 44.51, or 1.9 percent, to 2,360.92, still off 11 percent in 2008.

TREASURIES DECLINE AS STIMULUS PLAN, STOCKS DIM DEMAND FOR DEBT

Ten-year Treasury notes fell for a second day as the prospect of stimulus measures to support the economy and a rally in stocks pushed yields up from close to the lowest levels since 2003.

Demand for the relative safety of U.S. notes and bonds waned on speculation that an economic package combined with Federal Reserve interest-rate cuts will head off a recession. The Bush administration and House lawmakers reached an agreement to give rebate checks to 117 million families two days after the Fed cut its benchmark interest rate in an emergency move.

The yield on the 10-year note rose 6 basis points, or 0.06 percentage point, to 3.65 percent as of 2:41 p.m. in New York, according to bond broker Cantor Fitzgerald LP. The yield fell to 3.48 percent earlier, within 20 basis points of the lowest since June 2003. The price of the 4 1/4 percent security due November 2017 fell 3/8, or $3.75 per $1,000 face amount, to 104 29/32.

Ten-year yields surged 19 basis points yesterday from their lowest level, the biggest swing since April 2004, as stocks rallied. Volatility in Treasuries is the highest in six years, as measured by Merrill Lynch & Co.'s MOVE index, which climbed to 165.1 yesterday, more than triple its level in May.

EURO RISES VERSUS DOLLAR, YEN AS ECB'S WEBER DISMISSES RATE CUT

The euro rose against the dollar and yen after European Central Bank council member Axel Weber dismissed speculation that the bank will cut interest rates as ``wishful thinking.''

Weber's comments helped the European currency erase its losses as investors reduced bets the ECB will follow the Federal Reserve in lowering borrowing costs. The dollar fell against the Brazilian real and New Zealand dollar on speculation investors bought higher-yielding assets as global stocks extended gains.

The euro increased 1 percent to $1.4768 at 4:08 p.m. in New York from $1.4629 yesterday. It touched $1.4779, the highest since Jan. 16. Before Weber spoke, the currency dropped as much as 0.3 percent to $1.4592. The euro advanced 1.1 percent to 157.87 yen from 156.11 yesterday. The yen fell 0.2 percent to 106.89 per dollar from 106.71 yesterday.

EUROPEAN STOCKS RALLY MOST SINCE 2003; UBS, AXA, NOKIA ADVANCE

European stocks gained the most since 2003 as talks to bail out bond insurers, rising profits at Nokia Oyj and China's economic growth boosted expectations that equity markets will weather a slowdown in the U.S.

UBS AG, the region's biggest bank by assets, and insurer Axa SA jumped more than 8 percent. Nokia, the world's largest mobile-phone maker, surged 15 percent as profit beat analysts' estimates. Societe Generale SA fell after reporting a 4.9 billion-euro ($7.1 billion) trading loss and accusing a trader of fraud.

The Dow Jones Stoxx 600 Index surged 5.2 percent to 322.08, its biggest gain since March 2003, the month marking the turning point in a three-year rout after the Internet bubble burst. The index earlier this week extended declines from a 6 1/2-year high on June 1 to more than 20 percent, the common definition of a bear market, on concern the U.S. will enter a recession.

EUROPEAN TWO-YEAR NOTES TUMBLE MOST IN 17 YEARS ON STOCK RALLY

European two-year government notes fell by the most in at least 17 years after global stocks rallied and central bank policy maker Axel Weber dismissed speculation of interest-rate cuts as ``wishful thinking.''

The spread, or difference in yields, between two- and 10- year bonds narrowed for the first time in two weeks after a report showed business confidence in Germany, Europe's largest economy, unexpectedly rose this month. Stocks in the region rallied the most since 2003 and Asian and U.S. equities rose for a second day, reversing safe-haven buying of government debt.

The two-year German note yield climbed as much as 28 basis points, the most since Bloomberg data began in September 1990, and was 27 basis points higher at 3.48 percent by 4:40 p.m. in London. Green forecasts it may rise to 4.2 percent by the end of the first-quarter.

The price of the 4 percent security due December 2009 fell 0.49, or 4.9 euros per 1,000-euro ($1,472) face amount, to 100.92. Ten-year bund yields rose 13 basis points to 4.01 percent. Yields move inversely to bond prices.

OIL RISES MORE THAN $2 ON STIMULUS PACKAGE, EXPECTED RATE CUT

Crude oil rose more than $2 a barrel after the Bush administration and House lawmakers announced agreement on an economic stimulus package to avoid recession in the world's biggest energy consuming country.

The plan would distribute rebate checks to 117 million families and give businesses incentives to invest in equipment. Futures markets suggest the Federal Reserve will cut rates next week to bolster growth, prompting the dollar to fall against the euro and the purchase of commodities as an inflation hedge.

Crude oil for March delivery rose $2.42, or 2.8 percent, to $89.41 a barrel on the New York Mercantile Exchange. It was the biggest one-day gain since Jan. 2. Yesterday's close was the lowest since Oct. 23. Futures reached a record $100.09 a barrel on Jan. 3. Prices are up 61 percent from a year ago.

GOLD FUTURES TOP $900 AS DOLLAR DROPS; SILVER ADVANCES

Gold topped $900 an ounce in New York for the first time in a week after the dollar dropped against the euro, boosting the appeal of the precious metal as an alternative investment. Platinum futures surged to a record.

European Central Bank officials signaled interest rates would remain steady to cap inflation. The Federal Reserve on Jan. 22 slashed the benchmark U.S. rate by 0.75 percentage point in an emergency move. Gold surged 31 percent last year as reductions in borrowing costs sent the dollar 9.5 percent lower against the euro.

Gold futures for February delivery rose $24.80, or 2.8 percent, to $907.90 an ounce at 1:06 p.m. on the Comex division of the New York Mercantile Exchange. The price earlier soared as high as $911.10. Before today, gold gained 5.4 percent this month, reaching a record $916.10 on Jan. 15.

Silver futures for March delivery jumped 36 cents, or 2.3 percent, to $16.33 an ounce. Before today, the price gained 7 percent this month.

HIGHLIGHTS FROM NEWSPAPERS

Sky Network May Lose Exclusive Broadcast Rights, Dominion Says

Sky Network Television Ltd., New Zealand's largest pay-TV company, may be prevented from gaining exclusive broadcast rights to events deemed by the government as having ``national significance'' the Dominion Post said.

Mizuho, State Bank of India to Forge Partnership, Nikkei Says

Mizuho Financial Group Inc. and the State Bank of India are joining forces to offer financial services to Japanese firms seeking to invest in the Indian market, Nikkei English News reported, without citing anyone.

Last Updated: January 24, 2008 16:30 EST