Investors Wednesday weighed a report on private employment and comments from the Fed that the economy is improving
By Mary Childs
Dec. 2 (Bloomberg) -- Most U.S. stocks rose for a third day after the Federal Reserve said the economy is improving and gold's rally to a record lifted metal producers, overshadowing declines in energy companies and banks.
Alcoa Inc. (AA) , Home Depot Inc. (HD) and Verizon Communications Inc. (VZ) gained at least 1 percent as the Fed's Beige Book report said the economy improved "modestly" across the U.S. from October to mid-November as consumer spending increased. Exxon Mobil Corp. (XOM) and Schlumberger Ltd. (SLB) led energy shares lower as crude plunged on an increase in inventories, while JPMorgan Chase & Co. (JPM) fell on an analyst's prediction that revenue may fall by $3 billion if most derivatives trades move to exchanges.
"I don't see anything here that threatens a nascent recovery where the fourth quarter's going to show positive GDP growth," Peter Sorrentino, who helps manage $13.8 billion at Huntington Asset Management in Cincinnati, said of the Fed's summary of economic conditions. "At least at the moment, the economy's still recovering and we're out of recession.'"
Nine stocks advanced for every five that fell on the New York Stock Exchange. The Standard & Poor's 500 Index added less than 0.1 percent to 1,109.24 at 4:05 p.m. in New York. The Dow Jones Industrial Average slipped 18.9 points, or 0.2 percent, to 10,452.68.
Energy producers led the market lower earlier as crude tumbled more than 2 percent after the government's inventories report showed fuel demand slipped 2.6 percent as refineries reduced operating rates for the fourth time in five weeks.
The nine-month rally in the S&P 500 has pushed valuations to about 22 times its companies' reported operating earnings, the most expensive level since 2002, according to data compiled by Bloomberg. Analysts expect full-year earnings in the measure to drop 11 percent on average before rebounding 22 percent in 2010, estimates compiled by Bloomberg show.
The benchmark index for U.S. equities may climb to 1,250 by the end of next year as earnings continue to beat forecasts, UBS AG strategists said.
"Large-cap, dividend paying, globally oriented stocks offer good risk/reward," strategists including Thomas Doerflinger wrote in a report dated today.
To contact the reporter on this story: Mary Childs in New York at email@example.com