U.S. Stocks Rise, Led by Energy Producers as Crude Oil Climbs; Sears Gains

U.S. stocks rose, as the Standard & Poor’s 500 Index rebounded from a three-day slump, after Sears Holdings Corp.’s profit forecast and Lennar Corp.’s earnings beat estimates, while higher oil prices boosted energy shares.

Sears, the largest U.S. department-store chain, and homebuilder Lennar climbed at least 6.3 percent. Apollo Group Inc., whose earnings also exceeded estimates, jumped 13 percent. Chevron Corp. and Schlumberger Ltd. gained more than 1.5 percent as oil rose to a one-week high. Bank of America Corp. advanced 2 percent after Morgan Stanley recommended the lender.

The S&P 500 increased 0.4 percent to 1,274.48 at 4 p.m. in New York, returning to near its highest level since September 2008. The Dow Jones Industrial Average increased 34.43 points, or 0.3 percent, to 11,671.88.

“There’s still good stock-market momentum,” said Kevin Caron, a market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co., which has about $90 billion in client assets. “We continue to get improvement in the earnings picture,” he said. “The equity market looks reasonable, assuming the economy continues to expand.”

The benchmark gauge for U.S. equities gained 88 percent since its March 2009 low amid government measures to stimulate the economy and as companies reported better-than-estimated earnings. Companies in the S&P 500 posted higher-than-estimated results in all three quarters reported so far for 2010, and analysts predict they’ll climb 14 percent in 2011, according to data compiled by Bloomberg News.

E-Minis

Stocks briefly erased gains as trading volume of E-mini S&P 500 futures started to jump at 1:08 p.m. in New York, according to data compiled by Bloomberg. More than 24,000 March E-mini S&P 500 futures changed hands at 1:12 p.m., greater than any other minute of the day. Among the 25 biggest trades in the contract since 4:30 p.m. yesterday, about half occurred today between 1:09 p.m. and 1:24 p.m.

At 1 p.m., the U.S. government sold $32 billion of three- year notes in the first of three note and bond sales this week totaling $66 billion. The securities drew a yield of 1.027 percent, compared with the average forecast of 1.034 percent in a Bloomberg News survey of six of the Federal Reserve’s 18 primary dealers.

“While the pullback here in the stock market happened to start shortly after the auction, there was nothing unusual to be a cause of the stock selling,” Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York, wrote in an e-mail to clients. “Some can interpret the blah 3-year auction as evidence of a flight from safety, thus contradicting the immediate equity selloff. Thus, there must have been a sell program of some sort and this is more technical in nature.”

Debt Crisis

U.S. stocks also followed gains in Europe equities as Japan pledged to buy bonds issued by Europe’s financial-aid funds, joining China in assisting the region as it battles against a debt crisis that prompted bailouts of Ireland and Greece.

“It’s appropriate for Japan to make a contribution as a leading nation to increase trust in the deal. We want to buy more than 20 percent,” Finance Minister Yoshihiko Noda said at a news conference in Tokyo today.

Sears jumped 6.3 percent to $75.03. The largest U.S. department-store chain said it will earn $3.39 to $4.12 a share before any items for the fourth quarter. Analysts surveyed by Bloomberg had estimated profit of $3.05 on average.

Lennar advanced 7.1 percent to $20.24. The Miami-based homebuilder reported fourth-quarter earnings that beat analyst estimates after cutting costs. Net income in the three months ended Nov. 30 was 17 cents a share excluding some items. Analysts projected earnings of about 1 cent a share, according to the average of 15 estimates compiled by Bloomberg.

Apollo Group

Apollo Group added 13 percent to $40.74, the biggest gain in the S&P 500. The Phoenix-based education company said earnings in the first quarter were $1.63, surpassing the $1.35 average estimate of analysts.

Energy shares had the biggest gain in the S&P 500 among 10 industries, rising 1.6 percent. Oil rose to the highest level in a week after a presidential panel investigating the BP Plc spill in the Gulf of Mexico called for “urgent reform” and the Trans Alaska Pipeline System’s closure threatened refiners’ supplies.

Chevron, the second-biggest U.S. energy company, added 1.6 percent to $91.83. Schlumberger, the largest oilfield services provider, rallied 2 percent to $82.26.

Bank of America rose 2 percent, the most in the Dow average, to $14.69. The largest U.S. bank by assets was recommended by Morgan Stanley as long research tactical idea.

Supervalu, AMD

Supervalu Inc. tumbled 12 percent, the biggest decline in the S&P 500, to $7.59. The grocer said it expects a fiscal 2011 adjusted profit of $1.25 to $1.35 a share. It previously forecast $1.40 to $1.60 a share. The average estimate of analysts surveyed by Bloomberg was for $1.45 a share.

Advanced Micro Devices Inc. slumped 9 percent to $8.36. The second-largest maker of computer microprocessors named Thomas Seifert as interim chief executive officer, as Dirk Meyer resigned in a mutual agreement with the board.

Phone companies had the biggest decline in the S&P 500 among 10 industries, falling 1.5 percent.

Verizon Communications Inc. fell the most in the Dow average, sliding 1.6 percent to $35.36. Verizon Wireless, set to get Apple Inc.’s iPhone this month after four years of waiting, may spend $3 billion to $5 billion to subsidize customer purchases of the device this year, cutting into profits, analysts say.

Valuation May Tumble

The S&P 500’s valuation may tumble to the lowest level since the 1980s as profits rise faster than stock prices over the coming years, according to Janney Montgomery Scott LLC.

The price-to-earnings multiple for the U.S. equity benchmark may fall near 10 on a monthly basis, the valuation trough experienced in the previous three long-term bear markets since 1900, said Dan Wantrobski, who studies charts of trading patterns and prices to make forecasts at Janney. The index is trading at about 15.8 times reported operating profits.

“In past secular bear cycles, the U.S. has typically undergone a post-crisis recovery period where earnings rise against a range-bound stock market,” Wantrobski, Philadelphia- based director of technical research at Janney Montgomery, wrote in a note to clients yesterday. “The U.S. equity markets are entering this phase of the secular bear market.”

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Elizabeth Stanton in New York at estanton@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.

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