U.S. Stocks Post Biggest Two-Day Gain Since 2009 on Retail Data

U.S. stocks rose, capping the biggest two-day advance for benchmark indexes since March 2009, as the largest increase in American retail sales in four months tempered concern economic growth is slowing.

A gauge of retailers in the Standard & Poor’s 500 Index climbed 1.5 percent, as 26 of its 30 stocks advanced, after the Commerce Department reported a 0.5 percent increase in retail sales. Caterpillar Inc. (CAT) and United Technologies Corp. (UTX) added at least 2.9 percent, pacing gains among companies most-tied to the economy. Hewlett-Packard Co. (HPQ) advanced 4.1 percent after Jefferies Group Inc. raised its recommendation for the shares. Stocks pared earlier gains as financial companies declined.

The S&P 500 added 0.5 percent to 1,178.81 at 4 p.m. in New York, rising 5.2 percent in two days. The benchmark gauge fell for a third week, dropping 1.7 percent since Aug. 5. The Dow Jones Industrial Average added 125.71 points, or 1.1 percent, to 11,269.02 today. About 9 billion shares changed hands at 4:18 p.m. on U.S. exchanges, 42 percent below the average of the previous four days, according to data compiled by Bloomberg.

“The retail sales report was good,” Barry Knapp, the New York-based head of U.S. equity strategy at Barclays Plc, said in a telephone interview. “The first step is a stabilization of the macro outlook in the U.S. Once you remove the uncertainties, it allows for capital market stabilization. Stocks are exceptionally cheap and this is a buying opportunity.”

S&P 500’s Decline

The S&P 500 is down 14 percent from a three-year high at the end of April, after plunging as much as 18 percent through Aug. 8. About $2.3 trillion was erased from U.S. equity values in the last three weeks as Europe’s debt crisis, signs the economy is slowing and S&P’s downgrade of the government’s AAA credit rating left the benchmark gauge for U.S. shares within 11 points of a bear market.

The swings in U.S. equities this week are unprecedented in the history of the American stock market, according to data compiled by Birinyi Associates Inc., Bloomberg and Howard Silverblatt, senior index analyst at S&P.

The S&P 500 plunged 6.7 percent on Aug. 8, its biggest slump since December 2008, in the first trading session after the U.S. was stripped of its AAA credit rating at S&P. The index rebounded 4.7 percent the next day after the Federal Reserve said it will leave its benchmark interest rate at a record low through at least the middle of 2013. The gauge then fell 4.4 percent on Aug. 10 and rebounded 4.6 percent yesterday. Never before has the index reversed moves that large each day over four sessions, the data showed.

Bear Market

Both European shares and the Russell 2000 Index of small U.S. companies entered a bear market this week, falling at least 20 percent from their previous highs.

Stock futures extended gains before the open of regular trading as retail sales figures matched the median forecast of 81 economists surveyed by Bloomberg News and followed a 0.3 percent increase in June that was larger than previously estimated. Excluding auto sales, purchases rose more than projected.

“That’s a very positive sign on retail sales,” Darrell Cronk, the New York-based regional chief investment officer at Wells Fargo Private Bank, which oversees $210 billion. “Growth is slowing, but we cannot see it heading into a recession.”

Global stocks rose, extending the Stoxx Europe 600 Index’s rally from a two-year low, as France, Spain, Italy and Belgium imposed short-selling bans. Regulators imposed bans to stabilize markets after Societe Generale SA dropped to its lowest price since March 2009 on Aug. 10. A gauge of European banks increased 4.5 percent, for its second day of gains.

Positive Reaction

“It may generate a positive short-term reaction in the stock market as they are clearly targeting the short-selling of the banks,” Michael Holland, chairman and founder of New York- based Holland & Co., said in a telephone interview. His firm oversees more than $4 billion.

The Morgan Stanley (MS) Cyclical Index of companies whose earnings are most-dependent on economic growth rallied 1.6 percent. Caterpillar rose 2.9 percent to $89.81. United Technologies increased 3.9 percent to $72.45.

Hewlett-Packard gained 4.1 percent to $32.32. The biggest personal-computer maker was raised to “buy” from “hold” at Jefferies. The 12-month share-price estimate is $40.

Goodyear Tire & Rubber Co. (GT) rose 7.2 percent to $13.48. The largest U.S. tiremaker won $1.50 million in federal funding to develop fuel efficient tires, Senator Sherrod Brown said in a statement.

Nordstrom Rallies

Nordstrom Inc. (JWN) rose 4.6 percent to $44.28. The U.S. department store chain posted second-quarter earnings that beat the average analyst estimate, data compiled by Bloomberg show.

Financial stocks had the biggest decline in the S&P 500 within 10 industries, falling 1.2 percent after gaining 2.9 percent earlier. Morgan Stanley retreated 7.3 percent to $16.89, reversing a gain of as much as 3.7 percent. JPMorgan Chase & Co. (JPM) decreased 2.1 percent to $35.91. Bank of America Corp. (BAC) sank 0.8 percent to $7.19 today, losing 12 percent for the week.

Stocks briefly erased gains as a report showed that confidence among U.S. consumers plunged in August to the lowest level since May 1980. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment slumped to 54.9 from 63.7 the prior month. The gauge was projected to decline to 62, according to the median forecast in a Bloomberg News survey.

The stock market’s fastest electronic firms boosted trading threefold during the rout in U.S. equities, stepping up strategies that profit from volatility, according to one of their biggest brokers.

High-Frequency Traders

The increase from Aug. 1 to Aug. 10 over their 2011 average surpassed the 80 percent rise in U.S. equity volume, showing that high-frequency traders made up more of the market during the plunge, Gary Wedbush, executive vice president and head of capital markets at Wedbush Securities, said in a telephone interview. Wedbush is the largest broker supplying bids and offers on the Nasdaq Stock Market, according to exchange data.

“We’re seeing a tremendous amount of high-frequency trading,” said Wedbush, whose company is one of the biggest execution and clearing brokers catering to high-speed firms. “Their business is a trading business, and volatility creates far more opportunities. Some of their algorithms and automated systems are trading two, three or five times as many shares as they would have in a more normalized volatility environment.”

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net

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