U.S. Stocks Rise on Consumer Confidence, European Debt Agreement

U.S. stocks rose, as the Standard & Poor’s 500 Index (SPX) advanced for the second straight week, after European leaders agreed to boost a rescue fund and American consumer confidence topped estimates.

JPMorgan Chase (JPM) & Co. and Bank of America Corp. (BAC) climbed more than 2.3 percent as banks rallied amid optimism on Europe. Caterpillar Inc. (CAT) and Halliburton Co. (HAL) gained at least 2.8 percent as investors bought shares of companies most tied to economic growth. General Electric Co. (GE) jumped 3.3 percent after boosting its dividend. The S&P 500 Consumer Services Index climbed to a record as McDonald’s Corp. (MCD) increased 1.2 percent.

The S&P 500 rallied 1.7 percent to 1,255.19 at 4 p.m. New York time. The index rose 0.9 percent this week and posted its first back-to-back weekly gain since October. The measure slid 2.1 percent yesterday as the European Central Bank damped speculation it would boost purchases of government bonds. The Dow Jones Industrial Average added 186.56 points, or 1.6 percent, to 12,184.26 today.

“Speculation will continue to swirl over what’s coming from Europe,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. “In terms of the summit leading to a type of cohesive fiscal plan, it appears something is in order. There’s some relief they did come through on that front.”

The S&P 500 has struggled to make any headway this year, down 0.2 percent for 2011, amid investor concern the euro area’s debt crisis will spread to the 17-nation currency’s larger economies and trigger a global recession. The measure fell within 1 percent of a bear market from its high on April 29 through the beginning of October. The gauge has pared the decline to 8 percent.

Banks Rally

All 10 groups in the S&P 500 (SPXL1) rallied today. Financial companies had the biggest advance out of 10 industries in the S&P 500, rising 2.3 percent. Morgan Stanley (MS) increased 3.2 percent to $16.38. JPMorgan Chase climbed 3 percent to $33.18. Bank of America added 2.3 percent to $5.72.

Investors bought shares of companies closely tied to economic growth, sending the Morgan Stanley Cyclical Index 1.8 percent higher, while the Dow Jones Transportation Average added 1.9 percent.

Energy and industrial companies had the second- and third- biggest gains among groups in the S&P 500, advancing at least 2.2 percent. Caterpillar, the world’s largest construction and mining-equipment maker, increased 3.3 percent to $95.97. Halliburton, the Houston-based energy services provider, rose 2.9 percent to $34.08.

Summit Agreement

European leaders meeting in Brussels tightened anti-deficit rules and agreed to boost their crisis-fighting war chest by as much as 200 billion euros ($267 billion) by funneling money to the International Monetary Fund. They outlined a “fiscal compact” to prevent future debt run-ups and accelerated the start of a planned 500 billion-euro rescue fund.

U.S. stocks extended gains as confidence among consumers rose more than forecast in December to a six-month high. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 67.7 from a final November reading of 64.1. The gauge was projected to rise to 65.8, according to the median forecast of 73 economists surveyed by Bloomberg News.

Goldman Sachs Group Inc. raised its tracking estimate for U.S. gross domestic product growth in the fourth quarter, to 3.4 percent from 2.9 percent, citing improvement in the trade balance. The trade deficit narrowed in October to the lowest level of the year, reflecting a drop in imports that will help give the U.S. economy a lift. The gap shrank 1.6 percent to $43.5 billion, smaller than projected, from $44.2 billion in September, Commerce Department figures showed.

‘In Perspective’

“It’s important for investors to keep things in perspective,” said Jeffrey Schwarte, a money manager who helps oversee about $231 billion in Des Moines, Iowa at Principal Global Investors, in a telephone interview. “If you look at the underlying data in the U.S., it’s actually very strong relative to other developed markets.”

GE rallied 3.3 percent, the second-biggest gain in the Dow, to $16.84. The Fairfield, Connecticut-based company said its board approved a 2-cent increase in the company’s quarterly dividend to 17 cents a share. The dividend boost is the fourth since GE resumed increases in July 2010.

McDonald’s, Starbucks

The S&P 500 Consumer Services Index climbed 1.5 percent to 533.21, the highest level on record. McDonald’s, the world’s largest restaurant chain that has the biggest weight in the gauge, climbed 1.2 percent to $98.03. Starbucks Corp. (SBUX), the world’s largest coffee-shop operator that has the second-largest weight in the measure, advanced 2.6 percent to $43.96. The stocks have risen this year 28 percent and 37 percent, respectively.

DuPont Co. slid 3.2 percent, the biggest decline in the S&P 500, to $45.04. The chemical maker lowered its forecast for 2011 to no more than $3.95 a share from as much as $4.05, missing the average analyst estimate of $4.04. The Wilmington, Delaware- based company cited slower growth in certain segments.

Pall Corp. surged 7.9 percent, the second-biggest increase in the S&P 500, to $56.66. The supplier of filters (PLL) for drugmakers and refineries reported first-quarter earnings were 74 cents a share, exceeding the average analyst estimate of 65 cents.

Earnings Estimates

Cooper Cos. jumped 17 percent to $67.81. The maker of contact lenses forecast fiscal year 2012 earnings of at least $4.80 a share, above the average analyst estimate of $4.65 in a Bloomberg survey.

Myles Zyblock, the chief institutional strategist at RBC Capital Markets in Toronto, lifted his earnings estimates for S&P 500 companies in 2011 by $1 to $97 a share. He also boosted his projection for profit in 2012 to $101 from $100. Zyblock raised his recommendation on industrial stocks and cut his rating on phone companies, saying improving economic data provides a reason for investors to increase cyclical holdings.

“We remain neutral equities,” Zyblock wrote in a note dated today. “Domestic data has started to come in a little better than expected in recent weeks. However, these positive developments are being offset by uncertainty related to the consequences of a global debt overhang and how policy makers might respond to the challenge. Volatility will probably remain elevated until the authorities offer much better policy visibility.”

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

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

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