U.S. stocks rallied, giving the Standard & Poor’s 500 Index its biggest gain in a month, as industrial production rose more than forecast and corporate earnings topped estimates.
Citigroup Inc. added 1.6 percent after Chief Executive Officer Vikram Pandit stepped down. Johnson & Johnson climbed 1.4 percent after raising its 2012 forecast. Murphy Oil Corp. rallied 8 percent after saying it plans to spin off its U.S. refined fuels business. International Business Machines Corp. and Intel Corp. tumbled more than 2.4 percent after the market closed as the companies reported third-quarter results.
The S&P 500 climbed 1 percent to 1,454.92 at 4 p.m. in New York. The index advanced 1.8 percent over two days. The Dow Jones Industrial Average added 127.55 points, or 1 percent, to 13,551.78 today. About 6.2 billion shares traded hands on U.S. exchanges, 2.7 percent above the three-month average.
“Investors are cycling back into risk as earnings as well as economic numbers in the U.S. are somewhat better than expected,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $138 billion in client assets, said in a telephone interview. “Economic growth will continue to be sluggish even with the flickers of hope that we’ve seen this morning.”
The S&P 500 has rallied 16 percent this year and is about 7 percent below its all-time high of 1,565.15 reached in October 2007. More than 80 companies in the S&P 500 have scheduled their results this week, according to data compiled by Bloomberg. Of the 50 companies in the benchmark index that have reported since Oct. 9, 37 posted earnings that exceeded analyst estimates, the data showed.
Output at factories, mines and utilities rose 0.4 percent in September after a 1.4 percent decline in August that was the biggest since March 2009, the Federal Reserve reported today in Washington. The median estimate in a Bloomberg survey of 85 economists called for production to rise 0.2 percent. Manufacturing, which makes up 75 percent of the total, climbed 0.2 percent.
American equities followed European stocks higher as two German lawmakers said the country is open to Spain seeking a precautionary credit line. Michael Meister and Norbert Barthle, officials within Chancellor Angela Merkel’s Christian Democratic bloc, indicated a rolling back of German resistance to a full sovereign bailout for Spain.
“We have more good news than bad and no reason to take the market down in the short term,” James Gaul, a portfolio manager at Boston Advisors LLC which oversees about $2.3 billion in assets, said in a phone interview. “The comments by German lawmakers that Germany may be open to a precautionary credit line to Spain may take some risk off the table there.”
Nine out of 10 groups in the benchmark index rose, with commodity producers and technology shares rallying at least 1.5 percent. The Morgan Stanley Cyclical Index jumped 1.8 percent, the most since Sept. 6, as investors bought shares of companies most tied to economic growth. Financial shares added 0.7 percent as a group.
Citigroup advanced 1.6 percent to $37.25, with trading more than 187 percent above the five-day average. Directors ousted Pandit after concluding that he had mismanaged operations, leading to setbacks with regulators and a loss of credibility with investors, a person with knowledge of the discussions said.
Pandit said he decided yesterday to leave after turning the company around. He will be replaced as CEO by Michael Corbat. President and Chief Operating Officer John P. Havens also resigned, the bank said in a statement.
The departures remove a leadership team that navigated Citigroup through 2008’s global credit crisis, when taxpayers rescued the bank from collapse with a $45 billion bailout. Citigroup soared 5.5 percent yesterday, the most since March, after earnings topped estimates.
“We think this could be an intermediate term positive,” Matt Burnell, bank analyst at Wells Fargo & Co., wrote in a note today. He recommends investors buy Citigroup shares. “Corbat’s elevation strikes us as a positive for Citi, as it brings an experienced banker into the CEO’s role.”
State Street Corp. increased 4.7 percent to $43.53. The third-largest custody bank reported third-quarter operating profit that beat analysts’ estimates as it earned higher fees for managing client money.
Goldman Sachs Group Inc. slumped 1 percent to $123.22. The fifth-biggest U.S. bank by assets reported profit that beat analysts’ estimates on higher underwriting fees and a jump in the value of the firm’s own investments. Revenue from trading fixed-income, currency and commodities fell short of gains posted by JPMorgan Chase & Co. and Citigroup.
PNC Financial Services Group Inc. fell 4 percent, the most in the S&P 500, to $60.40. The seventh-largest U.S. bank by deposits reported quarterly profit that missed analyst estimates. Excluding the effects of securities transactions and integration costs, profit was $1.63 a share. The average estimate of 32 analysts surveyed by Bloomberg was $1.66.
Johnson & Johnson, the world’s biggest maker of health-care products, climbed 1.4 percent to $69.55. Third-quarter earnings beat analyst estimates on rising demand for medical tools acquired with the Synthes purchase and new prescription medicines. The drugmaker raised its 2012 earnings forecast to $5.05 to $5.10 a share excluding certain items, after trimming the forecast last quarter by 5 cents to $5 to $5.07 a share.
Apple Inc. jumped 2.4 percent to $649.79. The world’s most valuable company sent out invitations for what it’s calling a “special event” on Oct. 23 in San Jose, California. Apple plans to unveil a smaller version of its iPad tablet at the event, a person with knowledge of the matter said earlier this month.
IBM slid 3.3 percent to $203.99 at 5:18 p.m. New York time. The biggest computer-services company reported third-quarter revenue after the close of regular trading that fell short of estimates as currency fluctuations and slow hardware sales crimped results.
Intel soared 2.9 percent to $22.35 in regular trading. After the market closed, the shares erased 2.4 percent as the world’s largest semiconductor maker said sales in the current period will be $13.1 billion to $14.1 billion. Analysts on average had projected sales of $13.7 billion, according to data compiled by Bloomberg.
The company’s forecast suggests year-end demand won’t match the most pessimistic expectations. Still, it doesn’t mean computer makers will soon return to the growth pace of the years preceding the advent of tablets and smartphones. A shift away from traditional computers has put the market on course for its first decline in more than a decade.
Mattel Inc. rose 5 percent, the most since July, to $37.20. The world’s largest toymaker reported third-quarter profit and revenue that topped analysts’ estimates.
Murphy Oil rallied 8 percent to $63.74. The El Dorado, Arkansas-based company plans to spin off its U.S. refined fuels business, including a network of gasoline stations at Wal-Mart Stores Inc. locations, after hedge fund Third Point LLC said the company should shed assets.
Kroger Co., a supermarket operator, increased 4.3 percent to $24.43. Jefferies Group Inc. upgraded the stock to buy from hold.
Fossil Inc. gained 7.3 percent to $91.31 for the third-biggest advance in the S&P 500. The maker of jewelry and leather goods was upgraded to buy at Citigroup, which cited the company’s inexpensive valuation as well as the earnings impact from new brands and products.
Coca-Cola Co. slumped 0.6 percent to $37.90. The world’s largest soft-drink maker said third-quarter revenue advanced less than 1 percent to $12.3 billion, trailing the $12.4 billion average of analysts’ estimates compiled by Bloomberg.
Clearwire Corp. tumbled 17 percent to $2.23. People with direct knowledge of the situation said Sprint Nextel Corp. has no immediate plans to take over Clearwire. Sprint, which agreed to sell a 70 percent stake to Softbank Corp. for $20.1 billion, was unchanged at $5.69.
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