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U.S. Stocks Rise as Apple Rebounds Amid Budget Talks

Dec. 6 (Bloomberg) -- Bloomberg’s Trish Regan, Matt Miller and Adam Johnson report on today’s ten most important stocks including Starbucks, Zynga and Freeport-McMoRan. (Source: Bloomberg)

U.S. stocks rose for a second day as Apple Inc. rebounded from its biggest drop in four years and investors weighed prospects for a budget deal in Washington.

Apple advanced 1.6 percent, reversing an earlier loss. Akamai (AKAM) Technologies Inc. increased 10 percent after agreeing to sell services with AT&T Inc. H&R Block Inc. (HRB), the biggest U.S. tax preparer, advanced 5.1 percent after reporting a loss that was smaller than analysts estimated. Freeport-McMoRan Copper & Gold Inc. (FCX), the world’s largest publicly traded copper producer, and MetLife Inc. (MET), the biggest U.S. life insurer, declined at least 1.2 percent following analysts’ rating downgrades.

The Standard & Poor’s 500 Index increased 0.3 percent to 1,413.94 at 4 p.m. New York time. The Dow Jones Industrial Average advanced 39.55 points, or 0.3 percent, to 13,074.04. More than 5.7 billion shares changed hands on U.S. exchanges, or 8.9 percent below the three-month average.

“Apple stock is taking a breather after a sharp selloff and that’s helping the overall market,” said Alan Gayle, senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. “Most analysts continue to like their story. We’re seeing some validation of that. In addition, the jobless claims were better than expected. The data suggest the U.S. economy continues to heal and that will be the case as long as we don’t fall off the fiscal cliff.”

A few dozen Republicans joined a bipartisan push to break an impasse between President Barack Obama and House Speaker John Boehner over taxes for the highest-earning Americans, signing a letter calling for openness to “all options.” Fewer Americans than projected filed applications for unemployment benefits last week as disruptions caused by superstorm Sandy waned.

ECB Forecasts

Equities fell earlier as the European Central Bank forecast the economy will shrink 0.5 percent this year, more than the 0.4 percent contraction it predicted in September. The ECB cut its 2013 forecast to a contraction of 0.3 percent, and projected expansion of 1.2 percent in 2014. Risks to the outlook remain on the downside, ECB President Mario Draghi said.

“Weak activity is expected to extend into next year,” Draghi said at a press conference in Frankfurt after policy makers left the benchmark rate at a record low of 0.75 percent. “Later in 2013, economic activity should gradually recover as global demand strengthens and our accommodative monetary-policy stance and significantly improved financial market confidence work their way through to the economy.”

Gains, Losses

The S&P 500 swung between gains and losses earlier today. Intraday price fluctuations in the benchmark index averaged 0.8 percent over the past five days, the smallest since September, according to data compiled by Bloomberg.

“The market is showing not much conviction,” said Stephen Carl, head equity trader at Williams Capital Group LP in New York. “Fiscal cliff is on the forefront, stalling any moves at the moment. If there is a disparity one way or the other from tomorrow’s jobs report, you will probably see a move in the market.”

Data tomorrow is forecast to show U.S. payrolls rose by 85,000 workers last month, the smallest gain since June, according to the median forecast of economists.

Seven out of 10 groups in the S&P 500 rose today as technology and consumer discretionary shares had the biggest advances. Utilities and phone companies declined the most.

$100 Million

Apple (AAPL) rose 1.6 percent to $547.25, reversing an earlier decline of as much as 3.7 percent. It plans to spend more than $100 million next year on building Mac computers in the U.S., shifting a small portion of manufacturing away from China, the country that has handled assembly of its products for years.

The shares slumped 6.4 percent yesterday on concern that Apple will lose ground in smartphones to Nokia Oyj in China while giving up market share to Google Inc. in tablets. China Mobile Ltd. agreed to carry the Lumia 920T, a device based on Microsoft Corp.’s Windows Phone 8 software. In another announcement that may have fueled the stock’s slide, research firm IDC said yesterday that Apple’s share of the tablet market will slip to 53.8 percent this year from 56.3 percent in 2011, while Google’s will increase.

Akamai surged 10 percent to $39.06. The content-delivery services for AT&T’s business customers will be jointly sold and managed by both companies and be offered as a feature integrated into AT&T’s network, said Fletcher Cook, a spokesman for AT&T, the largest U.S. phone company. The contract is a multi-year, exclusive agreement, said Cook, who declined to disclose the terms.

Cost Cuts

H&R Block gained 5.1 percent to $18.26. The second-quarter results “reflect savings from our cost reduction initiatives and a strong tax season in Australia,” Chief Executive Officer Bill Cobb said in the statement.

Sirius XM Radio Inc. (SIRI) rose 0.7 percent to $2.79. The satellite-radio broadcaster said it will issue a special dividend of 5 cents a share and repurchase as much as $2 billion in stock. 

Starbucks Corp. gained 5.7 percent to $53.70. The world’s biggest coffee-shop operator was raised to outperform from neutral at Robert W. Baird & Co. by analyst David Tarantino. The 12-month share-price estimate is $62.

Freeport-McMoRan dropped 4.2 percent to $30.81 after being downgraded to market perform from outperform at BMO Capital Markets and Macquarie Group Ltd.

Freeport’s Takeovers

The shares slumped 16 percent yesterday, the most in four years, after the mining company agreeing to buy Plains Exploration & Production Co. (PXP) and McMoRan Exploration Co. (MMR) for $9 billion. The move was criticized by BlackRock Inc., one of Freeport’s largest investors, and Dan Rohr, an analyst at Morningstar Investment Service, for failing to create any obvious cost savings.

MetLife declined 1.2 percent to $32.91. The shares were downgraded to equal-weight from overweight at Barclays Plc by analyst Jay Gelb. The share-price estimate is $37.

Traders are pushing the cost of protecting against J.C. Penney (JCP) Co. swings to an all-time high relative to its competitors amid investor pessimism about Chief Executive Officer Ron Johnson’s turnaround plan.

Implied volatility, the key gauge of options prices, for three-month contracts closest to J.C. Penney shares has risen to 65.8, according to data through yesterday compiled by Bloomberg. That is 3.3 times the level for the SPDR S&P Retail ETF, near the record reached last month. J.C. Penney, the fourth-largest U.S. department-store company, has lost 48 percent this year.

Losing Clients

Johnson, who joined as chief executive officer about a year ago from Apple, is losing customers in a bid to implement an everyday low-pricing plan and turn the chain into a collection of branded shops. Revenue at J.C. Penney has declined by more than 20 percent for three straight quarters, sending the shares to their lowest price in almost four years. The company said earlier this week that its operating efficiency may be hurt after it fired employees while others left voluntarily.

“People are very focused on when the company will see some sort of bottom on the sales decline,” Jessica Bemer, a Sewickley, Pennsylvania-based senior analyst at Snow Capital Management LP, which oversees about $2.5 billion, said in a telephone interview yesterday. “The concern is that in order to be successful in that venture, the company will need to stabilize cash flow. It’s going to take some time to get there. How long are people going to wait?”

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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