U.S. stocks rose, giving the Standard & Poor’s 500 Index its biggest weekly rally in almost two months, following corporate takeovers and higher-than-estimated profit forecasts as well as easing concern that Japan’s nuclear crisis will curb global economic growth.
AT&T Inc. climbed 3.3 percent after agreeing to buy T-Mobile USA from Deutsche Telekom AG, forming the biggest U.S. wireless-phone company. Oracle Corp., Jabil Circuit Inc. and Micron Technology Inc. advanced more than 6.1 percent after profit or forecasts at the computer-related companies beat analysts’ projections. Sprint Nextel Corp. dropped 7.3 percent, the most in the S&P 500, after the mobile-phone company failed to purchase T-Mobile.
The S&P 500 gained 2.7 percent to 1,313.80, ending a two-week losing streak. The benchmark measure of U.S. equities pared its slump since Feb. 18 to 2.2 percent after losing 6.4 percent through March 16. The Dow Jones Industrial Average gained 362.07 points, or 3.1 percent, to 12,220.59.
“Investors are getting back into the mode of thinking there’s an economic expansion phase that’s likely to continue,” said Sean Kraus, who oversees about $2.2 billion as chief investment officer at Citizens Business Bank in Pasadena, California. This week’s earnings reports were “very, very positive, and a lot of the commentary coming out of the companies was also positive.”
The S&P 500 recouped all of its losses following Japan’s magnitude-9 earthquake on March 11. As concern about the temblor eased, the Chicago Board Options Exchange Volatility Index, which measures the cost of using derivatives as insurance against S&P 500 losses, extended its drop since March 16 to 39 percent. That’s the most since November 2008 for the measure known as the VIX.
Equities also gained after the Commerce Department said yesterday that the U.S. economy expanded at a 3.1 percent annual rate in the fourth quarter, higher than the prior estimate of 2.8 percent, as consumer spending increased. Applications for first-time unemployment benefits dropped and the total number of Americans receiving help dropped to the lowest level since October 2008, the Labor Department said March 24.
AT&T rose 3.3 percent to $28.85 this week. The deal would allow AT&T, now the second-largest U.S. wireless operator, to add about 34 million customers and surpass Verizon Wireless. The acquisition may face government scrutiny because it combines the second- and fourth-largest wireless providers, reducing consumer choice. Though regulatory approval may take a year, cost savings and revenue gains could total $3 billion a year, AT&T said.
Sprint, the third-largest U.S. mobile phone carrier, slumped 7.3 percent to $4.68. An AT&T purchase of T-Mobile may make Sprint a far weaker player in the industry, said Craig Moffett, an analyst at Sanford C. Bernstein & Co.
OptionsXpress Holdings Inc. rose 19 percent, the most since March 2009, to $18.26. Charles Schwab Corp. agreed to buy the retail options brokerage for about $1 billion in stock. Charles Schwab increased 3 percent to $18.09.
Technology companies in the S&P 500 added 4.1 percent, the second-biggest weekly gain among 10 groups.
Oracle, the world’s biggest supplier of database software, rose 6.1 percent to $32.64. The company forecast fourth-quarter profit that topped the average analyst predictions, a sign of growing demand for database software as well as hardware added by the Sun Microsystems Inc. purchase.
Most Since 2009
Jabil Circuit advanced 14 percent, the most since December 2009, to $21.28. The electronics manufacturer forecast third-quarter earnings excluding some items of at least 55 cents a share, beating the average analyst estimate of 53 cents in a Bloomberg survey.
Micron, the biggest U.S. producer of computer-memory chips, surged 15 percent to $11.55 for the largest weekly gain since December 2009. It posted second-quarter sales and profit that beat analysts’ estimates on increasing demand for chips used to store data on mobile phones and tablets.
Red Hat Inc. climbed 18 percent, the biggest gain in the S&P 500, to $46.34. The largest seller of the Linux operating system posted fiscal fourth-quarter profit of 26 cents a share excluding some items, beating the 22-cent average estimate in a Bloomberg survey, as customers updating data centers to take advantage of cloud computing boosted billings.
Accenture Plc gained 8 percent to $54.29. The world’s second-largest technology-consulting firm said 2011 earnings will be $3.22 to $3.30 a share, more than the average analyst estimate of $3.13.
Rejected by Fed
Bank of America Corp. fell 5 percent, the only decline in the Dow, to $13.34. The biggest U.S. lender by assets said the Federal Reserve rejected its request for a dividend increase in the second half of 2011, forcing the company to resubmit plans for a “modest” boost.
Best Buy Co. fell 7.3 percent, the second-biggest decline in the S&P 500, to $29.22. The world’s largest consumer electronics retailer forecast full-year profit that trailed some analysts’ projections, citing economic challenges.
Purchases of new U.S. homes unexpectedly declined in February to the slowest pace on record and prices dropped to the lowest level since December 2003. Sales decreased 16.9 percent to a 250,000 annual pace, figures from the Commerce Department showed on March 23. Economists surveyed by Bloomberg News projected a gain to a 290,000 rate, according to the median estimate.
The median price fell 8.9 percent from the same month in 2010. Wells Fargo analyst Carl Reichardt said the February home sales data may be revised up and didn’t reflect the market “reality” as bad weather hurt the market.
“The things that make a market go are monetary policy, which is stimulative right now, earnings growth and economic growth, which have both been good,” said James Moffett, a fund manager at Scout Investments, which oversees $20 billion in Kansas City, Missouri. “Stocks will continue to climb.”