U.S. Stocks Rise as Transport, Consumer-Staple Shares Advance

U.S. Stocks Advance as Transport, Consumer-Staple Gain
Costco Wholesale Corp. rallied 1.9 percent to pace an advance in companies that sell consumer necessities. Photographer: Brendan Smialowski/Bloomberg

July 6 (Bloomberg) -- U.S. stocks rose, posting their sixth advance in seven days, as gains in transportation and consumer-staple companies overshadowed a slowdown in service-industry growth and China’s interest-rate increase.

Union Pacific Corp. climbed 0.8 percent to lead gains in shipping companies, while Costco Wholesale Corp. rallied 1.7 percent to help lead an advance in companies that sell consumer necessities. DuPont Co., Intel Corp. and Caterpillar Inc. increased at least 1.3 percent, pacing gains among companies most-dependent on economic growth. Bank of America Corp. and JPMorgan Chase & Co. slumped at least 1.1 percent as financial stocks retreated.

The Standard & Poor’s 500 Index gained 0.1 percent to 1,339.22 at 4 p.m. in New York. The intraday move in the S&P 500 between its high and low was 0.7 percent, following a move of only 0.5 percent yesterday. The Dow Jones Industrial Average climbed 56.15 points, or 0.5 percent, to 12,626.02. Volume on U.S. exchanges totaled almost 6.1 billion at 4:53 p.m., 15 percent less than the three-month average through yesterday.

“We’re beginning to put the short-term economic issues behind us,” said Robert Schaeffer, a money manager at Becker Capital Management Inc. in Portland, Oregon, which oversees about $2.5 billion. “We’re likely to get better economic data over the next months and that will rally the stock market on an intermediate basis even if the long-term problems such as too much debt remain unsolved.”

Last Week’s Rally

U.S. stocks yesterday snapped a five-day rally in which the S&P 500 climbed 5.6 percent, the biggest weekly advance since July 2009. Last week’s gain helped the S&P 500 erase about 75 percent of the decline suffered since reaching its high for the year on April 29. Through June 24, U.S. equities had fallen for seven of the previous eight weeks on concern the European debt crisis would spread and the U.S. economy slow. The index is up 6.5 percent for the year, data compiled by Bloomberg show.

Transportation shares helped erase morning losses. Union Pacific gained 0.8 percent to $106.59, while the Dow Jones Transportation Average of 20 stocks, a proxy for economic growth, rose 1.2 percent.

Arkansas Best Corp. jumped 11 percent to $26.90. The trucking company said in a company release it will increase its rates by 6.9 percent. United Parcel Service Inc. rose 1 percent to $74.50. FedEx Corp. advanced 1.3 percent to $96.78.

The recent rally has marked a partial shift that had favored companies and industries less sensitive to economic growth. Since the S&P 500 slipped to its low for the year on March 16, drugmakers, phone companies, utilities and household-products producers have gained the most, according to data compiled by Bloomberg. The biggest advances in last week’s rally were among so-called cyclical stocks, including energy companies, computer makers, automakers and industrials.

Cyclical Index

The Morgan Stanley Cyclical Index added 0.1 percent today. Caterpillar, the world’s largest maker of construction equipment, rose 1.5 percent to $110.08, the most in the Dow. DuPont, the third-biggest U.S. chemical maker, climbed 1.4 percent to $55.20, while Intel increased 1.4 percent to $22.75.

Equities fell earlier after the ISM services index decreased to 53.3 in June from 54.6 a month earlier. A reading above 50 signals expansion. The measure was projected to drop to 53.7, according to the median forecast in a Bloomberg News survey. The slower pace is a sign the economy cooled at the end of the first half of 2011.

Other data showed employers in the U.S. announced 5.3 percent more job cuts in June than a year earlier, according to figures from Chicago-based Challenger, Gray & Christmas Inc. The report comes two days before the Labor Department’s monthly payrolls report.

Earnings Season

The second-quarter earnings season starts next week when Alcoa Inc. reports on July 11, the first Dow company to release results. Earnings are forecast to grow by 13 percent, according to estimates compiled by Bloomberg.

Stock-index futures retreated after China’s central bank said it will raise its benchmark deposit and lending rates by 25 basis points tomorrow. This is the third time this year China has raised rates as it tries to cool the world’s fastest-growing economy after inflation accelerated to the quickest pace since 2008.

“China is perceived as the economic engine of the world right now,” said Oliver Pursche, co-manager of the GMG Defensive Beta Fund and president of Suffern, New York-based Gary Goldberg Financial Services, which manages about $500 million. “Them slowing down by raising interest rates at a time when we have an overhang of high unemployment and low growth in the U.S., as well as the sovereign debt issues in Europe, causes investors to get concerned about what the impact will be on our markets and economies.”

Financials Slump

Shares of financial companies fell 0.6 percent as a group today, the second-most among 10 industries in the S&P 500. Bank of America, the largest U.S. lender, declined 2.4 percent to $10.74. JPMorgan, the second-biggest U.S. bank by assets, retreated 1.2 percent to $40.56.

Costco Wholesale, the largest U.S. warehouse-club chain, advanced 1.7 percent to $82.64 as an index of consumer staples stocks rallied 0.6 percent, the most among 10 industries in the S&P 500.

General Motors Co. advanced 1.1 percent to $31.19 after Morgan Stanley upgraded U.S. carmakers to “attractive” from “in line.” The brokerage named GM as its top pick among automakers.

News Corp. fell 3.2 percent to $17.94. The company’s News of the World, the tabloid accused of hacking into a murder victim’s voicemail, is losing advertisers including GM’s Vauxhall brand and Lloyds Banking Group Plc.

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

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