Stocks Rally Worldwide, S&P 500 Hits 1-Month High on Obama Plan

Stocks Rally Worldwide, S&P 500 Hits 1-Month High on Obama Plan


Dec. 8 (Bloomberg) -- Stocks rose around the world, sending the Standard & Poor’s 500 Index to a one-month high, as President-elect Barack Obama pledged to boost the economy with the biggest public-works spending package since the 1950s.

U.S. Steel Corp. and Alcoa Inc. climbed at least 15 percent, while Chevron Corp. added more than 4 percent, as Obama’s plan to increase infrastructure spending spurred gains in commodities. General Motors Corp. jumped more than 14 percent as lawmakers agreed in principle with the White House to provide funds to shore up the car industry. Benchmark indexes in Germany and France added more than 7 percent, while Tokyo’s Nikkei 225 climbed 5.2 percent as Siemens AG and Komatsu Ltd. rallied.

“Hopefully it helps get the economy turned around, jumpstarting private spending with public spending,” said Bill Stone, who helps oversee about $56 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “That’s the whole point of this is to try to get that jumpstart going.”

The Standard & Poor’s 500 Index increased 3.1 percent to 902.82 at 1:03 p.m. in New York, extending its advance from an 11-year low on Nov. 20 to almost 20 percent. The Dow Jones Industrial Average added 258.61 points, or 3 percent, to 8,894.03. The Nasdaq Composite Index rose 3.5 percent to 1,561.61. Five stocks gained for each that fell on the New York Stock Exchange.

The S&P 500 has climbed in nine of the 11 trading sessions since Nov. 20, in part on speculation the Federal Reserve will cut interest rates and Congress will step up efforts to boost the economy. The benchmark index is still down 39 percent in 2008 after the collapse of the subprime mortgage market reduced profits for five straight quarters.

Cash, Market Value

Stocks have fallen so far that 2,267 companies around the globe offered profits to investors for free as of the open of trading today. That’s eight times as many as at the end of the last bear market, when the shares rose 115 percent over the next year.

Bank of New York Mellon Corp., Danieli SpA in Buttrio, Italy, and Seoul-based Namyang Dairy Products Co. held more cash than the value of their stock and debt as the slowing world economy wiped out $32 trillion in capitalization this year. Companies in the MSCI World Index traded for an average $1.17 per dollar of net assets, the lowest since at least 1995, and 39 percent sold at a discount to shareholder equity as of the open, data compiled by Bloomberg show.

Obama said Dec. 6 he will boost investment in roads, bridges and public buildings to create or preserve 2.5 million jobs after companies cut payrolls at the fastest pace in 34 years.

‘Dramatic Action’

“There’s an awareness now that this is across the board,” Laszlo Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut, told Bloomberg Television. “A Band-Aid here and a Band-Aid there is not going to form a solution. You’ve got to really take some dramatic action, and I think that’s what investors are responding to today.”

U.S. Steel Corp. helped lead gains among raw material producers in the S&P 500 with a 20 percent advance, the most since at least May 1991, to $34.54. The second-largest U.S. steelmaker was raised to “conviction buy” by Goldman Sachs Group Inc. analysts, who predicted steel prices are on the verge of rebounding as supply cuts have outpaced the global collapse in demand.

Commodities Rally

Olympic Steel Inc. gained 22 percent to $18.50 after Goldman raised it to “buy” from “neutral.” AK Steel Holding Corp., the fourth-largest U.S. steelmaker, added 24 percent to $8.86.

Alcoa Inc., the largest U.S. aluminum maker, jumped 16 percent to $9.47. Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, added 20 percent to $20.20.

Raw materials producers in the S&P 500 climbed 6.7 percent as a group for the biggest advance among 10 industries.

Commodity prices rebounded from last week’s losses on speculation Obama’s spending on roads, bridges and school repairs will boost demand. Copper rose 10 percent, while crude climbed 7.2 percent to $43.73 a barrel.

Exxon Mobil Corp., the world’s largest oil company, climbed 3.2 percent to $79.07. Chevron, the second-biggest, increased as much as 6.5 percent to $79.28.

Chesapeake Energy Corp. surged 29 percent to $14.58 for the biggest gain since its February 1993 initial public offering. The second-biggest independent U.S. natural-gas producer said it will cut spending and plans to build cash resources because of a plunge in energy prices.

Construction, Automakers

Construction-equipment makers rallied, with Caterpillar Inc., the world’s largest maker of backhoes and excavators, adding 14 percent to $43.64. Manitowoc Co., the construction- crane maker based in the Wisconsin city of the same name, rose 17 percent to $8.69.

GM, the largest U.S. automaker, rallied 16 percent to $4.73. Ford, the second-biggest, surged 17 percent to $3.19.

Congress and the Bush administration have reached an accord on an auto-industry rescue plan that will probably be passed and signed into law this week, House Financial Services Committee Chairman Barney Frank said.

House Speaker Nancy Pelosi also dropped her opposition to drawing on $25 billion in funds from the Energy Department intended to help carmakers develop more fuel-efficient vehicles, according to a Democratic aide who declined to be identified.

Merger Speculation

NYSE Euronext jumped 20 percent to $25.74. Deutsche Boerse AG said it explored a merger offer for the world’s biggest owner of stock exchanges. The talks “ended without any conclusion,” Deutsche Boerse said.

NASDAQ OMX Group Inc. increased 6.9 percent to $24.95. The FTSE/Mondo Visione Exchanges Index, which tracks 17 publicly traded exchanges, rose 12 percent.

Obama’s plan to boost the economy with a “substantial” infrastructure stimulus package sent global stocks rallying.

Siemens AG, Europe’s largest engineering company, jumped 10 percent to 49.40 euros. Hochtief AG, Germany’s biggest builder, added 16 percent to 30.94 euros. Royal Dutch Shell Plc, Europe’s biggest energy producer, advanced 8.3 percent to 1,691 pence in London.

Komatsu Ltd., the world’s No. 2 maker of construction machinery, rose 11 percent to 1,007 yen. India’s biggest mortgage lender, Housing Development Finance Corp., added 5.7 percent to 1,511.95 rupees.

BLOOMBERG