U.S. Stocks Rise as Durable Goods Top Forecasts; GE, Alcoa Gain

U.S. Stocks Rise as Durable Goods Top Forecasts; GE, Alcoa Gain


March 25 (Bloomberg) -- U.S. stocks advanced after an unexpected increase in orders for durable goods spurred speculation the worst of the recession is over and President Barack Obama said the financial system is fundamentally strong.

General Electric Co., Alcoa Inc. and JPMorgan Chase & Co. led the Dow Jones Industrial Average higher after the government reported a 3.4 increase in demand for products meant to last several years, the fastest growth in more than a year. PepsiCo Inc. and Hewlett-Packard Co. rose as analysts recommended the shares. CB Richard Ellis Group Inc., the largest property broker, surged 40 percent after lenders eased debt covenants.

The Standard & Poor’s 500 Index added 1 percent to 814.04 as of 9:37 a.m. in New York. The Dow Jones Industrial Average gained 74.31 points, or 1 percent, to 7,734.28. The Nasdaq Composite Index increased 1 percent to 1,532.32.

“This could be the beginning of an improvement,” said Charles Smith, the Pittsburgh-based manager of the Fort Pitt Capital Total Return Fund, which beat 78 percent of its peers last year. “The market is essentially saying, ‘Now we have an idea that we’ve already seen the worst rate of change in GDP.’”

The S&P 500 erased about half of yesterday’s decline, which was spurred by concern the banking crisis would trigger tighter financial regulations. The benchmark U.S. stock index is up almost 21 percent since March 9 amid speculation the government’s plan to help investors buy toxic assets will revive credit markets.

Bonds Slump

Treasury notes declined for a fifth day as the U.K. suffered a failed debt auction and the U.S. prepared to sell $34 billion in five-year notes, raising concern record amounts of government debt will overwhelm demand. The last time the U.K. government was unable to attract enough investors was in 2002 when it tried to sell 30-year inflation-protected bonds.

GE, the biggest maker of power-plant turbines, jet engines, locomotives and medical-imagining equipment, climbed 3.4 percent to $10.77.

The increase in durable goods orders followed a 7.3 percent decrease in January that was larger than previously estimated, the Commerce Department said. Combined with reports showing improvements in retail sales, residential construction and home resales, the figures indicate the economy is stabilizing after shrinking last quarter at the fastest pace in a quarter century.

JPMorgan, the largest U.S. bank by market value, climbed 4.5 percent to $27.60. Wells Fargo & Co. increased 6.7 percent to $16.53. Obama scaled back criticism of Wall Street in a speech last night by saying lawmakers and the public shouldn’t vilify those who try to reap rewards in the free-market system.

White House Meeting

An administration official said the president will meet with the chiefs of about a dozen big U.S. banks at the White House on March 27 to stress the need for shared goals to revive the economy.

PepsiCo rose 1.8 percent to $52.44. The world’s biggest snack-food maker was raised to “buy” from “neutral” at UBS AG, which cited “earnings and investment flexibility.”

Hewlett-Packard added 1.1 percent to $30.96. The world’s largest personal-computer maker was rated “outperform” in new coverage at RBC Capital Markets.

“Investors will benefit from HP’s diverse revenue portfolio, recurring book of business, stronger margin profile and solid management team,” the brokerage wrote in a report.

CB Richard Ellis Group jumped 40 percent to $4.21. The shares were raised to “overweight” at JPMorgan Chase following the approval to amend its credit approval.

American Express Co. lost 1.9 percent to $13.64. The largest credit-card company by purchases was cut to “underweight” from “overweight” at JPMorgan, which cited the “strained consumer.”

Earnings Concern

JPMorgan cut its earnings estimates for S&P 500 companies as the recession worsens. Average earnings per share will be $57 this year compared with a previous forecast of $65, strategist Thomas Lee wrote in a report today. Next year’s earnings will be $76 a share compared with a prior estimate of $80.

The S&P 500 jumped 7.1 percent on March 23, its steepest gain since October, on speculation the U.S. plan to finance purchases of toxic assets will spur growth. Stocks slipped yesterday as Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Timothy Geithner yesterday called for new powers to take over and dismantle failing financial firms after the troubled rescue of American International Group Inc.

BLOOMBERG