By Elizabeth Stanton
June 19 (Bloomberg) — U.S. stocks rose for the first time in three days as an almost $5-a-barrel drop in oil boosted transportation and consumer companies and technology shares rallied on forecasts for higher earnings at Broadcom Corp.
The market extended its gains after regional bank BB&T Corp. said it expects to increase its dividend this year, countering speculation it will slash the payout. Broadcom rallied the most since April after Lehman Brothers Holdings Inc. said the maker of computer chips is poised for steadier profit growth. Ryder Systems Inc. and Southwest Airlines Co. led nine of ten transportation companies in the Standard & Poor’s 500 Index higher as crude slid.
The S&P 500 added 5.02 points, or 0.4 percent, to 1,342.83. The Dow Jones Industrial Average increased 34.03, or 0.3 percent, to 12,063.09. The Nasdaq Composite Index jumped 32.36, or 1.3 percent, to 2,462.07. More than three stocks rose for every two that fell on the New York Stock Exchange.
“If sentiment starts to develop that the economy’s indeed bottomed, and oil prices could pull back a little bit, I think that would set off a pretty bullish atmosphere,” James Paulsen, chief investment strategist of Wells Capital Management in Minneapolis, said on Bloomberg Television.
Among the 10 industries in the S&P 500, only energy producers declined. BB&T’s announcement helped financial shares in the index gain after the group earlier plunged to a five-year low on Citigroup Inc.’s forecast for more writedowns from subprime-infected holdings.
Broadcom rose 7.6 percent to $27.22 for the biggest gain in the S&P 500. Lehman analyst Tim Luke increased his second-quarter earnings forecast for the maker of semiconductors used in Nintendo Co.’s Wii video-game console and said his third-quarter profit forecast may “prove conservative” as demand increases.
All but one of 18 semiconductor companies in the S&P 500 advanced as the group gained 2.5 percent. Intel Corp., the world’s largest chipmaker, added 57 cents to $22.85.
Ryder, the largest U.S. truck-leasing company, rose $3.59 to $73.86. Southwest Airlines, the biggest low-fare carrier, climbed 66 cents to $14.80. Carnival Corp., the world’s largest cruise- line company, added 5.4 percent to $36.84.
Crude oil fell $4.75, or 3.5 percent, to $131.93 a barrel on speculation demand will decline after China said it will raise fuel prices starting tomorrow. China, the second-biggest fuel consumer after the U.S., will increase gasoline and diesel prices by 17 percent and 18 percent respectively, the National Development and Reform Commission said. Gasoline, natural gas and heating oil also fell.
Energy shares, the best performing of 10 industries in the S&P 500 over the past 12 months with an 17 percent gain, fell 2.1 percent as a group. Exxon Mobil Corp., the world’s largest oil company, lost 2.3 percent to $85.79. Chevron Corp., the second- biggest U.S. oil company, dropped 2.4 percent to $96.86. The two companies fell the most in the Dow average.
BB&T, the third-biggest bank based in North Carolina, rose 2 cents to $24.35 after earlier plunging as much as 12 percent. BB&T said it stood by its April 17 statement that it expects “some increase in the cash dividend during 2008.”
BB&T tumbled earlier after analysts at Sterne Agee & Leach Inc. said the bank may have to cut its dividend by 50 percent to preserve capital.
Fifth Third Bancorp, Ohio’s second biggest bank, led the market lower yesterday after slashing its dividend and forecasting earnings below analysts’ estimates.
Regional banks in the S&P 500 fell less than 0.1 percent as a group after sinking 5 percent earlier in the day.
Citigroup lost 23 cents, or 1.1 percent, to $20.17. The biggest U.S. bank will have “substantial” additional writedowns on its holdings of debt linked to the subprime mortgage market, Chief Financial Officer Gary Crittenden said on a conference call with investors hosted by Deutsche Bank AG.
American International Group Inc. rose 4.9 percent to $33.07 for the biggest gain in the Dow average. The world’s biggest insurer was upgraded to “buy” by Citigroup Inc. analyst Joshua Shanker, who said investors have “irrationally” driven the company’s shares down.
Coventry tumbled 22 percent to $31.30. The managed-care provider said higher medical costs and increased patient claims would hurt second-quarter profit.
Health Insurers Tumble
UnitedHealth, the largest U.S. health insurer, dropped 7.7 percent to $27.89. WellPoint, the second-biggest, lost 5.2 percent to $49.28. Aetna Inc., the third-largest, declined 1.8 percent to $41.85. Health insurers in the S&P fell 6.4 percent as a group, their steepest tumble since March.
Huntsman Corp. plunged the most ever after buyout firm Apollo Management LP and its Hexion Specialty Chemicals Inc. unit sued to back out of an agreement to acquire the chemical maker for $6.54 billion. Huntsman dropped $8, or 38 percent, to $12.86, the most since it went public three years ago.