By Eric Martin
July 30 (Bloomberg) — U.S. stocks rallied for a second day as a private report showed employers unexpectedly added jobs in July and the Federal Reserve extended an emergency lending program to banks.
Wal-Mart Stores Inc. and Walt Disney Co. helped lead the advance as ADP Employer Services said payrolls grew by 9,000 this month. Bank of America Corp. and Fannie Mae led financial shares higher on the Fed’s lending program and the Securities and Exchange Commission’s extension of a ban on a type of short sales. Benchmark indexes pared gains as oil prices rose on an unexpected decline in gasoline inventories.
The Standard & Poor’s 500 Index added 14.54 points, or 1.2 percent, to 1,277.74 at 11:14 a.m. in New York, building on yesterday’s 2.3 percent advance. The Dow Jones Industrial Average increased 128.16, or 1.1 percent, to 11,525.72. The Nasdaq Composite Index gained 13.14 to 2,332.76. Two stocks rose for each that dropped on the New York Stock Exchange.
“The employment picture has held up much better than expected,” said Lawrence Creatura, who helps manage $2.7 billion at Clover Capital Management Inc. in Rochester, New York. “It’s very difficult for the economy to collapse if people still have jobs. For the stock market, it may mean that some sectors which were depressed in anticipation of the consumer weakening may be mispriced.”
The S&P 500 extended its rebound from an almost three-year low on July 15 to more than 5 percent as the employment report bolstered speculation that the job market will weather the economic slowdown. Economists surveyed by Bloomberg forecast the ADP report would show a decrease of 60,000 in jobs. The report, based on payroll data, also revised last month’s decline lower.
European and Asian shares climbed and the dollar rose to a one-month high against the euro.
Earnings have topped estimates at almost three-quarters of the S&P 500 companies that have reported second-quarter results so far even as profits slump 21 percent on average from a year earlier, according to data compiled by Bloomberg. As recently as July 3, analysts had forecast a drop of 11 percent in earnings.
Wal-Mart, the largest retailer in the world, rose $1 to $58.45. Disney, the biggest theme-park operator, climbed 58 cents to $31.50.
Freddie Mac gained 16 cents, or 1.9 percent, to $8.58 and Fannie Mae added 35 cents, or 3 percent, to $11.96 after the SEC extended until Aug. 12 an emergency limit on so-called naked short sales in shares of the mortgage-finance companies and 17 brokerages as it prepares broader rules to thwart stock manipulation.
The order aims to keep traders from driving down financial stocks to boost profits after Bear Stearns Cos. and IndyMac Bancorp Inc. collapsed amid rumors they were faltering.
The Fed extended two emergency lending programs until Jan. 30, 2009, “in light of continued fragile circumstances in financial markets,” the central bank said. The Primary Dealer Credit Facility for direct loans to securities firms and the Term Securities Lending Facility for loans of Treasuries, both begun in March, “would be withdrawn should the board determine that conditions in financial markets are no longer unusual and exigent,” the Fed said.
Financial stocks in the S&P 500 rallied 1.2 percent. American International Group Inc., the world’s largest insurer, gained 45 cents to $26.30. Bank of America jumped 2.6 percent to $33.04.
Moody’s Corp., the world’s second-largest credit-rating company, gained 1 percent to $36.52 after second-quarter profit before one-time items was 51 cents, topping the 47-cent average of seven analysts’ estimates in a Bloomberg survey.
MetLife Inc., the nation’s biggest life insurer, dropped $2.62 to $50.19. The company cut its full-year earnings forecast and said second-quarter net income fell to $946 million, or $1.26 a share, from $1.16 billion, or $1.48. Operating profit, which excludes investment losses, was $1.30 a share, missing the $1.51 average estimate of 19 analysts surveyed by Bloomberg.
Wyeth dropped $4.90 to $40.21 after its experimental Alzheimer’s drug was linked to a brain-swelling side effect in a test. The company’s drug, bapineuzumab, developed with Elan Corp., showed no benefit for the majority of Alzheimer’s patients.
Declining oil prices helped spark a 2.3 percent rally in U.S. stocks yesterday. Financial shares rose for the first time in four days, led by Bank of America Corp. and JPMorgan Chase & Co., as Merrill Lynch & Co.’s plans to sell $8.5 billion of stock and liquidate $30.6 billion of bonds bolstered speculation that Wall Street is overcoming failed subprime bets.
“I’m looking for good follow-through from financials,” said Robert Stimpson, a money manager at Oak Associates Ltd. in Akron, Ohio, which oversees $1.2 billion. “ We’ve seen a lot of big one-day moves that faltered. I would like to see continued strength in the sector” based on “more indications we’re closer to the end of the writedowns.”
The S&P 500 has declined 18 percent from an October record as the collapse of the U.S. subprime mortgage market forced financial institutions worldwide to report $476 billion in writedowns and credit losses since the beginning of 2007.
Financial industry profits, which analysts estimated would fall 60 percent, have plummeted 87 percent. Record oil prices drove earnings of ConocoPhillips and Occidental Petroleum Corp. to the highest in their histories. The energy group of the S&P 500 has posted a 15 percent gain in earnings so far.
Comcast, RF Micro
Comcast Corp. increased $1.19, or 6.2 percent, to $20.37 today. The largest U.S. cable-television operator said second- quarter profit rose 7.5 percent as the company attracted more customers to its telephone and high-speed Internet services.
RF Micro Devices Inc. gained 40 cents, or 14 percent, to $3.31. The maker of chips and radio systems for mobile phones reported second-quarter profit of 5 cents a share, meeting the average analyst estimate in a Bloomberg survey.
Cummins Inc. rose $7.47, or 11 percent, to $73.49. The maker of more than a third of North America’s heavy-duty truck engines said that second-quarter profit rose 37 percent on increased engine demand at home and generator sales overseas.