March 15 (Bloomberg) -- U.S. stocks erased losses in the final hour as financial shares reversed declines, while consumer companies rallied on an analyst upgrade of Wal-Mart Stores Inc. and PepsiCo Inc.’s plan to return more money to investors.
American International Group Inc. erased a 2.7 percent slide after investor Bruce Berkowitz said he bought a stake in the bailed-out insurer. Financial shares in the Standard & Poor’s 500 Index recovered most of a 1.1 percent slide after Senator Christopher Dodd outlined a plan to overhaul banking rules. Wal-Mart rallied 2.8 percent on Citigroup Inc.’s recommendation to buy the shares, while PepsiCo gained 1.6 percent on plans to boost its dividend and buy back shares.
The S&P 500 increased 0.1 percent to 1,150.51 at 4:08 p.m. in New York after earlier sliding as much as 0.7 percent. The Dow Jones Industrial Average advanced 17.46 points, or 0.2 percent, to 10,642.15.
“We did get some clarity on financial regulation, so the market’s bouncing around and back up at the end,” said Walter Todd, who helps manage $775 million of assets at Greenwood Capital Associates in South Carolina. “The fact that we did get an outline of what’s going to be included in this type of bill, I’m sure some people look at that and say, ‘Well, at least I know what I’m dealing with.’”
The SPDR S&P 500 ETF Trust, an exchange-traded fund linked to the benchmark index for U.S. stocks, rallied for a 12th straight day, the longest winning streak since September 1995. The ETF rose less than 0.1 percent to $115.49 and has advanced 4.4 percent since Feb. 25.
Small Caps Slip
The S&P 600 SmallCap Index slipped 0.2 percent, ending a streak of 10 days in which it rose, as declines in the smallest U.S. stocks pushed the number of falling shares above rising ones in New York. The streak through the end of last week was the small-cap gauge’s longest in more than six years.
Earlier losses in equities were limited by reports showing an unexpected increase in industrial production and an eighth straight month of growth in New York manufacturing. Investors area also awaiting the Federal Reserve’s statement on interest rates and the economic outlook tomorrow.
“With the Fed meeting tomorrow, we’re going to continue to bounce around this very important technical level of 1,150,” said Greenwood Capital’s Todd.
The rally that lifted the S&P 500 by 8.9 percent since Feb. 8 was led by the same industries as the advance that started a year ago. Financial companies have gained 14 percent over the last five weeks and 149 percent since the index’s 12-year low in March 2009 for the biggest increase over both periods. Industrial and consumer shares were second and third, gaining 12 percent in the latest advance after doubling since March 2009.
AIG Gains
AIG rose 0.3 percent to $34.32 and jumped as much as 6.3 percent after Berkowitz said he bought “significant” stakes in the company’s shares, convertible debt and bonds. Berkowitz is the head of Fairholme Capital Management who was named Morningstar Inc.’s domestic stock mutual fund manager of the decade.
“Some improvement in AIG may be a factor in the move,” said Alan Gayle, a money manager at RidgeWorth Investments in Richmond, Virginia, which oversees $63 billion. “I would still say investors have been somewhat cautious today.
Wells Fargo & Co., Bank of New York Mellon Corp. and U.S. Bancorp also reversed earlier declines to gain at least 0.7 percent.
Dodd’s legislation includes a version of the Volcker Rule to require regulators to ban proprietary trading, investment in and sponsorship of hedge funds and private equity funds and to limit relationships with the funds. The plan would also empower the Federal Reserve to break up large firms that pose a “grave threat” to U.S. economic stability.
‘No Big Surprises’
“There’s no big surprises in the new financial proposals being rehatched,” said Matthew McCormick, a banking-industry analyst and portfolio manager at Bahl & Gaynor Inc. in Cincinnati, which oversees $2.8 billion. “The perception is that the changes will be less onerous than expected. They seem to be making some compromises.”
Wal-Mart led gains in the Dow, adding 2.8 percent to $55.42 as the stock was raised to “buy” from “hold” at Citigroup, which said the retailer is set to win market share with price cuts.
PepsiCo advanced 1.6 percent to $66.15, the fifth straight day of gains. The world’s second-largest soda maker said its directors approved an increase in the annual dividend. Directors also authorized the repurchase of as much as $15 billion of common stock through June 2013.
Beazer Upgraded
Beazer Homes USA Inc., an Atlanta-based builder of entry- level homes, was rated a new “buy” at
Citigroup, which said there is “considerable upside” for the stock compared with its valuation. The shares rose 4 percent to $4.73.
St. Jude Medical Inc. rose the most in the S&P 500, gaining 8.2 percent to $40.56. The medical-instruments company, along with larger rival Medtronic Inc., may benefit from Boston Scientific Corp.’s suspension of cardiac defibrillator sales, according to Sanford C. Bernstein & Co. Boston Scientific had to halt sales of its heart-rhythm devices because of a documentation error in regulatory filings.
Medtronic rallied 4.3 percent to $45.81. Boston Scientific lost the most in the S&P 500, falling 13 percent to $6.80.
Chordiant Software Inc., the maker of customer-relationship programs, rose the most in the Russell 2000 Index after Pegasystems Inc. agreed to acquire it for $5 a share. The stock surged 31 percent to $4.99, the most since 2003.
Earlier Declines
Earlier declines in equities came amid concern China will take steps to restrain economic growth to combat inflation.
Exxon Mobil Corp. lost 0.8 percent to pace declines in 38 of 40 energy companies in the S&P 500 as oil dropped 1.8 percent to $79.80 in New York.
U.S. lawmakers and economists say the China’s reluctance to let its currency appreciate is threatening global competitiveness at a time when Premier Wen Jiabao also is taking steps to rein in growth in the world’s third-largest economy.
Wen rebuffed calls yesterday for a stronger yuan, while Morgan Stanley said it expects increases in bank-reserve ratio requirements and higher interest rates as early as April.
Google Inc. tumbled 2.8 percent to $563.18, while Baidu Inc. gained 4.8 percent to $576.84, marking the first time Baidu’s stock has topped Google’s. Google advertisers in China are being advised to switch to rivals such as Baidu as speculation grows the owner of the most popular Internet search engine will shut its Web site in the country. China’s government last week said Google’s plan to end censorship at the Google.cn site was “irresponsible.”
‘Turn Their Back’
“It’s really pretty remarkable that Google has stated they’re going to turn their back on the largest single growth- market in the Internet,” said Robert Lutts, who manages $450 million as president of Cabot Money Management in Salem, Massachusetts, and said he owns both stocks. “That’s really a boost to Baidu and a short-term negative for Google.” MGM Mirage lost 3.6 percent to $11.38 as the casino operator and Dubai
World said the primary general contractor for their Las Vegas joint venture CityCenter intends to file mechanics’ liens claiming about $492 million.
European shares slipped today, with the Stoxx Europe 600 Index dropping 0.7 percent, as the region’s finance ministers plan work on still-secret plans to help Greece overcome its debt crisis today, while counting on the country’s belt-tightening steps to make a bailout unnecessary.
Government Debt Concern
The governments of the U.S. and the U.K. must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, Pierre Cailleteau, managing director of sovereign risk at Moody’s in London, said in a telephone interview.
Under the ratings company’s baseline scenario the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, according to Moody’s.
“The focus now is going to come back to the U.S. and what our debt is, and our companies, and how they performed for the first quarter,” said Jason Cooper, who manages $2.5 billion at 1st Source Investment
Advisors in South Bend, Indiana. “I still have some hesitancy to put money fully back into the market.”
--With assistance by Jeff Kearns and Craig Trudell in New York. Editors: Michael P. Regan, Nick Baker.To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.
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