U.S. stocks gained for a second week, led by energy and financial companies, after oil climbed to a record and investors speculated that bond insurers will keep their credit ratings.
Exxon Mobil Corp. and Chevron Corp., the largest U.S. oil producers, led all 36 energy companies in the Standard & Poor's 500 Index higher after oil rose to $101.32 a barrel on Feb. 20. American International Group Inc., the world's largest insurer by assets, and Morgan Stanley, the second-biggest securities firm by market value, gained on a plan to save Ambac Financial Group Inc.'s AAA credit rating and avoid losses on $556 billion of securities it guarantees.
``The financial companies are at the very core of global infrastructure, and they must be stabilized before you see the economy moving forward,'' said Quincy Krosby, chief investment strategist at the Hartford in Hartford, Connecticut, which manages $330 billion. ``When financials lead a downturn, they've got to bring you out.''
The S&P 500 added 0.2 percent to 1,353.11 for the week. The Dow Jones Industrial Average gained 0.3 percent to 12,381.02. The Nasdaq Composite Index decreased 0.8 percent to 2,303.35.
243-Point Turnaround
Rescue talks for the bond insurers sparked a 243-point turnaround in the Dow average during the week's final hour, erasing losses for the holiday-shortened period. The gains overshadowed a drop in industrial shares, including General Electric Co., after the Federal Reserve Bank of Philadelphia's general economic index slumped to the lowest level in seven years. The measure dropped to minus 24, a reading that has always corresponded with a U.S. recession, according to data since 1968 compiled by Bespoke Investment Group LLC.
Exxon gained 2.1 percent to $87.17. Chevron added 2.2 percent to $85.42. Oil climbed 3.5 percent for the week on speculation interest rate cuts will bolster fuel consumption and after Turkish soldiers crossed into northern Iraq, the first major incursion in 11 years.
Ambac climbed 4.8 percent to $10.71. The bond insurer may announce an agreement early next week, according to a person familiar with the discussions. Banks may invest about $3 billion in the company, said the person, who declined to be named because no details have been set.
AAA Rating
A rescue that enabled Ambac to retain its AAA rating for the municipal and asset-backed securities guaranty units would help banks and municipal debt investors avoid losses on securities it guarantees. Banks stood to lose as much as $70 billion if the top-rated bond insurers, which include MBIA Inc. and FGIC Corp., lose their credit ratings, Oppenheimer & Co. analysts estimated.
Hewlett-Packard Co. posted its steepest weekly advance in 20 months, climbing 8.1 percent to $47.40 after the biggest maker of personal computers reported profit that topped analysts' estimates and raised its annual sales forecast on increasing demand overseas.
Telephone companies in the S&P 500 fell 6.2 percent, the most among 10 industry groups, after Verizon Communications Inc. set off a price war by announcing it will sell unlimited calls for a flat fee of $99.99 a month. AT&T matched it five hours later and Deutsche Telekom AG's T-Mobile USA Inc. followed. Verizon dropped 4.3 percent to $36.20 and AT&T slid 7.7 percent to $34.98. Deutsche Telekom's American depositary receipts fell 1 percent to $18.99.
S&P 500
Companies in the S&P 500 scheduled to report earnings next week include Home Depot Inc., the world's largest home- improvement chain, and Target Corp., the second-largest U.S. discount chain.
Intuit Inc. fell the most in the S&P 500, losing 11 percent to $27.05. The largest maker of tax-preparation software trimmed its annual profit forecast because of slowing sales growth to small companies and a higher tax rate.
Consumer spending in the U.S., which grew at the weakest rate in six months during December's holiday season, probably increased at that pace in January as income growth slowed and Americans struggled with a deepening housing slump, economists surveyed by Bloomberg expect reports this week will show.
Treasury two-year notes posted their first weekly drop this year as traders eliminated bets the Federal Reserve will cut the target lending rate by three-quarters of a percentage point next month. All bets are now for a quarter- to a half-percentage point reduction.
The decline ended a nine-week streak of gains, the longest stretch of advances since 1998. The difference between the two- year note's yield and the 10-year rate narrowed this week for the first time in eight weeks after the central bank stopped short of forecasting a recession.
Exxon Mobil Corp. and Chevron Corp., the largest U.S. oil producers, led all 36 energy companies in the Standard & Poor's 500 Index higher after oil rose to $101.32 a barrel on Feb. 20. American International Group Inc., the world's largest insurer by assets, and Morgan Stanley, the second-biggest securities firm by market value, gained on a plan to save Ambac Financial Group Inc.'s AAA credit rating and avoid losses on $556 billion of securities it guarantees.
``The financial companies are at the very core of global infrastructure, and they must be stabilized before you see the economy moving forward,'' said Quincy Krosby, chief investment strategist at the Hartford in Hartford, Connecticut, which manages $330 billion. ``When financials lead a downturn, they've got to bring you out.''
The S&P 500 added 0.2 percent to 1,353.11 for the week. The Dow Jones Industrial Average gained 0.3 percent to 12,381.02. The Nasdaq Composite Index decreased 0.8 percent to 2,303.35.
243-Point Turnaround
Rescue talks for the bond insurers sparked a 243-point turnaround in the Dow average during the week's final hour, erasing losses for the holiday-shortened period. The gains overshadowed a drop in industrial shares, including General Electric Co., after the Federal Reserve Bank of Philadelphia's general economic index slumped to the lowest level in seven years. The measure dropped to minus 24, a reading that has always corresponded with a U.S. recession, according to data since 1968 compiled by Bespoke Investment Group LLC.
Exxon gained 2.1 percent to $87.17. Chevron added 2.2 percent to $85.42. Oil climbed 3.5 percent for the week on speculation interest rate cuts will bolster fuel consumption and after Turkish soldiers crossed into northern Iraq, the first major incursion in 11 years.
Ambac climbed 4.8 percent to $10.71. The bond insurer may announce an agreement early next week, according to a person familiar with the discussions. Banks may invest about $3 billion in the company, said the person, who declined to be named because no details have been set.
AAA Rating
A rescue that enabled Ambac to retain its AAA rating for the municipal and asset-backed securities guaranty units would help banks and municipal debt investors avoid losses on securities it guarantees. Banks stood to lose as much as $70 billion if the top-rated bond insurers, which include MBIA Inc. and FGIC Corp., lose their credit ratings, Oppenheimer & Co. analysts estimated.
Hewlett-Packard Co. posted its steepest weekly advance in 20 months, climbing 8.1 percent to $47.40 after the biggest maker of personal computers reported profit that topped analysts' estimates and raised its annual sales forecast on increasing demand overseas.
Telephone companies in the S&P 500 fell 6.2 percent, the most among 10 industry groups, after Verizon Communications Inc. set off a price war by announcing it will sell unlimited calls for a flat fee of $99.99 a month. AT&T matched it five hours later and Deutsche Telekom AG's T-Mobile USA Inc. followed. Verizon dropped 4.3 percent to $36.20 and AT&T slid 7.7 percent to $34.98. Deutsche Telekom's American depositary receipts fell 1 percent to $18.99.
S&P 500
Companies in the S&P 500 scheduled to report earnings next week include Home Depot Inc., the world's largest home- improvement chain, and Target Corp., the second-largest U.S. discount chain.
Intuit Inc. fell the most in the S&P 500, losing 11 percent to $27.05. The largest maker of tax-preparation software trimmed its annual profit forecast because of slowing sales growth to small companies and a higher tax rate.
Consumer spending in the U.S., which grew at the weakest rate in six months during December's holiday season, probably increased at that pace in January as income growth slowed and Americans struggled with a deepening housing slump, economists surveyed by Bloomberg expect reports this week will show.
Treasury two-year notes posted their first weekly drop this year as traders eliminated bets the Federal Reserve will cut the target lending rate by three-quarters of a percentage point next month. All bets are now for a quarter- to a half-percentage point reduction.
The decline ended a nine-week streak of gains, the longest stretch of advances since 1998. The difference between the two- year note's yield and the 10-year rate narrowed this week for the first time in eight weeks after the central bank stopped short of forecasting a recession.
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