U.S. stocks rose for the third straight day as speculation Washington Mutual Inc. will get a $5 billion investment overshadowed concern that slowing economic growth will hurt technology company earnings.
Washington Mutual rallied the most in 25 years as the largest U.S. savings and loan negotiated with private-equity firms for a cash infusion. Exxon Mobil Corp. gained as crude oil jumped above $109 a barrel. Speculation that memory chip demand will weaken and Alcoa Inc. would report profit below forecasts pared a 124-point gain in the Dow Jones Industrial Average.
The Standard & Poor's 500 Index climbed 2.14, or 0.2 percent, to 1,372.54. The Dow average added 3.01 to 12,612.43. The Nasdaq Composite Index slipped 6.15, or 0.3 percent, to 2,364.83. Almost 10 stocks rose for every nine that fell on the New York Stock Exchange
``You're starting to see a loosening up of liquidity,'' said Simeon Hyman, an equity strategist at Lehman Brothers Private Investment Management, whose New York-based parent company manages $277 billion. ``It's a broader array of players who are now stepping up and putting capital to work.''
Financial shares contributed the most to the S&P 500's gain as Washington Mutual's negotiations bolstered expectations that banks will weather more than $232 billion in global credit losses stemming from the collapse of the subprime mortgage market. The S&P 500 has rebounded 7.8 percent from an almost 19-month low on March 10.
Shares in Asia rose to a five-week high and all 18 western European markets advanced.
Washington Mutual Rallies
Washington Mutual, which had lost 74 percent of its market value in the past 12 months before today, gained $2.98, or 29 percent, to $13.15. Negotiations with a group led by TPG Inc. are at an advanced stage, according to a person familiar with the discussions, who declined to be identified because an agreement hasn't yet been reached. Washington Mutual needs the funds after reporting more than $3 billion of home-mortgage writedowns and loan losses.
TPG spokesman Owen Blicksilver and Washington Mutual's Derek Aney declined to comment.
Financial shares also advanced after Merrill Lynch & Co., the third-largest securities firm, raised European banks to ``neutral,'' saying credit markets are ``past their worst'' and banks have acknowledged the extent of the crisis.
Citigroup, the biggest U.S. bank, gained 52 cents to $24.60. Bank of America Corp., the second-largest, added 9 cents to $39.50.
`Loosening Up'
At least 14 banks and securities firms have sought cash from outside investors in the past year after losses and asset writedowns sparked by the collapse of the U.S. subprime mortgage market.
Alcoa Inc., the world's third-largest aluminum producer, fell $1.56, or 4 percent, to $37.44 on speculation the company's first-quarter earnings would trail analysts' estimates. After the close of trading, Alcoa posted profit, excluding some items, of 44 cents a share, less than the 50-cent average estimate of 14 projections compiled by Bloomberg. The world's third-largest aluminum company said higher energy costs and a weaker dollar caused profit to tumble 54 percent.
Alcoa, the first company in the Dow average to post results, typically kicks off the so-called earnings season.
Earnings Season
Earnings at S&P 500 companies probably fell an average of 11.3 percent from a year earlier in the first quarter, according to analyst estimates compiled by Bloomberg. That would be the third consecutive quarterly decline, the longest streak in six years.
Exxon added 18 cents to $88.92 and Chevron Corp., the second-biggest, gained 22 cents to $88.27. Crude oil rose more than $2 a barrel and gasoline climbed to a record as investors looking for an inflation hedge and higher returns flocked to commodity markets.
The S&P 500 is valued at 13.8 times estimated earnings, the least compared with reported profits since 1990, according to Bloomberg and S&P data.
``Most of today's current prices are discounting disaster,'' Douglas Ciocca, a money manager at Renaissance Financial Corp. in Leawood, Kansas, which manages $1.7 billion, said in an interview with Bloomberg Radio. ``Anything short of that is somewhat encouraging for the market.''
Stocks pared their gains after U.S. Treasury Secretary Henry Paulson said at a speech in Miami that there is ``no doubt the economy has slowed down dramatically'' and risks remain in housing and capital markets.
Retailers Slump
A gauge of retailers fell the most among 24 industries in the S&P 500 after oil's rally. Dillard's Inc., the Arkansas-based department-store chain, dropped $1.44, or 6.5 percent, to $20.59, the second-steepest decline in the S&P 500. Family Dollar Stores Inc., the discount chain featuring goods for less than $1, lost 62 cents, or 3 percent, to $19.76.
Tesoro Corp. had the steepest fall in the S&P 500, dropping $2.06, or 6.6 percent, to $29.19. Credit Suisse analyst Mark Flannery lowered his rating on the largest refiner in the Western U.S. to ``neutral'' from ``outperform.'' The change reflects ``the challenging refining environment expected to persist in 2008'' because of record crude oil prices, weak gasoline demand, and the introduction of ethanol to new regional markets, Flannery wrote.
Broadcom Corp., the maker of chips for mobile-phone manufacturers such as Nokia Oyj, dropped 73 cents, or 3.4 percent, to $20.68 after iSuppli said sales for the industry will rise less than previously forecast this year as consumer spending slows.
U.S. Steel, G.M.
U.S. Steel Corp. gained $3.02 to $143.72 after being upgraded to ``overweight'' from ``equal-weight'' at Morgan Stanley, which said increasing steel prices will boost earnings. The brokerage also rated Steel Dynamics Inc., the fourth-largest U.S.-based steel producer by market value, as ``overweight'' in new coverage, while downgrading Nucor Corp. to ``equal-weight'' from ``overweight.'' Steel Dynamics rose $1.45 to $37.38. Nucor added 74 cents to $71.28.
General Motors Corp., the biggest U.S. automaker, had the second-steepest gain in the Dow average on speculation a supplier's strike may end. Ford Motor Co., GM's smaller rival, advanced after Barron's said the stock may double. GM added 43 cents to $21.01 and Ford rose 24 cents to $6.73.
Apple, Yahoo
Apple Inc. added $2.81 to $155.89. The maker of the iPod media player was raised to ``overweight'' from ``market weight'' at Thomas Weisel Partners. The shares were also rated ``overweight'' in new coverage by Atlantic Equities LLP.
Yahoo! Inc., the Internet company that snubbed a $44.6 billion takeover bid from Microsoft Corp., fell 66 cents to $27.70 after the world's largest software maker threatened to cut its bid if directors fail to give in soon.
If Yahoo's directors refuse to negotiate a deal within three weeks, Microsoft plans to nominate a board slate and take its case to investors, Chief Executive Officer Steve Ballmer said April 5 in a statement. He suggested the deal's value might decline if Microsoft has to take those steps. Microsoft was unchanged at $29.16.
The Russell 2000 Index, a benchmark for companies with a median market value 95 percent smaller than companies in the S&P 500, fell 0.2 percent to 712.68. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, gained 0.2 percent to 13,845.37. Based on its advance, the value of stocks increased by $27 billion.
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