US stocks rose after the economy contracted less than forecast in the third quarter and investors speculated global interest-rate cuts will stem a further slump.
Intel Corp., Home Depot Inc. and Hewlett-Packard Co. climbed more than 3 per cent after the government said the economy shrunk 0.3 per cent last quarter. Colgate-Palmolive Co. rose 6.7 per cent on better-than-estimated earnings. The advance added to a global rally after Hong Kong joined the US in lowering borrowing costs and the Federal Reserve provided $120 billion to spur lending in emerging markets.
The Standard & Poor’s 500 Index gained 13.17, or 1.4 percent, to 943.26 at 12:36 p.m. in New York. The Dow Jones Industrial Average added 94.55, or 1.1 per cent, to 9,085.51. The Nasdaq Composite Index increased 18.66, or 1.1 per cent, to 1,675.85. Three stocks rose for each that fell on the New York Stock Exchange.
“There weren’t any nasty surprises,'' in the economic data, said Jeffrey Davis, chief investment officer at Lee Munder Capital Group in Boston, which manages $4 billion. “GDP was better than expected. The real economy didn't fall as dramatically as the financial markets. The central bank cuts are bringing a little bit of confidence.”
The S&P 500 advanced as much as 3.6 per cent after the decrease in GDP was less than the 0.5 per cent forecast by economists in a Bloomberg survey. The benchmark for U.S. equities extended its gain this week to 7.6 per cent.
Russia's benchmark index rallied 19 percent, South Korea's climbed 12 percent and the Czech Republic jumped 9.2 percent after the Fed provided $120 billion to spur lending in emerging markets. Hong Kong's Hang Seng Index surged 13 per cent and Taiwan's Taiex jumped 6.3 percent after their central banks lowered rates. The gains in developing nations pushed the MSCI Emerging Markets Index out of a bear market following a three-day jump of more than 20 per cent.
The S&P 500 is still down 35 per cent in 2008 and more than 18 per cent in October. The Fed cut its benchmark rate by 0.5 percentage point to 1 percent yesterday and has reduced it from 5.25 percent in the past 13 months, while also creating lending programs to channel more than $1 trillion into the financial system in an effort to stem a recession that threatens to worsen corporate profits.
Earnings for the 309 companies in the S&P 500 that have reported third-quarter results have dropped an average of 12 percent from a year earlier, according to Bloomberg data. Still, 206 of the companies have beaten analyst estimates, compared with 97 that missed.
Colgate increased $3.66 to $63.66. The world's largest maker of toothpaste said third-quarter profit rose to $499.9 million from $420.1 million a year earlier, driven by demand in Latin America and higher prices. Sales jumped 13 percent to $4 billion, matching the average analyst estimate.
Staples Inc. rose $2.01, or 13 per cent, to $17.95. The biggest U.S. office-supplies retailer forecast third-quarter profit that exceeds some analysts' estimates and reiterated its long-term earnings projections.
American Express Co. rallied 80 cents, or 3.2 percent, to $26.01. The largest U.S. credit-card company by purchases said it will slash 7,000 jobs and freeze hiring and management raises to save as much as $1.8 billion next year.
Exxon Mobil Corp. slumped as crude futures fell more than 4 percent. UBS AG cut its forecast for oil prices next year by 43 percent because the global economic slowdown may reduce demand.
Exxon declined 3.5 per cent to $72.01 even after reporting third-quarter profit before one-time items that was the highest ever for a US corporation. The world's biggest energy company netted $14.8 billion, up 58 per cent from a year earlier.
Hartford Financial Services Group Inc., the insurer that got an investment from Germany's Allianz SE this month, plunged $8.06, or 41 per cent, to $11.80 after reporting its first unprofitable quarter in five years. The shares were downgraded to “neutral” from “buy” at Merrill Lynch & Co., which said the company may need to raise capital.
Avon Products Inc. sank $6.59, or 25 per cent, to $20.08. The world's largest door-to-door cosmetics seller cut its profit- margin forecast because of a slowdown in North American sales and the strengthening of the US dollar.
