BloombergU.S. Stocks Extend Weekly Gain on Spending and Income...

Bloomberg


U.S. Stocks Extend Weekly Gain on Spending and Income Report
May 26 (Bloomberg) -- U.S. stocks rose, extending their first weekly advance in three weeks, as a government report that showed consumer spending matched economists' estimates reinforced optimism that inflation is in check.

The data eased concern that the Federal Reserve will continue its series of interest-rate increases. The market rallied yesterday after a report indicated the economy grew last quarter at a rate higher than first estimated, while lower than economists forecast.

``Inflation is eating into consumer spending, but it doesn't seem to be at a level that would be a major concern for the market right here,'' said Paul Mendelsohn, chief investment strategist at Windham Financial Services Inc. in Charlotte, Vermont. ``The Fed is looking for a reason to pause here if they can find one.''

General Motors Corp. advanced as Prudential Equity Group LLC recommended shares of the world's largest automaker. Financial shares climbed after Goldman Sachs Group Inc., Merrill Lynch & Co., and Charles Schwab Corp. were upgraded by analysts.

The Standard & Poor's 500 Index added 2.39, or 0.2 percent, to 1275.27 as of 9:55 a.m. in New York. The Dow Jones Industrial Average increased 12.97, or 0.1 percent, to 11,224.02. The Nasdaq Composite Index gained 4.51, or 0.2 percent, to 2202.75.

Trading was lighter than usual as some investors get a headstart on the holiday weekend. The market will be closed May 29 in observance of Memorial Day.

About 14 stocks rose for every five that fell on the New York Stock Exchange. Some 116 million shares changed hands on the Big Board, 54 percent less than the same time a week ago.

Weekly Advance

Stocks are heading for a weekly advance after a volatile five days in which the S&P 500 briefly erased its 2006 advance. The S&P 500 has added 0.7 percent, while the Dow average has climbed 0.9 percent. The Nasdaq has risen 0.5 percent.

The S&P 500 is still down about 4 percent from a five-year high on May 5 amid concern the Fed will keep raising rates, curbing economic and profit growth.

``Anytime the market is selling off, we are buying,'' said Ernie Ankrim, who helps manage $170 billion as chief investment strategist at Russell Investment Group in New York. ``At some point the market is going to recognize that the underlying profitability of the firms that make up the indexes have been really good and have just not been rewarded.''

April consumer spending rose 0.6 percent, matching economists estimates. For March, spending increased 0.5 percent, less than the 0.6 percent initially reported. Incomes added 0.5 percent, the same as the previous month. Economists expected a gain of 0.7 percent in a Bloomberg News survey.

PCE Index

The personal consumption expenditure index, minus food and energy, added 0.2 percent in April and was up 2.1 percent from the same month in 2005. The gauge, contained in the personal spending report, is the Fed's preferred measure of inflation.

The University of Michigan's final reading for its May consumer confidence index was 79.1, above the 79 initial reported. Economists expected 79.

GM rose 90 cents, or 3.2 percent, to $28.80 for the top gain in the Dow average and extending its weekly advance to 16 percent. Prudential analyst Michael Bruynesteyn raised his recommendation on the shares to ``overweight'' from ``neutral weight.'' The stock may be boosted by expectations of ``big'' sales increases for full-size sport-utility vehicles and reports that many U.S. union workers are accepting GM's buyout and early retirement offers, the analyst said.

Bank Stocks Upgraded

An index of financial companies rallied 1 percent for the second-biggest gain among two dozen groups in the S&P 500.

Goldman, the world's biggest securities firm by market value, added $4.51 to $151.83. UBS AG upgraded its recommendation on the stock to ``buy'' from ``neutral,'' citing optimism about the company's earnings outlook.

Merrill jumped $1.51 to $72.99. Wachovia Securities analyst Douglas Sipkin upgraded the world's second-largest securities firm to ``outperform'' from ``market perform,'' saying the company will benefit from efforts to focus more on increasing profitability rather than boosting market share.

Charles Schwab, the No. 2 U.S. discount broker, gained 51 cents to $16.97. Banc of America raised its recommendation on the stock to ``buy'' from ``neutral.''

Juniper

Juniper Networks Inc. climbed 54 cents to $15.83. Standard & Poor's said it would add the No. 2 maker of equipment that directs Internet traffic to the S&P 500. The company will replace Albertson's Inc., a grocery chain being sold to Supervalu Inc. in the S&P 500 at a date to be determined.

Managers of funds that mimic the S&P 500 may purchase Juniper's shares. Funds with more than $4 trillion in assets track the S&P 500, including $1.1 trillion in index funds, according to S&P.

Las Vegas Sands Corp. jumped $5.33 to $69. The casino company owned by billionaire Sheldon Adelson beat three rival offers to build a Singapore resort, with a bid valued at more than S$5 billion ($3.2 billion). The owner of the Venetian in Las Vegas wants to expand in Asia to tap economic growth.

Celgene Corp. rose $1.96 to $42.40. The drug developer said it won conditional U.S. clearance to sell its leprosy medicine to treat the blood cancer multiple myeloma.



To contact the reporter on this story:
Daniel Hauck in New York at [email protected].

Last Updated: May 26, 2006 09:56 EDT