u.s. stocks rise

U.S. Stocks Rise, Sending S&P 500 to Highest Close in 4 Years
Dec. 14 (Bloomberg) --

The Standard & Poor's 500 Index set a four-year high as a drop in import prices fueled speculation that the Federal Reserve may soon stop raising interest rates.

Honeywell International Inc. led the advance after saying 2006 earnings may rise as much as 30 percent. Apple Computer Inc. fell, holding back the Nasdaq Composite Index, after two analysts downgraded the shares because they were too expensive.

Prices for imported goods fell more than economists had forecast in November, according to a government report. The data arrived the day after Fed policy makers indicated rates are now high enough that they aren't spurring economic growth.

``It all leads to the idea that inflation isn't so bad,'' said Hans Olsen, who oversees $2 billion as chief investment officer at Bingham Legg Advisers LLC in Boston. ``That supplies some push for the market.''

The S&P 500 added 5.31, or 0.4 percent, to 1272.74, the highest close since June 2001. The Dow Jones Industrial Average increased 59.79, or 0.6 percent, to 10,883.51 still 48 points from its high for the quarter reached last month. The Nasdaq fell 2.41, or 0.1 percent, to 2262.59.

The S&P 500 is up 3.6 percent this quarter, the Dow average has risen 3 percent and the Nasdaq has gained 5.2 percent. The advances have been curbed by oil prices, which yesterday closed at the highest level since Nov. 3, and interest-rate increases.

Energy Prices

Stock indexes today were supported by a drop in energy prices. Crude oil for January delivery retreated 0.9 percent to $60.85 a barrel in New York today after the U.S. Energy Department reported an unexpected increase in inventories.

Federal Reserve policy makers yesterday raised their target rate to 4.25 percent, the 13th consecutive increase. The central bank dropped a reference to ``accommodation'' in its accompanying statement. That may signal members believe rates are closer to a so-called neutral rate that neither spurs nor restrains economic growth.

Today's import-price report indicated that inflationary pressures may be lessening.

November import prices fell 1.7 percent, the steepest drop since April 2003, after rising 0.3 percent the previous month, the Labor Department said. The decrease reflected declining costs of imported oil and other goods, after surges in the wake of Gulf Coast hurricanes. Prices were forecast to drop 0.5 percent, according to economists in a Bloomberg News survey.

Tomorrow, a government report is expected to show U.S. consumer prices last month slid by the most in almost two decades, adding further evidence that inflation is in check.

Honeywell

Honeywell, the world's largest maker of airport cockpit controls, added $1.62, or 4.5 percent, to $37.50 for the best performance in the Dow average. The company said earnings per share will increase to $2.35 to $2.50, including stock-option expenses, in 2006 as airlines replace and repair equipment. This year Honeywell expects to earn $1.93 to $1.95.

Shares of Boeing Co. advanced 86 cents to $71.45. The second-largest commercial aircraft maker beat rival Airbus SAS to win a 115-plane order valued at as much as $18 billion from Qantas Airways Ltd., Australia's biggest carrier.

``Corporations in the United States continue to generate good profits,'' said Abby Joseph Cohen, chief investment strategist and managing director at Goldman Sachs Group Inc. in New York. ``Stock prices are below where they might be based upon the fundamentals for 2005.''

Cohen expects the S&P 500 to reach 1400 by the end of 2006.

Almost eight stocks rose for every five that fell on the New York Stock Exchange. About 1.63 billion shares changed hands on the Big Board, 2.9 percent less than the three-month average.

Apple Falls

Shares of Apple, the maker of the iPod music player, dropped $2.97, or 4 percent, to $72.01 and was the biggest drag on the S&P 500 after two analysts said they are overvalued relative to future earnings.

Bear Stearns & Co. analyst Andrew Neff cut the stock's rating to ``peer perform'' from ``outperform.'' Keith Bachman, a Banc of America Securities analyst, cut Apple to ``neutral'' from ``buy,'' saying the stock's rally ``has left us less comfortable recommending putting new money to work.''

Since Nov. 14, the shares had jumped 22 percent through yesterday.

``The downgrades of Apple really take the wind out of the sails,'' said James Monaghan, head trader at AIG SunAmerica Asset Management in Jersey City, New Jersey. ``That was a stock with a lot of momentum.''