U.S. stocks rose for a second day after orders for durable goods unexpectedly advanced in July and analysts said new investments by Fannie Mae and Freddie Mac will boost their earnings.
Bank of America Corp. and American Express Co. each climbed more than 2 percent after the Commerce Department report bolstered expectations that the economy is recovering. Fannie Mae and Freddie Mac rallied more than 15 percent each after the largest U.S. mortgage finance companies also sold $3 billion in debt at yields which suggest they won't need a government bailout. Oil's advance of more than $2 a barrel pushed up 38 of 39 energy producers in the Standard & Poor's 500 Index.
The S&P 500 and Dow Jones Industrial Average both rose 0.8 percent, while the Nasdaq Composite Index increased 0.9 percent. Four stocks advanced for each that fell on the New York Stock Exchange.
“As long as businesses are optimistic, we have a good chance of pulling out of this weak period in the economy in fairly short order,” said Peter Jankovskis, who helps manage $1.5 billion at OakBrook Investments in Lisle, Ill. The durable goods data “was a very strong report, and the market has acted appropriately.”
Durable goods growth
The 1.3 percent gain in durable goods orders defied economist forecasts for an unchanged reading in July. Stock futures fell before the Commerce Department report as a third day of gains in oil spurred concern that crude's rebound from a more than 20 percent tumble since July will threaten profits at consumer, transportation and technology companies.
Trading on the NYSE was the slowest for a full session since December 2006, with about 820 million shares changing hands. Volume since the start of last week has been more than one-third lower than the year-to-date average.
Fannie Mae rose 15 percent and Freddie Mac 20 percent. The mortgage-finance companies may get the biggest profits on new investments since at least 1998. Both yesterday sold short-term debt at yields relative to benchmark rates that were higher than in sales earlier this month, yet below levels seen a year ago, data compiled by Bloomberg show.
Investors have been watching the debt sales for any “tell-tale” signs that the companies can't fund themselves, UBS AG analysts in New York wrote in a report. Fannie, which tumbled 37 percent last week on concern a government bailout will wipe out shareholders, has risen for five straight days for its longest streak of gains in a year.
“Once we get through this credit crisis and rebuild confidence, things should get better,” Kelli Hill, a portfolio manager at Ashfield Capital Partners in San Francisco, which manages $4 billion, said in an interview with Bloomberg Television. “There are still opportunities within the market.”
Health-care companies had the only decline among 10 S&P 500 industries, falling 0.1 percent. Pfizer and Bristol-Myers Squibb Co. dropped after saying their experimental blood thinner apixaban worked no better than an older pill in a study, causing them to delay seeking U.S. regulatory approval.
The S&P 500 is up 1.1 percent in August after falling in June and July. The benchmark index for U.S. equities has posted only two monthly gains since reaching a record in October and is down almost 13 percent this year.