U.S. stocks rose for a fifth week, capping the steepest rally since 1933, as Wells Fargo & Co.’s higher-than-estimated earnings and speculation banks will pass government stress tests spurred optimism that the industry’s slump is ending.
Bank of America Corp., American Express Co. and JPMorgan Chase & Co. helped drive a gauge of 80 financial companies in the Standard & Poor’s 500 Index to a 9.4 percent advance. Wells Fargo surged 20 percent after reporting record first-quarter profit. Lincoln National Corp. and Principal Financial Group Inc. jumped at least 37 percent as the Treasury considered bailouts for life insurers.
“This was a really, really positive start to the earnings season,” Hugh Johnson, who oversees $750 million as chairman of Johnson Illington Advisors in Albany, New York, told Bloomberg Television. “Banks are not going to be forced to take the kind of write-offs they had to take in prior quarters.”
The S&P 500 gained 1.7 percent to 856.56. It has soared 27 percent since March 9, the most in 23 days since the Great Depression, according to Howard Silverblatt, an analyst at S&P. The Dow Jones Industrial Average added 0.8 percent to 8,083.38 this week. U.S. exchanges are closed today for Good Friday. The S&P 500 has rebounded off the 12-year low reached a month ago as Citigroup Inc., Bank of America and JPMorgan said they made money at the start of 2009. Treasury Secretary Timothy Geithner spurred a 7.1 percent rally, the fourth-biggest gain since the 1930s, on March 23 after announcing a plan aimed at financing as much as $1 trillion in purchases of illiquid real- estate assets from banks. The index is now down 5.2 percent year to date after plunging 25 percent as of March 9.
Wells Fargo jumped 20 percent to $19.61. Net income rose about 50 percent from $2 billion a year earlier. Per-share profit equaled about 55 cents, more than double the average estimate of analysts surveyed by Bloomberg. The acquisition of Wachovia Corp., whose overdue home loans helped cut Wells Fargo’s stock price in half this year, is exceeding expectations, the company said.
Bank Stress Test
Citigroup gained 6.7 percent to $3.04, JPMorgan climbed 12 percent to $32.75, American Express rose 23 percent to $18.83 and Bank of America advanced 26 percent to $9.55. The New York Times said all 19 banks examined by the government will pass a review to determine their viability should the recession deepen.
The S&P 500 Banks Index jumped 25 percent yesterday, the most since its creation in 1989, following Wells Fargo’s report.
Textron Inc. gained the most in the S&P 500, soaring 83 percent to $13.56 on speculation it will be acquired. Kuwait’s Al-Watan newspaper reported a United Arab Emirates group is preparing to buy the maker of Cessna aircraft and Bell helicopters for $21 a share.
Bed Bath & Beyond Inc. rallied 13 percent to $31.09 after the largest U.S. home-furnishings retailer said fourth-quarter profit beat the average analyst projection by 26 percent.
Profits at S&P 500 companies probably fell 38 percent on average in the first quarter, according to analysts’ estimates compiled by Bloomberg. The stretch of quarterly declines is the longest since at least the Great Depression, data compiled by S&P and Bloomberg show.
Reports next week will probably show sales at retailers rose in March as tax refunds put more money in consumers’ pockets and car dealers boosted incentives to clear unwanted stockpiles, according to economists surveyed by Bloomberg. Data may also show factory output kept slumping last month and inflation cooled.
Citigroup, General Electric Co., Goldman Sachs Group Inc., Google Inc., Intel Corp. and JPMorgan are among 31 companies scheduled to announce quarterly results.
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