U.S. Stocks Increase a Day After the Biggest S&P 500 Advance Since July

Bloomberg — September 2, 2010 — U.S. stocks rose, extending yesterday’s gain that marked the Standard & Poor’s 500 Index’s biggest rally in almost two months, as initial jobless claims fell and pending home sales unexpectedly increased.

Nordstrom Inc., J.C. Penney Co. and Kohl’s Corp. advanced at least 1.5 percent after reporting August same-store sales that beat analyst estimates. Burger King Holdings Inc. gained 24 percent after affiliates of 3G Capital offered $4 billion for the company. Mariner Energy Inc. sank 4.2 percent after the Coast Guard reported a blast at its Gulf of Mexico rig.

The S&P 500 rose 0.4 percent to 1,085.01 as of 12:28 p.m. in New York. The Dow Jones Industrial Average climbed 3.75 points, or less than 0.1 percent, to 10,273.22.

“Today’s numbers are not going to hurt the market,” said Timothy Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York, which manages $2 billion. “The more we see the economic data stabilize, and hopefully in time improve, the more upside we see to the market. The payroll numbers tomorrow are going to be critical.”

Stocks rebounded yesterday from the biggest August plunge in nine years, with the S&P 500 surging 3 percent, as faster- than-estimated growth in manufacturing tempered concern that the global economy will slow as governments withdraw stimulus measures.

The S&P 500 remains 11 percent below this year’s highest level in April through yesterday amid concern that a slowdown in the pace of economic recovery at home and in China is harming the profitability of its companies.

Jobless Claims

Initial jobless claims fell by 6,000 to 472,000 in the week ended Aug. 28, in line with the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. Applications exceeded the 463,000 average so far this year.

The index of pending home resales rose 5.2 percent after a revised 2.8 percent drop the prior month, figures from the National Association of Realtors showed. A 1 percent decline was projected for July, according to the median forecast in a Bloomberg News survey of economists.

Homebuilders and home-improvement retailers advanced after the industry report. D.R. Horton Inc., the second-largest U.S. homebuilder by revenue, rose 3 percent to $11.03. Home Depot Inc., the largest home improvement retailer, gained 2.2 percent to $29.30. Lowe’s Cos., the second largest, advanced 3.8 percent to $22.04.

Factory Orders

Orders placed with U.S. factories rose less than forecast in July. The 0.1 percent increase in bookings compared with a 0.2 percent gain projected by the median forecast of economists in a Bloomberg News survey and followed a revised 0.6 percent decline in June, figures from the Commerce Department showed today in Washington. Orders for machinery and computers dropped.

The biggest rally in almost two months in the U.S. stock market yesterday was missing the hallmarks of a move that’s likely to last, said Jeffrey deGraaf, the top-ranked technical analyst.

The market’s trend turned negative in July and remains so in September, historically the worst month for stocks, deGraaf said in an interview. Equities aren’t “oversold,” and while investor sentiment has deteriorated, it hasn’t reached a pessimistic extreme, he said.

“It’s noise,” deGraaf said of the advance yesterday. “I would be more encouraged if volumes were heavier, if sentiment had reached what I thought was a capitulative extreme. Admittedly it’s choppy, but I don’t think it’s for real.”

VIX Could Fall

The benchmark for U.S. stock options may fall below 20 for the first time in four months even after a “lackluster” report tomorrow that may show that the labor market is “recovering sluggishly,” MKM Partners LP said.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, is likely to drop below its 20.4 average from the past two decades, Stamford, Connecticut-based options strategist Jim Strugger wrote in a note to clients today. The gauge has fallen by almost half since this year’s peak in May.

Retailers helped shares of consumer discretionary companies climb the most of 10 industry groups in the S&P 500 after August same-store sales rose 3.5 percent, according to Retail Metrics Inc. in an e-mailed statement. The group had forecast a 2.8 percent gain.

Nordstrom Inc. advanced 6.2 percent to $32.20, the most in the S&P 500. The U.S. department-store chain with more than 100 namesake locations said August comparable sales rose 6.3 percent, beating analyst estimates for a 5.5 percent growth.

J.C. Penney Rises

J.C. Penney Co. rose 2.5 percent to $21.27. The third- biggest U.S. department-store chain said August same-store sales increased 2.3 percent, compared with growth of 1.6 percent in an analyst survey.

Kohl’s Corp. gained 1.5 percent to $49.10. The fourth- largest U.S. department-store chain said August same-store sales rose 4.5 percent, compared with growth of 3.2 percent predicted by analysts.

Burger King surged 24 percent to $23.42 after it agreed to be acquired by 3G Capital in a deal valued at $4 billion including debt, giving the New York investment firm control over the second-largest U.S. hamburger chain. The $24-a-share price is 46 percent more than Burger King’s $16.45 close on Aug. 31, before reports of a deal surfaced.

Wendy’s/Arby’s Group Inc., the third-largest U.S. fast-food chain, rose 6 percent to $4.37.

Forest Laboratories Gains

Forest Laboratories Inc. gained 5 percent to $29.04. The drugmaker’s experimental antibiotic works as a treatment for pneumonia and skin infections, according to U.S. regulators weighing whether the drug should be cleared for sale.

Abercrombie & Fitch Co. fell 5 percent to $34.77, the most in the S&P 500. While same store sales rose in August, promotions probably contributed to the gain, and sales growth is decelerating, Howard Tubin, an analyst at RBC Capital Markets, said in a report.

Collective Brands Inc. slumped 6.1 percent to $12.92. The owner of Payless ShoeSource stores reported second-quarter earnings that fell short of the average projection of analysts surveyed by Bloomberg. Revenue also missed estimates.

Mariner Energy Inc. sank 4.2 percent to $22.37 after the Coast Guard said the company’s platform in the Gulf of Mexico was struck by an explosion, U.S. Coast Guard Petty Officer Casey Ranel said in a telephone interview.

Apache Corp., the energy company that last month agreed to buy $7 billion in assets of BP Plc, whose Gulf of Mexico well caused the biggest U.S. offshore oil spill, fell 2.2 percent to $90.44.