U.S. Stocks Rise, S&P 500 Posts Back-to-Back Gains; GM Rallies

By Elizabeth Stanton

Dec. 26 (Bloomberg) -- U.S. stocks rose, giving the Standard & Poor’s 500 Index its first back-to-back gains in three weeks, after GMAC LLC’s conversion to a bank spurred a rally in General Motors Corp. and oil’s increase sent Exxon Mobil Corp. higher.

GM jumped 13 percent and Ford Motor Co. climbed 8.5 percent. The Federal Reserve’s approval of GMAC’s shift eased the threat that the automobile lender, which provides financing to GM dealers, will default. Exxon advanced after oil surged 6.7 percent to $37.71 a barrel. Macy’s Inc. lost 2.5 percent on data from SpendingPulse that suggested holiday-shopping sales dropped the most in four decades.

“The taxpayers are bailing out another financial company,” Ralph Shive, the South Bend, Indiana-based manager of the $800 million Wasatch 1st Source Income Equity Fund, said of GMAC’s conversion. “In the long run it may come back to haunt us, but in the short run it’s being viewed as a positive.”

The S&P 500 added 0.5 percent to 872.80. The Dow Jones Industrial Average climbed 47.07 points, or 0.6 percent, to 8,515.55. The Russell 2000 Index of small companies rose 1.3 percent to 476.77.

Fewer than 4.3 billion shares traded in the U.S., or 58 percent less than the three-month average. Almost 3.64 billion shares changed hands on Dec. 24, the least since Dec. 26, 2003, as trading on the New York Stock Exchange and Nasdaq Stock Market ended three hours early before the Christmas holiday.

The MSCI Asia Pacific Index rose 0.3 percent today on speculation takeovers and higher memory-chip prices will help the technology industry overcome the economic slowdown. Markets were closed in western Europe, Canada, Australia, Hong Kong, New Zealand and the Philippines, while yesterday and today were Japan’s two slowest full days of trading in the past five years.

Economic Reports

The S&P 500 fell 1.7 percent during the holiday-shortened week, extending its 2008 slide to 41 percent as home prices plunged, the government confirmed the economy contracted by the most since 2001 last quarter and the outlook for corporate earnings deteriorated.

GM advanced 13 percent to $3.66 for the biggest gain in the Dow average and the third-largest in the S&P 500. The Fed used emergency powers to grant GMAC’s bank conversion, citing turmoil in financial markets and the potential impact on GM as the biggest U.S. automaker taps emergency federal loans to stay in business.

Ford Motor Co. added 8.5 percent to $2.29.

GMAC’s shift to a bank may help prevent a default that threatened to dry up credit for GM dealers who used the company to finance about three-quarters of their inventory. GMAC also handled loans for about 35 percent of GM’s 2007 retail buyers.

Oil Production Cuts

Exxon, the biggest U.S. energy company, advanced 1.9 percent to $77.19 and contributed most to the S&P 500’s gain. Crude oil futures rose the most in two weeks after the United Arab Emirates said it would reduce output to comply with OPEC’s supply curbs.

Macy’s, the second-largest U.S. department-store company, fell 2.5 percent to $8.60. Nordstrom Inc. lost 1.2 percent to $11.91.

Discounts of 70 percent or more by Macy’s, AnnTaylor Stores Inc. and other retailers failed to prevent a spending drop of as much as 4 percent during the final two months of the year, according to data from SpendingPulse. Including fuel, sales tumbled as much as 8 percent.

The SpendingPulse data follow forecasts of falling sales from industry groups. Sales at stores open at least a year may drop as much as 2 percent in November and December, the International Council of Shopping Centers said on Dec. 23, the worst drop since at least 1969.

‘Best Ever’

Amazon.com Inc. rose 0.7 percent to $51.78. The world’s largest Internet retailer said this was its “best ever” holiday season, with a record number of orders on Dec. 15. Amazon didn’t provide specific profit or revenue data.

The U.S. stock market historically performs better-than- average during the Christmas week, according to Bespoke Investment Group LLC. The Dow average has risen an average 0.7 percent during the holiday season, compared with a 0.1 percent advance for all 4-day periods, data since 1900 from the Harrison, New York-based research firm show.

Jones Apparel Group Inc. surged 44 percent, the most since it began trading in 1991, to $5.62. The maker of Jones New York clothing and Nine West shoes reduced its credit lines and got more flexible lending terms from bankers.

In Asia, AU Optronics Corp., Taiwan’s largest liquid- crystal-display maker, climbed 2.5 percent after saying it was open to a merger. Hynix Semiconductor Inc., the world’s second- largest maker of computer memory, jumped 3.1 percent as it trimmed investment plans. India’s Reliance Petroleum Ltd. surged 6.7 percent after it started processing oil at a new refinery.

“We’re going to see lot of merger and acquisition activities as restructuring goes on at companies that are really sensitive to the economic slowdown,” said Kim Yong Tae, who helps manage about $2.3 billion at Yurie Asset Management Co. in Seoul. “Chipmakers continue to reduce oversupply and that’s positive for the industry.”