Oct. 12 (Bloomberg) -- U.S. stocks rose, briefly erasing the Dow Jones Industrial Average's 2011 loss, as European leaders provided a road map of plans to recapitalize banks and the Federal Reserve said it discussed further asset purchases.
All 10 groups in the Standard & Poor's 500 Index gained. JPMorgan Chase & Co. and Bank of America Corp. added at least 4 percent, following a rally in European lenders. Sears Holdings Corp., Dow Chemical Co. and Caterpillar Inc. climbed more than 1.9 percent to pace gains among companies most-reliant on economic growth. PepsiCo Inc., the world's largest snack-food maker, increased 3.7 percent as profit beat analysts' estimates.
The S&P 500 advanced 1.4 percent to 1,211.79 at 3:17 p.m. New York time, its highest level since Sept. 16 on a closing basis. The Dow climbed 138.01 points, or 1.2 percent, to 11,554.31. The 30-stock index is down 0.2 percent for 2011.
“The market is going to fly,” Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus & Co., which oversees more than $115 billion in client assets, said in a telephone interview. “Sentiment is shifting as uncertainty dissipates. Policy makers have taken the right steps to scotch the fear trade, which will improve equity and credit markets. Get ready. This is going to be some rally.”
The Dow has gained 8.7 percent since reaching this year's closing low on Oct. 3 amid optimism European leaders will tame the region's debt crisis and after American economic data improved. Before that, the gauge had slumped as much as 17 percent from this year's high on April 29 amid concern that Europe's crisis would slow down the economic recovery.
‘Coordinated Approach'
Global stocks rose as European Commission President Jose Barroso called for a reinforcement of crisis-hit banks, the payout of a sixth loan to Greece and a faster start for a permanent rescue fund to master Europe's debt woes. Barroso urged a “coordinated approach” to deliver a “significantly higher capital ratio of highest quality capital” for banks, while offering government funds only as a last resort.
Slovak parties reached an agreement to approve Europe's enhanced bailout fund, paving the way for a repeat vote in the coming days after the pact failed to win support yesterday. Slovakia is the only country in the 17-member euro area left to approve the EFSF. Earlier today, European Economic and Monetary Affairs Commissioner Olli Rehn said the region is moving toward a consensus on resolving the “calamity” of the debt crisis.
‘Heroic Effort'
“The situation in Europe is going to take a heroic effort,” Warren Koontz, head of U.S. large-cap value stocks at Loomis Sayles & Co. in Boston, which manages $150 billion, said in a telephone interview. “At least for now, it seems that they are making steps in the right direction. If people come to realize that economic growth isn't as poor as sentiment or as stock prices have indicated, we probably could create some type of bottom.”
Some Federal Reserve officials last month wanted to keep further asset purchases as an option to boost the economy as policy makers saw “considerable uncertainty” that U.S. growth will pick up, the Fed said today in minutes of the Sept. 20-21 session. The debate culminated in the Federal Open Market Committee's decision to replace $400 billion of Treasuries in the central bank's portfolio with longer-term debt to reduce borrowing costs.
The Morgan Stanley Cyclical Index of companies most-tied to economic growth added 2.5 percent. The Dow Jones Transportation Average rose 1.8 percent. The KBW Bank Index gained 4.3 percent. Bank of America added 4.6 percent to $6.66. JPMorgan gained 4 percent to $33.60. Sears Holdings rallied 8.4 percent to $72.60. Dow Chemical jumped 3.6 percent to $27.35. Caterpillar climbed 1.9 percent to $82.16.
Frito-Lay Sales
PepsiCo jumped 3.7 percent to $63.23 after saying third- quarter profit rose 4.1 percent as sales of Frito-Lay products increased. Chief Executive Officer Indra Nooyi created a council in September to better coordinate sales of snacks and beverages after the company reduced its full-year profit forecast.
“The reason we're bullish and why we're having a different view of the market is because we've had a lot more faith in the ability of U.S. corporations and the U.S. economy to still navigate through a U.S. expansion, despite what looks like very, very scary headlines,” Thomas Lee, the chief U.S. equity strategist at JPMorgan Chase & Co., said in an interview on Bloomberg Television “In the Loop” with Betty Liu.
Liz Claiborne Inc. surged 33 percent to $6.77 after agreeing to sell its namesake and Monet brands to J.C. Penney Co. and its Kensie line to Bluestar Alliance as the company works to reduce debt. The transactions and the completion of the sale of Dana Buchman brand to Kohl's Corp. are worth a total of $328 million in cash, New York-based Liz Claiborne said today.
Alcoa Earnings
Alcoa Inc. fell 1.9 percent to $10.10, paring an earlier decline of as much as 5.5 percent. The first company in the Dow to report earnings this quarter posted profit that trailed estimates, saying European customers “dramatically” cut orders on economic uncertainty. Alcoa is grappling with rising production costs while the price of aluminum on the London Metal Exchange has fallen in the past two months.
The rebound from a 13-month low on Oct. 3 has yet to bring the S&P 500 out of a trading range it's been stuck in for more than two months. The benchmark index for U.S. stocks has fluctuated between 1,074.77 and 1,230.71 since Aug. 5 as investors remained cautious toward riskier assets amid speculation Greece will default on its debt.
The 1,230 level is “where the rally was capped in late August,” Roger Volz, director of equities at BGC Partners LP in New York, said in a telephone interview. “If we can close above the previous major high, that would open the door for a sustained advance.”
--With assistance from Lu Wang in New York. Editors: Jeff Sutherland, Michael P. Regan
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