July 16 (Bloomberg) -- U.S. stocks rose, helping the Standard & Poor's 500 Index rebound from the lowest level since 2005, after profit at Wells Fargo & Co. topped analysts' estimates and oil dropped for a second day.
Wells Fargo, which avoided the worst of the subprime mortgage rout, rallied the most since at least 1980, leading Washington Mutual Inc., JPMorgan Chase & Co. and Bank of America Corp. higher. United Parcel Service Inc. and Dillard's Inc. climbed as the two-day retreat in crude prices overshadowed a government report showing the biggest gain in consumer prices since 2005.
The S&P 500 added 7.28 points, or 0.6 percent, to 1,222.19 at 11:50 a.m. in New York. The Dow Jones Industrial Average climbed 78.24, or 0.7 percent, to 11,040.78, while the Nasdaq Composite Index increased 24.12, or 1.1 percent, to 2,239.83. About two stocks rose for each that fell on the New York Stock Exchange.
``The fact that Wells is a huge mortgage underwriter and servicer and their numbers came out better than expected really helps the market calm down,'' said Malcolm Polley, who helps oversee about $1 billion as president and chief investment officer at Stewart Capital Advisors in Pittsburgh. ``Not all mortgage companies are in dire straits.''
Profits have slipped only 0.8 percent on average for the 26 companies in the S&P 500 that have reported second-quarter results so far, according to data compiled by Bloomberg. Earnings for all companies in the index are forecast to drop 14 percent on average, according to an analyst survey published July 11. The quarter is expected to cap a full year of declining earnings, the longest profit slump since 2002.
Wells Fargo, UPS
Wells Fargo rallied $4.90, or 24 percent, to $25.41 for the steepest advance in the S&P 500. Gains in credit card fees and insurance revenue softened the blow from bad home loans. Net income slumped 23 percent to $1.75 billion, or 53 cents a share. That beat the 50-cent average estimate of 21 analysts surveyed by Bloomberg. Revenue rose 16 percent to a record $11.5 billion and the bank boosted its dividend by 10 percent.
UPS, the largest package delivery company, climbed $1.59 to $58.03, helping the S&P 500 Transportation Index rise 3.5 percent as all 10 companies in the group advanced.
Dillard's, the Arkansas-based department-store chain, rallied 67 cents, or 8.1 percent, to $8.92. Retailers in the S&P 500 climbed 3.1 percent as a group.
Crude oil for August delivery declined $5.60, or 4 percent, to $133.14 a barrel in New York after retreating $6.44 yesterday.
The decline in energy prices offset a government report that showed consumer inflation quickened faster than analysts estimated in June. The cost of living soared 1.1 percent last month, the Labor Department said. Excluding food and energy, so- called core prices climbed 0.3 percent, also more than anticipated.
Financials Rebound
Wells Fargo led the S&P 500 Financials Index to a 5.7 percent advance, its first gain in six days, as 83 of its 89 companies increased.
Financial stocks with the biggest losses in the past week were among the shares with the steepest gains today following Wells Fargo's profit report.
Washington Mutual, the largest U.S. savings and loan, surged 23 percent to $4.43 for the third-biggest gain in the S&P 500. The advance pared the stock's drop over the past five days to 26 percent.
JPMorgan, the third-largest U.S. bank by assets, climbed $2.45 to $33.47. Bank of America added $1.35 to $19.87.
Fannie Mae rose 13 percent to $7.99 and Freddie Mac surged 15 percent to $6.05. Fannie Mae tumbled 27 percent yesterday for its steepest slump since at least July 1980 and Freddie Mac plunged 26 percent as investors lost confidence in the government's plan to rescue the largest U.S. mortgage-finance company.
Schwab Rallies
Charles Schwab Corp. had the biggest gain in three months, climbing 8.8 percent to $20.91. The largest U.S. online brokerage reported quarterly profit from continuing operations above the average analyst estimate as an influx of customer assets helped buoy revenue amid a decline in equity markets.
Intel Corp. rose 43 cents to $21.14. Third-quarter sales will be $10 billion to $10.6 billion, the company said yesterday. That compares with an average prediction of $10 billion in a Bloomberg survey of analysts. Computer-processor sales remain strong worldwide, with no signs of the U.S. economy sapping demand, according to Chief Financial Officer Stacy Smith.
Ackman's Target Bet
Target Corp. gained for the first time in six days, climbing 2.8 percent to $44.88. Investor William Ackman put more cash into the $2 billion hedge fund he started to invest in Target as shares of the second-largest U.S. discount retailer declined 38 percent in the past year, according to two people with knowledge of the matter.
About $14 trillion has been wiped off the value of global equities since October, with the S&P 500 falling into a bear market last week, as $417 billion in credit-related losses prolong the global economy's slump and rising commodity prices stoke inflation.
Among the 23 industrialized nations in the MSCI World Index, only Canada averted a bear-market decline of 20 percent. Financial institutions and consumer companies dependent on discretionary spending led the world's retreat in 2008, losing 31 percent and 22 percent.
The global bear market in equities will deepen from New York to London to Tokyo in the next six months as credit losses prolong the economy's slump and inflation erodes profits, a survey of Bloomberg users showed.
Bearish Sentiment
The S&P 500, the U.K.'s FTSE 100 Index, Japan's Nikkei 225 Stock Average, Spain's IBEX 35 Index, the Swiss Market Index, France's CAC 40 Index, Italy's S&P/MIB Index and Germany's DAX Index will decline, according to the Bloomberg Professional Global Confidence Survey of 4,232 users taken July 7 to 11. In Brazil, the only market where investors predict gains, optimism dropped to a five-month low, the survey showed.
The S&P 500 has slumped 22 percent since its Oct. 9 record. Financial shares in the measure capped the steepest-ever five-day decline yesterday, with Citigroup Inc., the biggest U.S. bank, plunging to the lowest level since it was created through a merger in October 1998.
The S&P 500 now trades for 20.2 times the reported earnings of companies in the index, while the MSCI World Index, excluding the U.S., is valued at 11.8 times profit. When the gap between their price-to-earnings ratios widened to 9.89 in May, the rest of the world hadn't been that much cheaper than the U.S. since 2002.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.
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