Retailers, Banks Lead Market Rally; Oil Retreats

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American stocks rose, adding to the biggest weekly rally since April, after oil’s drop below $115 a barrel boosted retailers and credit card companies.

All but one of the 29 companies in the Standard & Poor’s 500 Retailing Index advanced as crude retreated for a second day and Goldman Sachs Group Inc. said Wal-Mart Stores Inc. may increase its profit forecast. Financial shares contributed the most to the S&P 500’s gain as American Express Co., Discover Financial Services, and Capital One Financial Corp. climbed more than 2% each.

The S&P 500 advanced 9 points, or 0.7%, to 1,305.32 after jumping 2.9% last week. The Dow Jones Industrial Average increased 48.03, or 0.4%, to 11,782.35, its highest level since June 25. The Nasdaq Composite Index added 25.85, or 1.1%, to 2,439.95. Almost five stocks rose for every two that dropped on the New York Stock Exchange.

“We could have another 6 to 8% rally in the next few months as people start picking stocks that will do well in a lower oil environment,” the president of Dayton, Ohio-based James Investment Research, which manages $2 billion, Barry James, said. “This is not a temporary drop in oil. It’s going to be something that’s a huge driver when you think about what it could mean for companies.”

After falling to a 2 1/2-year low on July 15, the S&P 500 has rebounded 7.4%. It’s still down 11% this year as record fuel costs and bank losses stemming from the American mortgage crisis prompted analysts to lower profit estimates.

Leadership in the market reversed as the S&P 500 rebounded. Financial shares have led the gain among 10 industries since July 15, rising 29% as a group. Energy shares have fared the worst, losing 8.8%. In the previous 12 months, energy shares had posted the only advance among 10 industries, while financial shares slumped 53% for the worst performance.

Wal-Mart gained 1.2% to $58.56. Second-quarter earnings at the world’s largest retailer may exceed the company’s own forecast because of fewer clearance sales in home and clothing departments, Goldman said.

S&P 500 consumer companies dependent on discretionary spending had the biggest gain among 10 S&P 500 industries, climbing 2.5%. The group extended last week’s 7.7% advance, which was the steepest since March 2003. Home Depot Inc., the biggest home-improvement retailer, gained 4.3% to $27.51 today.

General Motors Corp., the largest U.S. automaker, rallied 7.3% today after the Financial Times reported that the company’s chief executive officer, Rick Wagoner, said the company’s struggles with American job cuts, rising retiree health-care costs, and pension problems are “largely behind us.”

American Express, the largest American credit-card company by purchases, climbed 3.6% to $39.17. Discover added 2.8% to $15.39. Capital One rose 6% to $46.

Financial stocks in the S&P 500 gained for a second day, increasing 1.8%.

Oil dropped 0.7% to $114.45 a barrel in New York, the lowest close since May 1, on signs the American economic slump will extend into 2009, crimping fuel demand. The U.S. may grow at an average 0.7% annual pace from July through December, half the gain in the first half of the year, a Bloomberg survey of economists showed.

Commodities prices are in the “greatest decline ever,” according to Birinyi Associates Inc., a Westport, Connecticut-based research and investment firm. The Reuters Jefferies/CRB Index of 19 raw material and agricultural commodities has tumbled 19% since its July record. The last similar slump was in April 1974 when the measure lost 15%, Birinyi said.

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