U.S. Stocks Rise After Cisco Ups Sales Forecast

American stocks continued their recovery from a three-week rout after Cisco Systems Inc. raised its sales forecast and speculation increased that banks and homebuilders may have weathered the worst of the subprime mortgage shakeout.Merrill Lynch & Co. and Morgan Stanley helped lead the Standard & Poor’s 500 Index higher for a third day after a Citi Investment Research analyst recommended buying the shares. Pulte Homes Inc. pushed a gauge of construction companies to its biggest advance in four years. Cisco, the world’s largest maker of computer-networking equipment, climbed to a six-year high after saying demand for Internet gear increased.The S&P 500 rose 20.78, or 1.4%, to 1497.49. The Dow Jones Industrial Average gained 153.56, or 1.1%, to 13,657.86. The Nasdaq Composite Index added 51.38, or 2%, to 2612.98, its biggest advance since October.Stocks have recouped almost half of the $1.6 trillion lost the previous three weeks on concern mortgage defaults would spread through credit markets. An S&P 500 index of financial shares has gained 7.9% since ending last week at a 13-month low, helped yesterday when the Federal Reserve said the housing slump won’t derail the economic expansion.“You’ve got a pretty good opportunity in your money-center banks and brokers,” said David Katz, who helps oversee $1.6 billion as chief investment officer of New York-based Matrix Asset Advisors Inc. “The negative exposure they have is fairly minimal, and you’re getting them at a great price.”Stocks also got a boost after a government report showed sales at American wholesalers climbed faster than inventories in June and the perceived risk of owning corporate bonds fell.A Citi analyst, Prashant Bhatia, wrote that the drag on earnings at Wall Street’s five biggest investment banks from the declining value of leveraged-buyout loans is “very manageable.” He said the banks may be stuck with $75 billion of loans that could reduce annual earnings by 2% to 5%.Investors have been cutting back on riskier assets such as the loans and bonds that fund leveraged buyouts after being burned by losses on subprime mortgages.Merrill Lynch, the third-biggest American securities firm, climbed $2.98 to $78.17. Morgan Stanley, the second-largest securities firm, increased $1.06 to $65.39. Lehman Brothers Holdings Inc., the largest American underwriter of mortgage bonds, increased $4.07 to $64.78.Bear Stearns Cos., the no. 2 underwriter, climbed $4.23 to $121.12. Chief Executive Officer James Cayne is planning to go to China to look for a joint-venture partner or a partnership that would lead to a strategic investment in the company, CNBC reported, without citing anyone.Goldman Sachs Group Inc. rose $2.05 to $193.30. The stock fell in the last hour, dragging down the S&P 500, on speculation the investment bank would announce losses at a hedge fund. Shares erased the decline after Goldman said there would be no announcement.

U.S. Stocks Rise After Cisco Ups Sales Forecast

U.S. Stocks Rise After Cisco Ups Sales Forecast

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