U.S. Stocks Advance, Led by Banks, as Whitney Says Buy Goldman

U.S. stocks rose, with the Standard & Poor’s 500 Index rebounding following four weeks of losses, as analyst Meredith Whitney recommended buying shares of Goldman Sachs Group Inc. and said banks may advance 15 percent.
Goldman Sachs gained 5.3 percent as Whitney gave the firm the only “buy” rating among the eight companies she covers. Bank of America Corp. climbed the most in a month after the analyst told CNBC the shares were the “cheapest” among U.S. banks. JPMorgan Chase & Co. and Wells Fargo & Co. each rose at least 5 percent. All 10 industries in the S&P 500 and 29 of 30 Dow Jones Industrial Average companies increased.
The S&P 500 advanced 1.9 percent to 895.72 at 1:20 p.m. in New York, the biggest gain in more than two weeks. The Dow average added 144.72 points, or 1.8 percent, to 8,291.24. More than five stocks gained for each that fell on the New York Stock Exchange.
“We need to have a healthy banking sector for this economy to work properly,” said Keith Wirtz, who helps oversee $19.8 billion as chief investment officer at Fifth Third Asset Management in Cincinnati. “Any positive commentary or news will be good for the banking stocks, will be good for the psychology of the market.”
U.S. stocks capped a fourth straight week of declines on July 10, matching the longest losing streak in a year, as consumer sentiment dropped more than estimated and oil’s steepest retreat since January dragged down energy shares. Investors this week will be looking at reports on retail sales and factory production to gauge the strength of the economy after a $787 billion stimulus bill passed in February.
Earnings Watch
Goldman Sachs, JPMorgan Chase & Co., International Business Machines Corp. and Google Inc. are among more than 30 companies in the S&P 500 Index scheduled to report results this week. Analysts estimate the group’s profits fell an average 35 percent in the second quarter and will decrease 21 percent from July through September, according to data compiled by Bloomberg.
“It’s going to be a while before we’re confident we’re going to have a strong, sustainable recovery in place,” Treasury Secretary Timothy Geithner said, according to the transcript of an interview with “CNN’s Fareed Zakaria GPS” show broadcast yesterday.
Goldman Sachs climbed 5.3 percent to $149.32, helping lift a gauge of financial shares up 4.5 percent, the most among 10 industries in the S&P 500 and the group’s steepest advance since May 18. Whitney, founder of Meredith Whitney Advisory Group, upgraded the shares to “buy,” her first such rating on a U.S. bank since she started her own firm. Whitney created the firm earlier this year after correctly predicting in 2007 that Citigroup Inc. would cut its dividend, a call that triggered the steepest drop in the shares since September 2002.
‘Surprise Big’
Goldman Sachs will post “enormous” revenue from its fixed-income, currencies and commodities business, she told CNBC. “Goldman is going to surprise big on the upside,” she said. Whitney also told CNBC that she could see a 15 percent rise in the banks she covers.
Goldman Sachs may post the largest profit since it set earnings records in 2007 when it reports second-quarter results tomorrow. The company will probably say it earned $2.2 billion, or $3.65 a share, excluding some items in the three months through June, according to the average estimate of analysts surveyed by Bloomberg. The stock may reach $186 from $141.87 on July 10, Whitney said in a note to clients.
‘All Eyes’ on Goldman
“People are questioning the strength of the recovery and whether there is need for a second stimulus package,” said Alberto Espelosin, who helps manage the equivalent of $10.5 billion at Zaragoza, Spain-based Ibercaja Gestion. “All eyes will be on Goldman’s earning’s tomorrow.”
American International Group Inc. rose the most in the S&P 500, rallying 25 percent to $14.71, after the Commercial Times reported that Primus Financial Holdings Ltd. will make a $2 billion bid for the U.S. insurer’s Taiwan life insurance unit, citing unidentified industry people. The insurer bailed out four times by the U.S. government has gained 49 percent in the past two days, trimming its loss this year to 55 percent.
Best Buy Co., the world’s largest electronics retailer, rose 4.3 percent to $34.17. The shares were raised to “outperform” from “perform” at Oppenheimer & Co., which said investors were too quick to dismiss benefits from Circuit City Stores Inc.’s liquidation.
Bets against the S&P 500 rose to the highest since April last month as investors shorted more shares of health-care, technology and financial companies, according to data compiled by U.S. exchanges and news of last week.
CIT Slides
CIT Group Inc. lost 20 percent to $1.22. The century-old lender that hasn’t been able to persuade the government to back its debt sales, says its demise would put 760 manufacturing clients at risk of failure and “precipitate a crisis” for as many as 300,000 retailers.
Expeditors International of Washington Inc., the manager of cargo ships in 70 countries, dropped the most since May, losing 5.3 percent to $29.99, after saying second-quarter earnings would be 24 cents to 26 cents a share, less than the 30-cent average estimate of analysts surveyed by my Blog news Record.
CapitalSource Inc. fell 6.6 percent to $4.22. The loan provider to small and mid-sized businesses said it plans a public offering of about 17.5 million shares of its common stock.