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Stocks, commodities climb on speculation economy is growing

(Bloomberg) — U.S. stocks rose, extending a global advance that sent the MSCI World Index to an almost one- year high, and commodities gained amid speculation the economy has returned to growth.

Alcoa Inc. and Barrick Gold Corp. rose at least 2.4 percent as metal prices climbed.Citigroup Inc. rallied 2.9 percent as people familiar with the situation said the third-biggest U.S. bank is planning an exit from the government debt guarantee program. General Electric Co. and Caterpillar Inc. climbed more than 1.3 percent after the Federal Reserve said industrial production increased more than forecast.

“Investors have been embracing risk as they feel more comfortable about the global economy,” said John Carey, a Boston-based money manager at Pioneer Investments, which oversees more than $200 billion worldwide. “People feel more confident putting money into the stock market. There seems to be a better sentiment regarding big companies, such as GE, that were under such a cloud during the peak of the credit crisis.”

The Standard & Poor’s 500 Index gained 0.6 percent to 1,058.98 at 11:22 a.m. in New York and the Dow Jones Industrial Average added 30.23 points, or 0.3 percent, to 9,713.64. About five stocks advanced for every two that fell on the New York Stock Exchange.

Global equities rallied after the S&P 500 maintained its highest level in almost a year yesterday following faster-than- estimated growth in retail sales and billionaire investor Warren Buffett’s statement that his company is buying stocks.

‘Likely Over’

Federal Reserve Chairman Ben S. Bernanke said yesterday in Washington that “the recession is very likely over,” while Buffett told a conference in Carlsbad, California, yesterday that the economy is responding to government stimulus measures. The Group of 20 nations has committed about $12 trillion to reviving growth.

“The bigger and uglier the bear market, usually the bigger the V,” Kenneth Fisher, who manages $28 billion as chief executive officer of Fisher Investments Inc. in Woodside, California, said in an interview. “A normal V-shaped recovery lasts one year, and the current rally started in March.”

The MSCI World Index of 23 developed nations has climbed 64 percent since March 9 as the Fed kept its target rate for overnight lending between banks at near zero to unlock credit markets after the bankruptcy of New York-based Lehman Brothers Holdings Inc. a year ago.

Global Advance

The MSCI World added 1.1 percent today, led by raw-material producers, financial shares and companies dependent on consumer spending. The global gauge trades at 27.3 times the earnings of its 1,659 companies, the most expensive level since 2003.

The MSCI Emerging Markets Index advanced to the highest level in more than a year. South Korea’s Kospi index led the advance among Asian developing nations, rising 1.8 percent as exporters including Samsung Electronics Co. and Hyundai Motor Co. rallied.

Confidence in the world economy held at a record high in September after reports suggested the recession is over and officials said they won’t rush to withdraw stimulus, a Bloomberg survey of users on six continents showed.

The Bloomberg Professional Global Confidence Index rose to 58.54 this month from 58.12 in August. The index exceeded 50 for a second month, which means optimists outnumbered pessimists. Measures of confidence in France and Germany surged after their economies unexpectedly returned to growth last quarter.

Metals Climb

Metals advanced. Gold climbed to an 18-month high in New York and London on concern that a global economic recovery may stoke inflation, boosting demand for the metal as an alternative investment.

Barrick Gold, the world’s biggest producer of the metal, added 2.5 percent to $38.89. Alcoa, the largest U.S. aluminum producer, gained 2.4 percent to $14.32. Copper rose for a second day. Aluminum, zinc, lead and nickel also increased.

Anadarko Petroleum Corp. had the biggest gain in the S&P 500, rising 8.4 percent to $64.11. The second-largest U.S. natural-gas producer reported a discovery off the coast of Sierra Leone that will lead to further exploration.

Citigroup climbed 2.9 percent to $4.24. The largest user of U.S. government debt guarantees plans to exit the program as regulators push to withdraw aid intended as temporary, people familiar with the matter said.

The bank has been in discussions with the Federal Deposit Insurance Corp. over exiting the program when it expires on Oct. 31, the people said. The bank, which had $72.4 billion of FDIC- guaranteed debt outstanding as of June 30, doesn’t plan to seek an emergency extension, one of the people said.

FDIC spokesman David Barr declined to comment, as did Danielle Romero-Apsilos, a spokeswoman for the bank.

Bank of America, GE

Bank of America Corp., which said yesterday that it had won approval from the FDIC to exit the program, advanced 2 percent to $17.13.

GE had the biggest gain in the Dow average, rising 4.6 percent to $16.74. Shares of the world’s largest maker of power- plant turbines erased their loss for the year, rising above the 2008 year-end closing price of $16.20 in New York Stock Exchange trading.

U.S. stocks such as GE, whose performance are most tied to the economy, are signaling that the S&P 500 will extend its 56 percent advance since March 9, according to Strategas Research Partners LLC.

The Strategas Bellwether Index, a basket of 15 companies in the S&P 500 with the closest correlation to economic expansion, has risen to the highest level in almost two years relative to the equity benchmark.

Caterpillar gained 1.4 percent to $52.40.

‘Path to Recovery’

“We’re on the path to recovery,” said Malcolm Polley, chief investment officer at Stewart Capital Advisors in Indiana, Pennsylvania, which manages $1 billion. “Clearly, the latest reports show that the economy is not getting worse. That gets investors waiting for an inflection point where the improvement in corporate earnings is going to come less from cost cuts and more from top-line growth.”

Amazon.com Inc. added 5.2 percent to $87.89. The world’s largest online retailer was raised to “buy” from “neutral” at Bank of America, which cited “sustainable competitive advantages in ecommerce, including customer loyalty, distribution infrastructure and technology investment.”

Fortune Brands Inc. gained 6.8 percent to $44.49. The maker of MasterBrand cabinets and Jim Beam bourbon was upgraded to “buy” from “neutral” by Goldman Sachs Group Inc., which said “the market under-appreciates” the company’s earnings potential.

Genworth Sells Shares

Genworth Financial Inc. added 6.8 percent to $12.87. The life insurer and mortgage guarantor raised about $564 million in a stock sale, more than planned, after selling 48 million shares. The stock sold for $11.75 a share.

Omniture Inc. rallied 26 percent to $21.75. Adobe Systems Inc., the biggest maker of graphic-design software, agreed to buy the maker of software that allows companies to gauge the effectiveness of their online advertising for $21.50 a share, or $1.8 billion. Adobe dropped 6.8 percent to $33.21.

Verizon Communications Inc. declined 2.8 percent to $30.12. The second-biggest U.S. phone company was cut to “neutral” from “buy” at UBS AG, which said the wireline market continues to worsen and is unlikely to improve until 2010. UBS reduced its earnings estimates for Verizon by 4 percent to $2.42 a share in 2009 and by 9.3 percent to $2.45 in 2010.

About Ross Reily

Ross Reily is editor of the Mississippi Business Journal. He is a husband to an amazing wife, dad to 3 crazy kids and 2 dogs. He is also a fan of the Delta State Fighting Okra and the Boston Red Sox.

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