January 23rd, 2012

Dow Jones Futures – U.S. stocks rose, sending the Dow Jones Industrial Average toward the highest level since May, as banks rallied and European finance ministers gathered in Brussels to discuss new budget rules and a Greek debt swap.

Bank of America Corp. and Citigroup Inc. added at least 2.1 percent to pace gains among financial companies. Sears Holdings Corp. jumped 8.6 percent, gaining 59 percent in five days. Chesapeake Energy Corp. (CHK) climbed 5.2 percent as the natural-gas producer plans to cut production. Halliburton Co., the world’s largest provider of hydraulic fracturing services, slumped 3.9 percent as its profit margin in North America declined.

The Standard & Poor’s 500 Index gained 0.3 percent to 1,319.46 at 10:45 a.m. New York time. The gauge is 20 percent above last year’s Oct. 3 closing low. The Dow Jones Industrial Average added 22.02 points, or 0.2 percent, to 12,742.50.

“It’s going to be more about here than Europe,” Tom Wirth, who helps manage $1.5 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a telephone interview. “If the stress of Europe starts to alleviate and people’s fears start to wane, they are going to start focusing more on the domestic market. If earnings can hold their own, we can see the price-earnings multiple expand.”

The S&P 500 rose all four days U.S. exchanges were open last week as data bolstered confidence in the American economy and companies from Goldman Sachs Group Inc. to Union Pacific Corp. topped analysts’ income projections. Of the 52 companies in the S&P 500 that reported results since Jan. 9, 34 posted per-share earnings that beat projections, Bloomberg data show.

Dow Jones: Greek Talks

European officials will forge ahead today with crafting a plan to tackle the debt crisis, as banking and government negotiators continue trying to reach a deal that will lighten Greece ({GDBR10)’s debt burden. Bondholders negotiating a debt swap with Greece have made their “maximum” offer, leaving it to the European Union and International Monetary Fund to decide whether to accept the deal, the negotiator for private creditors said.

Barton Biggs, who increased bets on U.S. equities before the Standard & Poor’s 500 Index rallied last month, said he remains bullish even amid concerns over progress in solving Europe’s debt crisis.

“I’m terrified I’m not long enough if we’re going to have a strong rally here, which we could,” he said during an interview on Bloomberg Television’s “In the Loop” with Betty Liu today. Biggs said his net-long position in equities is 65 percent. At the same time, “I’m terrified I’m too long if the apocalypse is coming in Europe,” he said.
Banks Rally

The Morgan Stanley Cyclical Index of companies most-tied to the economy gained 1.1 percent. Among financial companies, Bank of America gained 3.8 percent to $7.34. Citigroup increased 2.1 percent to $30.27. Sears Holdings jumped 8.6 percent to $53.22.

Chesapeake Energy rallied 5.2 percent to $22.04. Gross production at wells it operates will be cut by as much as 1 billion cubic feet a day and the Oklahoma City-based company will defer gas-well completions wherever possible. Planned spending on gas wells will fall 70 percent from 2011 levels, to $900 million.

Halliburton slumped 3.9 percent to $34.78. The company posted a decline in its fourth-quarter operating margin in North America as companies cut natural-gas drilling. It reported a profit margin of 27.2 percent for the region, its largest, down from 29 percent in the past two quarters, according to a statement today.

Research In Motion Ltd. (RIM) tumbled 6.5 percent to $15.90. The BlackBerry maker replaced co-Chief Executive Officers Jim Balsillie and Mike Lazaridis with an insider who said he sees no need for radical change as the company struggles to compete with Apple Inc. (AAPL) Thorsten Heins, a chief operating officer who joined RIM four years ago from Siemens AG, will replace the pair in the CEO post effective immediately, RIM said.

Dow Jones: Most Ever

The biggest January rally for stocks since 1997 is pushing down the benchmark gauge for U.S. options prices by the most ever as dealers find fewer buyers for protection against equity losses.

The VIX plunged 60 percent to 18.28 since the S&P 500 reached its 2011 low on Oct. 3 through Jan. 20, the biggest decrease ever, according to data compiled by Bloomberg. Declines of 50 percent or more have preceded S&P 500 rallies in the next year of a median 14 percent in the past two decades.

Stocks have rallied as the world’s largest economy shows signs of strength and investors shift their focus away from the European crisis. The S&P 500 has surged 20 percent since October as data on hiring, manufacturing and construction exceeded Wall Street forecasts. While bears say the retreat shows complacency among investors and leaves equities vulnerable to declines, bulls such as Jeffrey Kleintop of LPL Financial Corp. in Boston say a lower VIX means stocks are a safer bet.

“That much of a drop in the VIX suggests that we’ve moved past a critical risk for the markets,” Kleintop, who helps oversee $340.8 billion as the chief market strategist at LPL in Boston, said in a Jan. 20 phone interview. For Europe’s debt crisis, “it doesn’t mean it’s been resolved, it just means the market’s gotten more comfortable that it’s on a path toward resolution,” he said.

- Rita Nazareth in New York at Bloomberg.