NEW YORK – U.S. stock futures advanced, indicating that the Standard & Poor’s 500 Index will gain for a second straight day, as President Barack Obama expressed confidence that he will reach a budget agreement with Congress.
Freeport-McMoRan Copper & Gold Inc. and Newmont Mining Corp. rallied more than 1.7 percent. Cisco Systems Inc. increased 1.2 percent after it agreed to buy closely held Meraki Inc. for $1.2 billion. Lowe’s Cos. surged 4.6 percent after the home-improvement retailer posted profit that beat estimates. Apple Inc. and Amazon.com Inc. added at least 1.1 percent.
S&P 500 futures expiring in December rose 0.9 percent to 1,371.8 at 8:33 a.m. in New York. Concern about the so-called fiscal cliff drove the benchmark measure down 1.5 percent last week. Contracts on the Dow Jones Industrial Average climbed 85 points, or 0.7 percent, to 12,655 today.
“This change and transition in taxation is much more important for equity allocations going forward than what people realize,” said Michael Shaoul, chairman of New York-based Marketfield Asset Management, which oversees $3.5 billion. He spoke in a phone interview. “The U.S. economy looks pretty good. Earnings are OK. As long as Congress doesn’t absolutely wreck it, it will be fine.”
Obama met with senior Democrats and Republicans on Nov. 16 for talks to avoid $607 billion of automatic tax increases and spending cuts that, if allowed to come into force, might push the country into a recession next year.
Constructive talks
The S&P 500 rose 0.5 percent on Nov. 16 as House Speaker John Boehner, a Republican, described the budget discussions as constructive and said he would accept increased government revenue coupled with spending cuts. Congress is now in recess for Thanksgiving until Nov. 26.
“I am confident we can get our fiscal situation dealt with,” Obama said yesterday at a news conference in Bangkok, where he began a three-nation Asian trip. The S&P 500 has still fallen 4.8 percent since the U.S. president was elected for a second term on Nov. 6.
A report today may show sales of previously owned houses held near a two-year high in October, according to the median estimate in a Bloomberg News survey of economists. The National Association of Realtors publishes its benchmark index at 10 a.m. New York time.
Gold and oil rallied as a weaker dollar and concern about unrest in the Middle East increased demand for the commodities as alternative investments. Israel’s Defense Minister Ehud Barak said the army was prepared to invade the Gaza Strip for the first time in almost four years.
Freeport-McMoRan, the biggest publicly traded copper producer, added 2.3 percent to $37.65. Newmont Mining, the largest U.S. gold producer, added 1.7 percent to $46.90. Occidental Petroleum Corp. rose 1.2 percent to $74.70.
Cisco rose 1.2 percent to $18.20. The world’s largest maker of computer-networking equipment agreed to pay $1.2 billion for Meraki, adding technology that helps businesses manage Wi-Fi networks remotely and expanding its lineup of products for mid- sized customers.
Lowe’s gained 4.6 percent to $33.44. The company, headed by Chief Executive Officer Robert Niblock, boosted sales of generators, chainsaws and cleaning supplies in the northeastern U.S. before Sandy struck on Oct. 29, destroying homes and leaving millions without power. Consumers also spent more as the U.S. housing market improved.
Home Depot Inc., the biggest U.S. home-improvement retailer, gained 1.2 percent to $62.86.
Most valuable
Apple, the world’s most valuable company, gained 1.7 percent to $536.50. Amazon, the largest online retailer, gained 1.1 percent to $227.65.
The post-election rout in U.S. stocks has driven the S&P 500 down so far that it would have to advance 26 percent to reach the valuation of bull markets since John F. Kennedy was in the White House.
Investors have seen $806 billion erased from the value of American equities since Obama was re-elected Nov. 6 in the biggest decline since May. The combination of falling stocks and rising profits as the economy recovers has left the S&P 500’s price-earnings ratio below the ending level of eight of the nine bull markets since 1962 and beneath the average of any since Ronald Reagan was in power.
Bears say the 4.8 percent drop in the S&P 500 and valuations show investors are losing confidence that Congress and Obama will reach a budget compromise that would keep the recovery from stalling. Bulls, including the top strategists at six Wall Street firms, say that the declines are another reason to buy and that stock prices from Apple to Dollar Tree Inc. are bound to improve as earnings increase.
“The stock market looks cheap because people are way too pessimistic about what growth looks like for the next 10 years,” said Brian Jacobsen, who helps oversee $208 billion as chief strategist at Wells Fargo Advantage Funds and predicts the S&P 500 will rise 47 percent to 2,000 in 2014. “You can get big and rapid moves in the market when expectations are so low.”
