Sept. 26 (Bloomberg) -- U.S. stocks rallied the most in a week after General Motors Corp. agreed on a contract with the United Auto Workers and investors speculated billionaire Warren Buffett will buy a stake in Bear Stearns Cos.
GM climbed to the highest since July after cutting a deal that will allow the largest U.S. automaker to get rid of $50 billion in health-care costs. Bear Stearns, the second-biggest U.S. underwriter of mortgage bonds, jumped the most in six weeks on a New York Times report that Buffett may provide capital to stem losses from the housing slump.
``Warren Buffett buying a stake in Bear Stearns would be a vote of confidence in the financial sector if it's true,'' said Michael Metz, chief investment strategist at Oppenheimer Co., which oversees $60 billion in New York. ``It revives hopes of more takeovers and is positive for stocks.''
The Standard & Poor's 500 Index added 8.21, or 0.5 percent, to 1,525.42. The Dow Jones Industrial Average gained 99.5, or 0.7 percent, to 13,878.15. The Nasdaq Composite Index increased 15.58, or 0.6 percent, to 2,699.03. European and Asian stocks also advanced, while emerging-market shares rose to a record for the second time this week.
U.S. financial shares contributed the most to the advance and posted their steepest gain since the day after the Federal Reserve cut its benchmark interest rate on Sept. 18. Stocks also rose after a larger-than-forecast decrease in durable goods orders reinforced expectations of more rate cuts.
GM Contract
GM rallied $3.22, or 9.4 percent, to $37.64 for the top gain in the Dow average. The four-year accord may transform the competitive landscape for the U.S. auto industry, allowing the company to operate with a cost structure closer to that of its Japanese rivals. Should the deal be approved by GM workers, Ford Motor Co. and Chrysler LLC will seek similar cost-cutting UAW contracts.
Ford Motor Co., the second-largest U.S. automaker, gained 54 cents to $8.88. Auto-parts suppliers also rallied. American Axle & Manufacturing Holdings Inc., whose biggest customer is GM, gained $1.68 to $24.94. Lear Corp., the second-largest maker of automotive seats, climbed $1.81 to $33.26.
Bear Stearns added $8.76, or 7.7 percent, to $123. The New York Times reported that the securities firm is in ``serious talks with several outside investors'' including Buffett to sell as much as 20 percent of the firm, citing unidentified people familiar with the matter. A Bear Stearns spokesperson declined to comment. Jackie Wilson, a spokeswoman for Buffett, said nobody was available to comment.
Durable Goods
Demand for American-made durable goods such as jetliners and telephone network switches fell 4.9 percent in August, the most in seven months. Excluding transportation equipment, durable- goods orders declined 1.8 percent. Total orders were forecast to fall 4 percent, according to economists surveyed by Bloomberg.
The report suggested that business investment, which had been counted on to help offset a cooling of consumer spending, may instead weaken. That would endanger the 2.2 percent growth rate that forecasters anticipate for the U.S. in the final three months of the year.
A gauge of companies in the S&P 500 that sell consumer staples such as cosmetics, personal care items, food, drinks and tobacco climbed 0.9 percent to a record as investors bought companies that may sustain earnings growth if the economy slows.
P&G, Whole Foods
Procter & Gamble Co. gained 66 cents to $70.51, the highest since at least 1980. The stock's 13-day winning streak is the longest since Bloomberg began tracking the data. McCormick & Co., the seller of spices that reports earnings tomorrow, climbed $1.44 to $38.04.
Whole Foods Market Inc., the largest U.S. natural-foods grocer, gained $2.25 to $47.97. RBC Capital Markets resumed coverage of the shares with an ``outperform'' rating, saying the stock may climb to $55 as same-store sales growth accelerates.
``More and more people are recognizing that there's a greater possibility of a sharp slowdown and they're going into consumer staples,'' said Charles Knott, who helps manage about $1 billion as chief investment officer of Knott Capital Management in Exton, Pennsylvania.
Producers of raw materials in the S&P 500 rose 0.9 percent as a group after Monsanto Co. rallied to a record and Alcoa Inc. climbed.
Monsanto added $2.91 to $83.75 after saying it expects its corn seeds to gain as much as 2 percentage points in market share a year outside of the U.S. Jefferies & Co. initiated coverage of Monsanto with a ``buy'' rating, while Goldman, Sachs & Co. analyst Robert Koort raised his earnings estimates and 12-month price target.
Alcoa, the second-largest aluminum company, gained $1.47 to $38.47 after prices for the metal rose.
Record Buyback Pace
Chevron Corp. advanced 63 cents to $92.51. The second- largest U.S. oil company said it will repurchase as much as $15 billion of its shares in the next three years.
MetLife Inc. climbed $1.13 to $69.69. The largest U.S. life insurer increased its stock buyback program by $1 billion. The authorization represents about 14.6 million shares, or 2 percent of its outstanding stock, according to Bloomberg data.
U.S. companies have announced plans to buy $596 billion of their own shares in 2007, 15 percent ahead of last year's record pace, according to data compiled by Birinyi Associates Inc. as of Sept. 20.
``That's a positive sign that managements believe their stocks are very attractive,'' said David Risgaard, who helps oversee $950 million at North Star Asset Management Inc. in Menasha, Wisconsin.
Office Depot Inc. added $1.03 to $20.25. JPMorgan raised its recommendation on the shares to ``overweight'' from ``neutral,'' saying there is ``room for shareholder activism'' at the world's second-largest office-supplies chain.
The market briefly pared some of its advance today after Goldman analysts reduced profit estimates for Merrill Lynch & Co., the third-largest U.S. securities firm, because of credit market losses.
Merrill
Merrill declined 37 cents to $71.75. Goldman analysts including William Tanona reduced their 2007 earnings estimate to reflect a possible ``multibillion dollar'' loss due to weakness in the market for mortgages, leveraged loans and collateralized debt obligations. The analysts also lowered their profit estimates for 2008 and 2009.
SLM Corp. fell $1.24 to $45.01. The biggest U.S. provider of student loans said the group planning to buy the company doesn't expect to complete the $25.3 billion purchase.
Newmont Mining Corp. declined $2.79, or 5.9 percent, to $44.90 for the steepest drop in seven months. The world's second- biggest gold producer said costs in 2007 may exceed an earlier forecast of as much as $400 per ounce of gold and that it is having difficulty replacing depleted reserves.
Builders Slump
Homebuilders fell after mortgage applications in the U.S. decreased 2.8 percent last week, led by the biggest drop in purchases since January, according to the Mortgage Bankers Association.
Pulte Homes Inc., the third-largest U.S. builder by market value, dropped $1.17, or 8 percent, to $13.47 for the steepest decline in the S&P 500. KB Home lost $1 to $24.09, the lowest since May 2003.
The Chicago Board Options Exchange Volatility Index fell 5.2 percent to 17.63, the lowest in more than two months. Lower readings in the so-called VIX, derived from prices paid for S&P 500 options, indicate traders expect smaller share-price swings in the next 30 days.
In Europe, the Dow Jones Stoxx 600 Index added 0.7 percent to 375.03. Japan's Nikkei 225 climbed 0.2 percent to 16,435.74.
In other markets, Treasuries recovered from a decline and were little changed after demand in a monthly auction of two-year notes signaled investors expect additional interest-rate cuts by the Fed. The dollar rebounded from a record low against the euro.
The Russell 2000 Index, a benchmark for companies with a median market value of $647 million, gained 0.8 percent to 809.12. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, climbed 0.6 percent to 15,338.03. Based on its advance, the value of stocks increased by $104.9 billion.
Alcoa Inc. (AA US)
American Axle & Manufacturing Holdings Inc. (AXL US)
Bear Stearns Cos. (BSC US)
Chevron Corp. (CVX US)
Ford Motor Co. (F US)
General Motors Corp. (GM US)
KB Home (KBH US)
Lear Corp. (LEA US)
McCormick & Co. (MKC US)
Merrill Lynch & Co. (MER US)
MetLife Inc. (MET US)
Monsanto Co. (MON US)
Newmont Mining Corp. (NEM US)
Office Depot Inc. (ODP US)
Procter & Gamble Co. (PG US)
Pulte Homes Inc. (PHM US)
SLM Corp. (SLM US)
Whole Foods Market Inc. (WFMI US)
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