U.S. stocks rebounded from their biggest plunge in four years after Federal Reserve Chairman Ben S. Bernanke said the economy will continue growing and the nation’s largest financial institutions advised investors the bull market isn’t over.
Shares of consumer, telephone and health-care companies, whose earnings are less reliant on swings in the economy, led the advance. Procter & Gamble Co. climbed the most in seven months for the best performance in the Dow Jones Industrial Average. Sprint Nextel Corp. rose after its sales beat analysts’ estimates. Merck & Co. gained on a higher profit forecast.
European and Asian stocks slumped, while emerging markets had their steepest two-day drop in eight months in the wake of yesterday’s U.S. selloff. In all, more than $1 trillion of global stock market value was wiped out over the last two days. The Dow average completed its worst month since April 2005.
“People are poking around amidst the rubble of yesterday’s market collapse, looking for good things to buy,” said John Carey, who manages about $12 billion at Pioneer Investment Management in Boston. “The consumer economy here in the U.S. is still pretty strong. The longer-term picture continues to be encouraging.”
The Dow industrials added 52.39, or 0.4 percent, to 12,268.63 as strategists at Merrill Lynch & Co., Citigroup Investment Research and UBS AG recommended buying stocks. The Standard & Poor’s 500 Index rallied 7.78, or 0.6 percent, to 1406.82. The Nasdaq Composite Index increased 8.29, or 0.3 percent, to 2416.15.
Before yesterday’s tumble, the S&P 500 had gained 2.2 percent for the year, building on four years of advances. The S&P 500 and Nasdaq last week closed at six-year highs, while the Dow set a record. Both the S&P 500 and Dow have now declined in 2007, while the Nasdaq is little changed.
The Dow dropped 2.8 percent in February, while the S&P 500’s 2.2 percent slide snapped eight straight months of gains.
The advance in stocks came even as evidence mounted that growth in the world’s biggest economy is slowing. New home sales plunged and manufacturing contracted, data showed. A report yesterday showing orders for durable goods slid the most since October was blamed by many investors for the market selloff.
Bernanke said there didn’t appear to be “any single trigger” for the rout in stocks and that financial markets “seem to be working well” now. He also cited a “reasonable possibility” that the economy will show signs of strengthening around the middle of the year. He spoke in response to questions during testimony at the House Budget Committee.
Treasuries fell and the dollar advanced after Bernanke’s remarks, while oil rose to the highest close of the year. Crude oil futures gained 0.5 percent to $61.79 a barrel in New York.
Strategists today recommended investors keep buying stocks given the outlook for economic and earnings growth.
“Following a long, correction-free rally in equity markets, the move appears more technical than fundamental,” wrote Darren Read and Larry Hatheway of UBS’s global asset allocation team in a report distributed today. “We use this opportunity to add to our equity overweight.”
Europe’s Dow Jones Stoxx 600 Index had the worst two-day slide since 2002, while Asian shares fell the most in eight months. Emerging markets slumped, with stocks falling in India, Russia and Turkey. Chinese shares bounced back and recouped some of yesterday’s losses that triggered the global selloff.
“To equate emerging markets with the U.S. is a little naive in terms of their risk,” said Marshall Front, chairman of Front Barnett Associates LLC in Chicago, which manages $800 million. “However, that’s how things were being priced, with very low risk premiums. That needed to be cured and we took a step yesterday toward doing that.”
On the New York Stock Exchange, seven stocks rose for every five that fell. Some 2.26 billion shares changed hands on the Big Board, 47 percent more than the three-month daily average.
Shares of P&G jumped $2.24, or 3.7 percent, to $63.49 for the best gain since August. The largest U.S. consumer-products maker postponed the euro portion of its proposed $4 billion bond sale.
P&G had intended to issue at least $2 billion in bonds denominated in euros before the disruption in global markets caused investors to flee all but the safest assets. The company still sold $1.4 billion in 30-year bonds denominated in dollars today.
Sprint climbed 85 cents to $19.30. The third-biggest U.S. mobile-phone company said fourth-quarter profit increased 32 percent as sales rose 6.7 percent to $10.4 billion. Analysts had estimated sales of $10.3 billion, according to a Bloomberg News survey. Citigroup upgraded the shares to “buy” from “hold.”
Merck, the nation’s third-largest maker of prescription drugs, added 97 cents to $44.15. The company said it expects to report adjusted earnings per share in the first quarter of 63 cents to 67 cents on higher demand for new drugs including a cervical cancer vaccine and a diabetes pill. Analysts had estimated 59 cents, on average.
Also in the health-care industry, Hospira Inc. reported a 78 percent jump in earnings last quarter, thanks to an increase in sales. Shares of the hospital supply company that was spun off from Abbott Laboratories surged $2.41 to $38.31.
Pioneer Investment’s Carey said he is eyeing some consumer, health-care and materials shares, though he declined to name companies.
Housing stocks fell as the government said new home sales plunged the most in 13 years. Sales dropped 16.6 percent to an annual rate of 937,000 in January, less than any economist had forecast in a Bloomberg survey.
Fifteen of the 16 homebuilders in S&P indexes declined. Toll Brothers Inc., the largest U.S. luxury homebuilder, lost 72 cents to $29.86.
Manufacturing contracted for a second month. The National Association of Purchasing Management-Chicago’s business barometer fell to 47.9 this month from 48.8 in January. A reading lower than 50 signals contraction.
Housing and factory production have already put a drag on economic growth. The Commerce Department said gross domestic product last quarter rose at a 2.2 percent annual rate, compared with a 3.5 rate reported on Jan. 31 and a 2 percent pace in the third quarter, as manufacturers reduced stockpiles. Consumer spending, which accounts for about 70 percent of the economy, increased at an annual rate of 4.2 percent in the fourth quarter.
In the same report, the Fed’s preferred measure of inflation rose 1.9 percent in the period, less than previously estimated.
“We’ve been thinking economic growth was going to moderate here,” said Steven Folker, who helps oversee $3 billion as managing director of growth strategies at Fifth Third Asset Management in Cincinnati. “The Fed is closer to being able to cut rates again. That will be a positive for the stock market.”
Folker said he is looking for opportunities to buy technology, financial services and health-care stocks.
Fremont General Corp. slumped $2.84 to $8.81. The third- largest provider of subprime U.S. mortgages through brokers and lenders postponed filing earnings for the fourth quarter and for the year 2006.
S&P 500 shares, called Spiders, added $1.43 to $140.93. Nasdaq-100 Index tracking shares, known by their QQQQ symbol, gained 14 cents to $43.33.
S&P 500 futures expiring in March advanced 13.60 to 1408.90 on the Chicago Mercantile Exchange. Nasdaq-100 futures increased 15 to 1765.50.
The Russell 2000 Index, a benchmark for companies with a median market value of $662 million, rose 0.1 percent to 793.30. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, gained 0.3 percent to 14,249.62. Based on its advance, the value of stocks increased by $5