U.S. Stocks Gain, Led by Energy; Exxon, ConocoPhillips Advance

U.S. stocks rose, led by energy shares, after a gain in natural gas prices boosted the earnings outlook for the stock market's best-performing industry of 2007.

Exxon Mobil Corp., the world's biggest energy company, advanced for the seventh time in eight days. ConocoPhillips, the largest U.S. natural gas producer, rose to three-month high. Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., the biggest U.S. banks, erased early gains and led financial shares to the steepest decline in the Standard & Poor's 500 Index after a report showed new-home sales fell to a 12-year low.

The S&P 500 advanced 2.12, or 0.1 percent, to 1,478.49, extending its fifth straight annual advance. The Dow Jones Industrial Average added 6.26, or 0.1 percent, to 13,365.87. The Nasdaq Composite Index decreased 2.33, or 0.1 percent, to 2,674.46. About the same number of stocks rose as fell on the New York Stock Exchange.

We don't think the prices on the energy stocks are overdone at all, said Ted Baszler, who helps manage $3 billion at Heartland Advisors Inc. in Milwaukee. They definitely have more room to run here. The long-term story for oil remains very bullish.

The S&P 500 lost 0.4 percent for the week, while the Dow slipped 0.6 percent and the Nasdaq dropped 0.7 percent.

Energy and mining companies have led the S&P 500 to a 4.2 percent advance this year as speculation the global economy will keep growing overshadowed a worsening U.S. housing slump. Oil drillers, refiners and drilling services companies have rallied 34 percent in 2007, helping the S&P 500 Energy Index more than triple in five years.

Yearly Gains

The Dow average has risen 7.2 percent in 2007, while the Nasdaq Composite has gained 11 percent.

Natural gas for February delivery rose 2.6 percent to $7.386 per million British thermal units, the highest since Dec. 12. Crude oil for February delivery touched $97.92 a barrel, rising within $1 of its record close of $98.18 on Nov. 23, before falling 51 cents to $96.11.

ConocoPhillips added 48 cents to $89.13. Exxon, also a producer of natural gas, increased $1.33 to $95. The rise in energy shares helped erase earlier losses spurred by concern falling home sales will cause a recession.

Energy is not the best leader to have because it's typically based on higher energy prices, said Richard Sichel, chief investment officer at Philadelphia Trust Co., which manages $1.5 billion in Philadelphia. You would rather see consumer and financial stocks leading the way. That would be a healthier environment.

Financial Shares

Financial shares lost 0.5 percent for their third consecutive retreat. Citigroup fell 27 cents to a five-year low of $29.29. Bank of America slid 36 cents to a three-year low of $41.10. JPMorgan Chase declined 38 cents to $43.26. Fannie Mae dropped $1.27 to $38.34.

Banks and brokerages retreated even as traders increased bets the Federal Reserve will lower interest rates at its next two meetings. The odds of a quarter-point cut to 4 percent at the Jan. 30 meeting increased to 90 percent from 76 percent, and the chances of a reduction to 3.75 percent on March 18 rose to 58 percent from 44 percent, future contracts indicate.

Purchases of new homes slid 9 percent to an annual pace of 647,000 in November and October sales were revised down to a 711,000 rate, the Commerce Department said. Last month's sales were weaker than the lowest forecast in a Bloomberg survey.

The market has been slow to grasp just how bad things were going to be for housing, said Doug Peta, market strategist at J.&W. Seligman & Co. in New York, which manages $20 billion.

Source - Bloomberg