U.S. Stocks Advance as Obama Budget Asks for More Bailout Funds

U.S. stocks rose for a second day this week after President Barack Obama’s budget proposed as much as $750 billion in new aid for the financial industry.

JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. gained more than 9 percent. Exxon Mobil Corp. and Chevron Corp. advanced as oil climbed to a one-month high. UnitedHealth Group Inc. dragged health-care stocks to the steepest loss among S&P 500 industry groups on concern Obama will cut Medicare costs. European stocks climbed for the first time in five days as Royal Bank of Scotland Group Plc planned to put assets into a U.K. government insurance program and UBS AG replaced its chief executive officer.

“You’ve got to be glued to your screen, not only to watch prices, but to see what’s coming out of Washington,” said Michael Mullaney, a Boston-based money manager at Fiduciary Trust Co., which oversees $9.5 billion. “Details are starting to flow into the market and that’s what the market needs.”

The Standard & Poor’s 500 Index added 0.6 percent to 769.43 at 12:23 p.m. in New York. The Dow Jones Industrial Average gained 46.12 points, or 0.6 percent, to 7,317.01 and the Russell 2000 Index increased 0.4 percent. Three stocks rose for every two that fell on the New York Stock Exchange.

Benchmark indexes advanced even after government reports showed orders for durable goods decreased more than economists forecast, initial jobless claims unexpectedly rose and sales of new homes plunged to a record low.

Budget Details

Obama’s first budget request also includes an overhaul of the health-care system and a program to reduce carbon-dioxide emissions. A senior administration official, speaking on condition of anonymity, said the White House hasn’t decided whether the $750 billion in additional aid will be needed. He said it will be put in the budget as “placeholder.”

JPMorgan rallied 10 percent to $24. Bank of America jumped 9.5 percent to $5.65. Wells Fargo added 11 percent to $14.86.

An S&P 500 index of banks, which gained 11 percent today, is up 35 percent over the past four days, poised for a record weekly advance. The index tumbled 21 percent last week on concern the government would seize control of lenders.

Europe’s Dow Jones Stoxx 600 Index gained 1.9 percent, while the MSCI Asia Pacific Index declined 0.9 percent.

U.S. stocks fell yesterday as dividend cuts triggered a sell-off in insurers and an unexpected drop in home sales dragged down industrial shares, overshadowing speculation that banks will pass the government’s so-called stress tests.

Energy Gains

Exxon climbed 0.7 percent to $72.53. Chevron increased 1.3 percent to $64.31. The S&P 500 Energy Index gained 2.1 percent.

Rowan Cos. rallied 11 percent to $12.38, the most among S&P 500 oil producers. The oil and natural-gas driller reported per- share earnings that beat the average analyst estimate by 18 percent.

Crude oil for April delivery climbed 4.9 percent to $44.59 a barrel on the New York Mercantile Exchange, the highest intraday price since Jan. 27.

UnitedHealth, WellPoint Inc. and Aetna Inc., the biggest U.S. medical insurers, dragged health-care stocks in the S&P 500 to a 1.7 percent loss, the steepest decline among 10 industries.

Obama will ask Congress to set aside $634 billion over 10 years toward paying for changes to the U.S. health-care system, according to an administration official. About half the money would come from cost cuts, mostly in Medicare, the health program for the elderly, the official said.

UnitedHealth tumbled 11 percent to $20.48, the lowest since Dec. 9. WellPoint slid 7.8 percent to $36.09. Aetna fell 11 percent to $23.99.

Health-Care Stocks Retreat

The S&P 500 group of drugmakers, insurers and biotechnology companies ranks as the second biggest in the index, making up 16 percent, compared with fourth place at the beginning of last year. The weighting has risen as the stocks weathered the recession and financial crisis better than banks and energy producers last year.

SLM Corp., the largest U.S. student lender known as Sallie Mae, fell as much as 37 percent after Obama’s budget called for an end to loan subsidies.

Goldman Sachs Group Inc. and UBS AG strategists cut their year-end forecasts for the S&P 500 today on expectations earnings will keep declining. David Kostin at Goldman Sachs lowered his estimate to 940 from 1,100 and said the index may fall as much as 15 percent in “the near term.” UBS’s David Bianco cut his prediction to 1,100 from 1,300.

‘Critical Signposts’

“We have seen some progress with regard to two critical signposts on the way to a sustained rally: passage of a fiscal stimulus plan and some clarity surrounding the Financial Stability Plan,” wrote Kostin. “However, we have yet to see any improvement in two other key signposts: home price stabilization and declines in financials’ losses.”