U.S. Stocks Rise for 2nd Week on Bush Plan to Avert Recession

Dec. 8 (Bloomberg) -- U.S. stocks posted their steepest two- week advance since September after President George W. Bush announced a plan to freeze some mortgage rates to prevent foreclosures from causing a recession.

Centex Corp. and D.R. Horton Inc. led homebuilders as they climbed the most in seven years. Intel Corp., Micron Technology Inc. and other semiconductor companies in the Standard & Poor's 500 Index rose the most since June following analyst predictions that demand for computers will increase. All 10 industries in the S&P 500 gained.

Stocks have rebounded after losing their 2007 gain at the end of last month, spurred by speculation the Federal Reserve will reduce interest rates to prop up the world's largest economy. The S&P 500 declined yesterday after a Labor Department report showed U.S. employers added more jobs than estimated in November, diminishing the odds that central bankers will cut their rate benchmark by half a point on Dec. 11.

``The economy is slowing, but it's not falling off a cliff,'' Jeremy Siegel, an economics professor at the University of Pennsylvania's Wharton School of Business, said during an interview in New York. ``That's important for investors.''

The S&P 500 added 1.6 percent to 1,504.66, bringing its two- week gain to 4.4 percent and its advance this year to 6.1 percent. The Dow Jones Industrial Average rose 1.9 percent to 13,625.58. The Nasdaq Composite Index climbed 1.7 percent to 2,706.16.

Quarter-Point Cut

Ten-year Treasury yields had the first weekly gain since October, rising to 4.11 percent, as traders pared bets that the Fed will reduce its rate benchmark by more than a quarter point. Two-year yields rose to 3.10 percent.

Homebuilders in the S&P 500, which fell as much as 78 percent from their July 2005 peak through Nov. 27, added 17 percent for the steepest weekly advance since August 2000. Centex gained the most, climbing 24 percent to $25.81. D.R. Horton rose 16 percent to $13.86.

Bush announced on Dec. 6 an agreement between the government and the lending industry that would freeze rates for five years on some variable rate mortgages and provide assistance to as many as 1.2 million homeowners.

The government's plan may help end the recession in the U.S. housing market, which is entering its third year. The number of Americans behind on their mortgage payments in the third quarter was the highest in 20 years, the Mortgage Bankers Association said Dec. 6.

`Muddle Through'

``The economy will muddle through without tipping into recession,'' said Joshua Feinman, chief economist in New York at Deutsche Asset Management, which oversees $798 billion. Growth will accelerate during the second half of next year, he said.

Intel gained the most in the Dow average, climbing 6.3 percent to $27.73. Thomas Weisel Partners LLC analyst Kevin Cassidy raised his rating on the world's largest chipmaker to ``overweight'' and increased his 2008 profit estimate in part because of growing demand for computers from Brazil, Russia, India and China.

Micron, the largest U.S. maker of computer-memory chips, rose 8.5 percent to $9.03. Nvidia Corp., the world's second- biggest maker of computer-graphics chips, advanced 7.4 percent to $33.88.

MBIA Inc., the largest bond insurer, lost 18 percent to $30 for the biggest decline in the S&P 500. Moody's Investors Service said MBIA is ``somewhat likely'' to face a shortage of capital that threatens its AAA credit rating.

Comcast Cuts Forecast

Comcast Corp. dropped 11 percent to $18.28. The biggest U.S. cable-television provider cut its 2007 forecasts for sales, new customers and cash flow.

Payrolls rose by 94,000 in November, the Labor Department said yesterday. The jobless rate remained at 4.7 percent for the third month in a row. Economists predicted a gain of 80,000 jobs and an unemployment rate of 4.8 percent, according to the median estimates in a Bloomberg survey.

Sales at U.S. retailers probably rose in November as discounts and wage gains helped Americans cope with near-record fuel costs, economists said before reports this week.

``The economy from a numbers standpoint is stronger than what people's perceptions are,'' said Scott Fullman, director of investment strategy at Israel A. Englander & Co. in New York, a derivatives brokerage firm for institutional clients with combined assets under management of more than $100 billion.

Lehman Brothers Holdings Inc. and H&R Block Inc. are among at least five members of the S&P 500 that will report quarterly results next week.