U.S. Stocks Gain as Housing Data Overshadows Stimulus Concern

Oct. 27 (Bloomberg) -- U.S. stocks rose for the first time in three days after home prices climbed for a third consecutive month, overshadowing concern that more governments around the world will wind down stimulus efforts as the economy recovers.

Lennar Corp. advanced 1.6 percent to lead gains in homebuilders. Verizon Communications Inc. rallied 1.7 percent after Wells Fargo & Co. recommended the shares. A gauge of emerging-market equities tumbled 1.5 percent after India began withdrawing its record monetary stimulus.

“Earnings are good, we continue to see stabilization in housing prices,” said Mark Bronzo, a money manager at Security Global Investors, which oversees $21 billion in Irvington, New York. “Ultimately, that should give support to the stock market.”

The Standard & Poor’s 500 Index added 0.4 percent to 1,071.11 at 9:53 a.m. in New York. The Dow Jones Industrial Average increased 51.85 points, or 0.5 percent, to 9,919.81.

The S&P 500 index has rallied 58 percent from a 12-year low on March 9 amid growing confidence a U.S. economic recovery will drive profit growth. The S&P/Case-Shiller home-price index climbed 1 percent in August from the prior month on a seasonally adjusted basis, adding to speculation that the nation is emerging from the worst recession in seven decades.

A gauge of 12 homebuilders in the S&P 500 rose as much as 0.8 percent, led by Pulte Homes Inc. and Lennar Corp.

Verizon had the second-steepest gain in the Dow average, rising 1.7 percent to $29.13. The second-largest U.S. phone company was raised to “outperform” at Wells Fargo & Co., which said “wireline margins troughed in Q3 and should be a driver of upside going forward.”

‘Drop Painfully’

Jeremy Grantham, the chief investment strategist at Boston- based Grantham Mayo Van Otterloo & Co., said stocks will “drop painfully from current levels” in the coming year amid disappointing economic data and profits as margins shrink. The benchmark S&P 500 for U.S. equities fell 1.2 percent to 1,066.95 yesterday, higher than Grantham’s estimate for its so-called fair value at 860.

Grantham said his firm has recently reduced equity holdings from a “neutral” 65 percent weighting in its portfolio to 62 percent, leaving “room to pull back further” should markets continue to climb.