U.S. Stocks Erase Advance as SunTrust CEO Predicts Bank Losses

Diver

By Jeff Kearns

Aug. 24 (Bloomberg) -- U.S. stocks swung between gains and declines as financial institutions slumped after SunTrust Banks Inc. said lenders face more credit losses and commercial real estate may falter through 2010. Rallies in commodity prices had sent equities higher earlier.

Banks in the Standard & Poor’s 500 Index fell 1.7 percent as SunTrust Chairman and Chief Executive Officer James Wells III said “the industry is a long way from declaring any sort of victory.” Ford Motor Co. declined 4.3 percent before the “cash for clunkers” program for cars expires today. Commodities and equities rallied globally as leaders of the biggest central banks buttressed confidence in the economic recovery.

The S&P 500 rose 0.1 percent to 1,026.99 at 1:59 p.m. in New York after earlier climbing as much as 0.9 percent. The Dow Jones Industrial Average added 11.79 points, or 0.1 percent, to 9,517.75. The MSCI World Index of 23 developed nations advanced 0.7 percent. The UBS Bloomberg Constant Maturity Commodity Index increased 1 percent.

“Maybe we’re not completely out of the financial crisis,” said E. William Stone, who oversees $101 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “We’ve had almost no economic data, plus light trading and a good week last week, so that may give people an itchy trigger finger to take profits if they sniff trouble.”

Most Expensive Since 2004

The S&P 500 added 2.2 percent last week, sending the S&P 500 to the highest level since October, as rising commodity prices and a surge in home sales signaled an economic recovery. The index’s 52 percent rebound from a 12-year low in March left it valued at 18.9 times the profits of its companies, the most expensive since 2004, according to data compiled by Bloomberg.

Copper prices rose to a one-week high in New York, with futures for December delivery gaining 0.6 percent to $2.912 a pound. December-delivery copper on the Shanghai Futures Exchange jumped 5 percent, the daily limit. Crude oil gained 0.7 percent to a 10-month high of $74.43 a barrel.

Central bankers spurred a rally in global equities and commodities earlier. Federal Reserve Chairman Ben S. Bernanke and European Central Bank President Jean-Claude Trichet, speaking at the annual central bankers’ symposium in Jackson Hole, Wyoming, said the world economy is pulling out of recession.

“You’ve moved to a stage where investors accept that it’s a bull market and are worried that they’re missing it,” said Hugh Johnson, who manages more than $1.6 billion as chairman of Albany, New York-based Johnson Illington. “The underlying economic numbers confirm that it’s a bull market.”

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.