Dec. 1 (Bloomberg) -- U.S. stocks rose as crude-oil prices plummeted more than $3 a barrel, bolstering optimism that the economy can sustain its expansion. The Standard & Poor's 500 Index closed at its highest since Aug. 7, 2001.

Retailers such as Wal-Mart Stores Inc. gained after the government reported that consumer spending accelerated in October. Equipment makers including Honeywell International Inc. advanced after a survey showed U.S. factories received more orders last month.

``Crude is a positive for the market,'' said Frank Gannon, who oversees $1.4 billion at AIG SunAmerica Asset Management in Jersey City, New Jersey. ``The economic statistics continue to be pretty positive and it's the beginning of a new month. People have the expectation that December will be a good month for stocks.''

The S&P 500 added 17.55, or 1.5 percent, to 1191.37, as 22 of its 24 industry groups rose. The Dow Jones Industrial Average gained 162.20, or 1.6 percent, to 10,590.22. Advances in Intel Corp. and other semiconductor shares lifted the Nasdaq Composite Index to its highest since Jan. 26. The benchmark climbed 41.42, or 2 percent, to 2138.23.

December Rally

History suggests the rally has further to go. Over the last decade, the S&P 500 averaged a 1.4 percent rise in December and has fallen only twice in the month -- in 2002 and 1996. The benchmark finished November with its best monthly gain of the year, up 3.9 percent.

More than three stocks rose for every one that fell on the New York Stock Exchange. Almost 1.8 billion shares changed hands on the Big Board, 25 percent more than the three-month average.

Oil prices had their biggest drop in three years after the government said U.S. heating oil inventories increased last week. Crude for January delivery tumbled 7.4 percent to $45.49 in New York. Prices have slumped 18 percent from a record $55.67 on Oct. 25. The S&P 500 has climbed 8.8 percent in that period.

Consumer spending rose 0.7 percent in October following a 0.6 percent gain in September, the Commerce Department said.

The figures, along with lower oil prices, eased concerns that holiday sales will be lackluster. An S&P 500 index of retailers advanced 1.6 percent, rebounding from a 2.9 percent retreat in the first two days of the week.

Wal-Mart, Home Depot

Wal-Mart, the world's largest retailer, gained 76 cents to $52.82, ending a five-day decline. Home Depot Inc., the No. 1 home-improvement chain, climbed 53 cents to $42.28.

Industrial stocks rose after a survey showed U.S. manufacturing strengthened more than expected. Honeywell, the biggest maker of cockpit electronics, added $1 to $36.33. United Technologies Corp., which produces Pratt & Whitney jet engines and Carrier air conditioners, advanced $2.57 to $100.15.

The Institute for Supply Management's factory index rose to 57.8 last month, the first increase since July, from 56.8 in October. Economists in a Bloomberg News survey expected 57.

The Federal Reserve said in its latest regional survey that the U.S. economy continued to expand with ``numerous reports of hiring'' and ``increased cost pressures'' from the middle of October through mid-November.

`Positive Implications'

``The economy is on a good solid growth path, which of course has positive implications for the stock market,'' said Stuart Wester, who helps manage $10 billion at USAA Investment Management Co. in San Antonio. ``Business and consumers are contributing to the growth, and I expect to see that continue.''

A gauge of companies that make semiconductors and chip equipment jumped 3.8 percent for the largest gain among the S&P 500's industry groups. Intel added 72 cents to $23.10. The No. 1 chipmaker gives investors an update on fourth-quarter results tomorrow.

Novellus Systems Inc. increased $1.41 to $28.35. The maker of machines used in chip manufacturing forecast fourth-quarter sales and profit that exceeded analysts' estimates, saying orders won't decline as much as previously expected.

International Business Machines Corp. rose $1.64 to $95.88. The biggest computer-services company said it won more than $1 billion in new contracts linked to the acquisition of two Danish businesses.

Network Appliance Inc. jumped $1.97 to $32.13. The company, which sells storage computers and software, said fiscal 2006 profit and sales will top analysts' estimates as it takes customers from rivals.

Cigna, Humana

Health insurers gained after Cigna Corp. and Humana Inc. boosted their profit predictions. Cigna, the No. 4 U.S. health insurer, said 2004 earnings excluding some items will be $950 million to $975 million, surpassing a forecast given last month. The stock climbed $5.78 to $75.80.

Humana advanced $2.31 to $27.13. The biggest insurer of U.S. military families said it will probably earn about $1.69 a share, up from its previous forecast of $1.66 to $1.69.

SBC Communications Inc. rose 61 cents to $25.78. The second- largest U.S. local-telephone company said its October acquisition of AT&T Wireless Services Inc. will give profit a bigger boost sooner than expected.

Louisiana-Pacific Corp. jumped $2.50, or 10 percent, to $26.97, for the best performance in the S&P 500. The largest North American maker of wood panels for floors and roofs gained as prices increased on housing demand in California and supply shortages in the southeastern U.S., analysts said.

The Nasdaq-100 Index Tracking Stock, formerly known by its QQQ ticker symbol, added 80 cents to $39.92 in its first day of trading since moving to the Nasdaq Stock Market. The listing for the most actively traded U.S. security will now trade under the ticker symbol QQQQ. The shares, with a total market value of about $23 billion, had been listed on the American Stock Exchange since they began trading five years ago.

Cigna Corp. (CI US)
Home Depot Inc. (HD US)
Honeywell International Inc. (HON US)
Humana Inc. (HUM US)
Intel Corp. (INTC US)
International Business Machines Corp. (IBM US)
Louisiana-Pacific Corp. (LPX US)
Nasdaq-100 Index Tracking Stock (QQQQ US)
Network Appliance Inc. (NTAP US)
Novellus Systems Inc. (NVLS US)
SBC Communications Inc. (SBC US)
United Technologies Corp. (UTX US)
Wal-Mart Stores Inc. (WMT US)

To contact the reporter on this story: Dune Lawrence in New York at dlawrence6@bloomberg.net.

Last Updated: December 1, 2004 17:08 EST