Aug. 2 (Bloomberg) -- U.S. stocks rose as companies continued to post better-than-expected earnings for the second quarter and government reports showed personal incomes and factory orders increased.

``Earnings growth has been strong,'' said Michael Odlum, chief investment officer at Security Benefit Group, which manages $14.5 billion in Topeka, Kansas. ``The backdrop is positive for stocks over the next six months because I think the economy will continue to surprise and exasperate economists who are still expecting it to weaken.''

Energy shares led the advance after Transocean Inc., the world's largest offshore oil and natural-gas driller, had profit that topped analysts' estimates. Chevron Corp. climbed after China's Cnooc Ltd. abandoned its bid to buy Unocal Corp., clearing the way for Chevron to make the purchase.

The Standard & Poor's 500 Index added 7.52, or 0.6 percent, to 1242.87 as of 3:27 p.m. in New York. The Dow Jones Industrial Average advanced 47.21, or 0.4 percent, to 10,670.36.

The Nasdaq Composite Index rose 19.60, or 0.9 percent, to 2214.98, heading toward its highest since June 2001. The gain was bolstered by a rally in chipmakers after Maxim Integrated Products Inc. said sales may beat expectations.

Of the 400 companies in the S&P 500 that reported quarterly earnings as of today, 71 percent beat analysts' estimates. Profit at S&P 500 members increased 14 percent in the second quarter. Analysts surveyed by Thomson Financial about a month ago estimated earnings would rise 6.6 percent.

Economic Reports

Personal incomes rose 0.5 percent in June after a 0.2 increase the previous month, the Commerce Department said. Economists expected a 0.4 percent gain. Factory orders climbed for a fourth month in June, expanding 1 percent. That matched the median economist estimate in a Bloomberg survey.

Personal spending jumped 0.8 percent following no change in May. The report's price gauge tied to spending patterns and excluding food and energy costs, Federal Reserve policy makers' preferred measure for tracking inflation, was unchanged. Economists forecast core prices would increase 0.1 percent.

``The consumer hasn't died and earnings are better than most people anticipated,'' said William Dwyer, who helps manage $11.5 billion as chief investment officer at MTB Investment Advisors in Baltimore. ``People are becoming a little more comfortable with the economic momentum that is in place.''

Two stocks were up for every one that fell on the New York Stock Exchange. Some 1.28 billion shares changed hands on the Big Board, 5.8 percent more than the same time a week ago.

Energy Shares

A gauge of energy companies contributed the most to the S&P 500's advance among 24 industry groups, climbing 1.3 percent to a record.

Transocean added $1.52 to $59.41. Profit, excluding some items, was 38 cents a share. Analysts expected 33 cents, according to the average estimates in a Thomson survey.

Chevron, the No. 2 U.S. oil company, increased 94 cents to $59.37. China's Cnooc dropped an $18.5 billion takeover of Unocal, clearing the way for Chevron to buy the oil and gas producer. Chevron's $17.3 billion cash-and-stock offer was backed yesterday by Institutional Shareholder Services, the biggest adviser to fund managers on merger votes.

Cnooc's U.S. shares jumped $3.82 to $73.16. Unocal slipped 2 cents to $64.35.

Maxim Jumps

Maxim was the best performer in the S&P 500. The maker of semiconductors for consumer electronics said first-quarter sales will be ``at least 4 percent higher'' than the previous period. That translates into sales of about $416.4 million, exceeding the $412.6 million average estimate of analysts surveyed by Thomson. Its shares jumped $3.35, or 8 percent, to $45.36.

Maxim's forecast gave the Philadelphia Semiconductor Index a 2.3 percent boost. The measure is headed toward a 13-month high.

Kinder Morgan Inc., which operates about 35,000 miles of U.S. pipelines, advanced $6.51 to $95.11. The company said late yesterday that it agreed to buy Terasen Inc. for $3.1 billion.

Gen-Probe Inc. jumped $4.49 to $48.69. The maker of products used to diagnose disease and screen blood raised its full-year profit forecast to $1.20 to $1.24 a share from a May prediction of $1.17 to $1.22.

United Therapeutics Corp. surged $12.33, or 23 percent, to $66.38. The drugmaker submitted successful interim study results of its Remodulin drug to the U.S. Food and Drug Administration and has requested to end Phase IV commitments.

Tyco, Lilly Slide

Tyco International Ltd. slumped $2.99 to $27.83. The world's biggest maker of electronic connectors cut its annual profit forecast because of lower prices for steel tubing and slowing sales of circuit boards. Per-share profit, excluding some items, will be $1.85 to $1.87 this year, down from an earlier forecast of $1.88 to $1.93.

Eli Lilly & Co. lost 93 cents to $55.76. The drugmaker said it won't seek U.S. approval to use its Arxxant drug to treat nerve damage in diabetics after two studies showed the treatment wasn't effective for that use.

Cooper Tire & Rubber Co. fell $2.89, or 14 percent, to $17.88 for the steepest decline in the S&P 500. The No. 2 U.S. tiremaker said third-quarter profit will be 10 cents to 14 cents a share, including the impact of about 8 cents from a strike. Analysts surveyed by Thomson expected 24 cents.

Career Education Corp. retreated $1.98 to $37.14. The No. 2 U.S. chain of for-profit colleges had second-quarter revenue of $497.5 million, less than the estimate of $500.9 million in a Thomson survey.

Masco Corp., the maker of Delta faucets and KraftMaid cabinets, said 2005 profit from continuing operations will fall to $2.30 as it speeds job and operations cuts. The company in May forecast profit at the low end of its prediction of $2.40 to $2.50 a share. Masco shares dropped $1.51 to $32.11.

To contact the reporter on this story: Dune Lawrence in New York at dlawrenc6@bloomberg.net.

Last Updated: August 2, 2005 15:28 EDT