Jan. 28 (Bloomberg) -- U.S. stocks rose this week, rebounding from their lows for the year as forecasts from companies including Caterpillar Inc. and Microsoft Corp. eased concern about the outlook for corporate profits.

Results from Honeywell International Inc. and United Technologies Corp. also helped the Dow Jones Industrial Average erase its 2006 loss even after a government report showed economic growth last quarter was the slowest since 2002.

Stock indexes had tumbled last week after disappointing earnings from companies such as Intel Corp. and General Electric Co. rattled investors and energy prices rose.

``We've got reasonably good earnings momentum,'' said Philip Dow, director of equity strategy at RBC Dain Rauscher Corp. in Minneapolis. ``While confidence has been shaken somewhat by some of these earnings releases and revenue shortfalls, my belief is we're in pretty good shape.''

This week, the Dow average advanced 2.3 percent to 10,907.21, rebounding from a two-month low of 10,667.39 reached on Jan. 20. The Dow has gained 1.8 percent in 2006.

The Standard & Poor's 500 Index added 1.8 percent to 1283.72, recouping most of a 2 percent loss a week earlier. The Nasdaq Composite Index was up 2.5 percent this week to 2304.23. All three had their best weekly rise in three.

Four-Year High

Stocks began falling earlier this month as the pace of earnings picked up. The S&P 500 had its biggest one-day loss since 2003 on Jan. 20, and dropped as much as 2.5 percent from its four-year high reached Jan. 11.

The profit concerns subsided this week as more than 140 S&P 500 companies released earnings, making it the busiest period for fourth-quarter results. Through yesterday, 63 percent of the 244 companies that had reported fourth-quarter results surpassed analysts' estimates. That's above the 59 percent ratio for the first 100 companies that reported, according to Bloomberg analysis of data from Thomson Financial.

Caterpillar, the world's No. 1 maker of earth-moving equipment, this week raised its 2006 per-share profit forecast to $4.65 to $5 from an estimate of $4.52 to $4.91 and said it expects to be able to charge higher prices. Fourth-quarter profit of $1.20 a share exceeded analysts' estimates in a survey by Thomson, which doesn't provide Bloomberg News with the parameters for estimates. Caterpillar jumped 11 percent to $67.53 and was the biggest contributor to the Dow average's advance.

Microsoft

Microsoft also supported the Dow average, adding 5.2 percent to $27.79. The world's No. 1 software maker said per- share earnings this quarter will be 32 cents to 33 cents on revenue of $10.9 billion to $11.2 billion as it benefits from new product releases such as the SQL server and Xbox 360 video- game console. Goldman, Sachs & Co. analyst Rick Sherlund expected revenue of $11 billion and profit of 31 cents.

United Technologies, the world's largest maker of elevators and air conditioners, rallied 6.8 percent to a record $58.75. Fourth-quarter profit, excluding some items, was 71 cents a share. Analysts, on average, expected 70 cents in a survey by Thomson.

Shares of Honeywell, the world's biggest maker of aircraft cockpit controls, added 5.5 percent to $37.81 after the company said it expects 2006 per-share earnings of $2.40 to $2.50 on greater demand for commercial aircraft. It had previously forecast profit of $2.35 to $2.50 a share.

The encouraging profit announcements overshadowed a report that showed economic expansion slowed. Gross domestic product rose at a 1.1 percent rate in the fourth quarter, less than the 2.8 percent economists expected and the slowest pace since the fourth quarter of 2002.

`Don't Believe It'

``Frankly, I don't believe it,'' said Randy Bateman, who oversees $11.8 billion as chief investment officer at Columbus, Ohio-based Huntington Capital Corp. ``It will be revised and it will be revised upward. I don't think we had that bad a Christmas season and business spending has hung in there. The market will do pretty well.''

Other economic data was more encouraging. December orders for durable goods, items made to last at least several years, increased 1.3 percent to $228 billion, more than the 1 percent economists expected.

A report yesterday showed sales of new homes unexpectedly rose 2.9 percent to a 1.269 million annual rate last month, easing concern that a housing boom may have ended. The National Association of Realtors had said on Jan. 25 that sales of previously owned homes declined for a third straight month in December.

A pullback in oil prices also helped the advance over the past five days. Crude oil for March delivery slipped 1.1 percent this week to $67.76 a barrel in New York as a report from the Energy Department showed U.S. fuel supplies increased for a fourth straight week.

Steelmakers Surge

Shares of Allegheny Technologies Inc., a stainless steel producer, rallied 27 percent to $51.74 for the biggest gain in the S&P 500 average. Excluding some items, the company reported fourth-quarter profit of 96 cents a share. Analysts expected 88 cents according to Thomson.

Shares of other steelmakers such as U.S. Steel Corp. surged on speculation they may be targets for takeovers after Mittal Steel Co. made an unsolicited bid for rival Arcelor SA.

U.S. Steel, the nation's biggest steelmaker, climbed 17 percent to $58.73. Nucor Corp., the No. 2 U.S. steel company, added 22 percent to $85.50.

The rally in steelmakers and higher metal prices helped push a gauge of raw-material producers up 4.9 percent for the best performance among 10 industry groups in the S&P 500.

Alcoa

Alcoa Inc., the world's biggest aluminum maker, gained 8.7 percent to $31.30 amid speculation the metal's rally to a 17- year high will help the company boost earnings. Aluminum reached $2,526 a metric ton in London this week. Alcoa on Jan. 9 announced profit that trailed analysts' estimates.

General Motors Corp. jumped 19 percent to $23.80 for its biggest weekly gain since at least August 1980, according to Bloomberg data. Regulatory filings showed that billionaire Kirk Kerkorian's Tracinda Corp. purchased an additional 12 million shares, boosting its stake in the world's largest automaker to 9.9 percent. The weekly gain came even as GM said it was unprofitable on an annual basis for the first time in 13 years.

A gauge of auto-related companies climbed 7.8 percent for the best performance among 24 industry groups in the S&P 500.

Ford Motor Co., the second-largest U.S. automaker, gained 9.5 percent to $8.65 after the company said it would close 14 manufacturing facilities and cut up to 30,000 jobs over the next six years. The company also announced quarterly profit excluding some items, of 26 cents a share. On that basis, analysts predicted earnings of 1 cent a share, according to Thomson.

Disappointing Results

Among companies whose results disappointed investors were 3M Co. and Johnson & Johnson.

Shares of 3M, the maker of more than 50,000 products, retreated 3.4 percent to $72.65. Fourth-quarter sales were $5.33 billion, while analysts expected $5.4 billion. This year, revenue will rise 4 percent to 7 percent, 3M said, below its long-term target of 5 percent to 8 percent set by former CEO James McNerney.

J&J also fell 3.4 percent to $58.71, matching 3M's retreat for the biggest decrease in the Dow average. Fourth-quarter sales at the world's biggest maker of medical devices declined to $12.6 billion from $12.8 billion. Analysts expected sales of $13.2 billion, according to Thomson.

Separately, Guidant Corp., the world's No. 2 maker of implantable defibrillators and pacemakers, accepted Boston Scientific Corp.'s $27 billion offer over a bid from J&J.

To contact the reporter on this story: Colleen McElroy in New York at cmcelroy@bloomberg.net; Edgar Ortega in New York at barrales@bloomberg.net.

Last Updated: January 28, 2006 11:22 EST