Oct. 31 (Bloomberg) -- U.S. stocks staged their biggest two-day rally in almost a year as oil prices closed below $60 a barrel and reports showed gains in consumer incomes and spending.

The advance pared the October loss for the Standard & Poor's 500 Index to 1.8 percent, the steepest since April. Better-than- forecast monthly sales from Wal-Mart Stores Inc. and more than $17 billion in proposed acquisitions aided today's climb.

``The market is certainly taking its cue from oil prices,'' said David Rolfe, who manages $450 million as chief investment officer of Wedgewood Partners Inc. in St. Louis. ``The economic news has been, on balance, better than expected. We got to a point where we endured a short-term selloff, the short-term sentiment got to an extreme, and we were ripe for a rebound.''

The S&P 500 rose 8.60, or 0.7 percent, to 1207.01. The Dow Jones Industrial Average added 37.30, or 0.4 percent, to 10,440.07. The Nasdaq Composite Index gained 30.42, or 1.5 percent, to 2120.30.

The S&P 500's 2.4 percent rise the last two days is the biggest since November 2004. The gain on Oct. 28 was sparked by a government report that showed the economy expanded at a 3.8 percent pace in the third quarter, alleviating investor concern that higher fuel costs will curb profit growth, spur inflation and push the Federal Reserve to keep raising interest rates. The Dow average lost 1.2 percent in October, while the Nasdaq slumped 1.5 percent.

$60 Oil

Crude for December delivery dropped 2.4 percent to $59.76 a barrel in New York, the first close below $60 since July. Expectations that warmer-than-normal weather may cut consumption in the U.S. Northeast caused the retreat.

Evidence of economic and earnings growth may spark a rebound from October's decline. Since 1950, the S&P 500 has fallen in October 22 times, according to research from Richard McCabe, technical research analyst at Merrill Lynch & Co. in New York. In 18 of those years, the benchmark posted an increase for November and December combined, averaging a gain of 5.9 percent.

``It looks to me as though October has done its usual thing of worrying everybody and providing a low point from which the market can rally,'' said Rod Smyth, chief investment strategist at Wachovia Securities LLC in Richmond, Virginia.

Fed policy makers tomorrow will probably increase the Fed's benchmark lending rate by a quarter point to 4 percent, 85 of 88 economists surveyed by Bloomberg News said.

Retailers Jump

A measure of retailers jumped 2.5 percent for the biggest gain among two dozen industry groups in the S&P 500.

Wal-Mart, the world's largest retailer, rallied $1.81, or 4 percent, to $47.31 for the best performance in the Dow average. The company said October same-store sales rose 4.3 percent, beating its forecast of 2 percent to 4 percent.

Home Depot Inc., the No. 1 U.S. home improvement chain, added 52 cents to $41.04.

Placer Dome Inc. surged $3.44 to $19.95. Barrick Gold Corp., the world's third-biggest gold producer, made an unsolicited $9.2 billion bid for Placer Dome, the fifth-biggest gold miner. Placer Dome investors would get $20.50 a share with 13 percent in cash and the rest in Barrick shares, Toronto-based Barrick said. Barrick shares lost $1.95 to $25.25.

Chiron Corp., a U.S. vaccine maker recovering from a manufacturing shutdown, rose 74 cents to $44.14. Novartis AG will acquire the 57.8 percent of Chiron that it doesn't own after increasing a cash offer for the stake to $5.1 billion.

Saks Inc. advanced $1.49 to $18.15. The luxury retailer agreed to sell its Northern department-store chain to Bon-Ton Stores Inc. for $1.1 billion to focus on rebuilding or selling its Saks Fifth Avenue unit.

Economic Reports

Consumer incomes increased 1.7 percent in September, the biggest gain since December 2004, the Commerce Department said. Economists surveyed expected growth of 0.3 percent. Consumer spending rose by 0.5 percent, inline with economists' expectations. Spending when adjusted for inflation dropped for a second month to 0.4 percent, after falling 1 percent in August.

The National Association of Purchasing Management-Chicago said its Business Barometer, which is based on a survey of executives in the region, rose to 62.9 from 60.5 in September. Numbers higher than 50 signal growth. Economists in a Bloomberg News survey expected an October reading of 57.4.

`Start Running'

The economic reports today and Oct. 28 show ``we're not falling apart,'' said Kurt Brunner, who helps manage $1.9 billion for Swarthmore Group in West Chester, Pennsylvania. ``People are saying `hey, we had a sell off and we're through a lot of the earnings and they've been OK, and we've got two months left to the year, so let's start running.'''

Five stocks rose for every one that fell on the New York Stock Exchange. Almost 1.91 billion shares changed hands on the Big Board, 20 percent more than the three-month average.

A 2.1 percent drop in McDonald's Corp., the biggest restaurant chain, limited the Dow's advance. Chief Executive Jim Skinner told franchisees that the company will not spin off its company-owned stores or create a real-estate investment trust.

Hedge fund Pershing Square Capital Management LP in September acquired a 4.9 percent stake in the chain, leading some investors to predict the fund would urge McDonald's to spin off company outlets and create a REIT with its real estate.

Caterpillar Inc. gained $1.52, or 3 percent, to $52.59 for the second-best performance in the Dow average. The world's largest maker of earthmoving equipment expects demand from the mining and construction industries to help bolster revenue by 66 percent over the next five years to $50 billion.

Apple

Apple Computer Inc. increased $3.12 to a record $57.59. The maker of the iPod music player has sold more than 1 million videos that run on the devices since adding the programs less than three weeks ago.

Google Inc., the most-used Internet search engine, advanced $13.97 to $372.14. The company is becoming one of the leading players in the world of advertising, the New York Times reported, citing Goldman, Sachs & Co. analyst Anthony Noto. He estimates Google will sell $6.1 billion in advertisements this year, according to the newspaper.

Valero Energy Corp., the No. 1 U.S. oil refiner, rallied $5.74 to $105.24. The company said earnings expectations for the current fourth quarter are ``significantly too low.'' Third- quarter profit also exceeded forecasts.

Acquisitions

Other U.S. companies involved in acquisitions today include Cumulus Media Inc. and Honeywell International Inc.

Cumulus and private-equity partners agreed to buy Susquehanna Pfaltzgraff Co.'s radio unit for $1.2 billion, creating a company with 343 stations in 67 markets. Cumulus shares rallied $1.22 to $12.16.

Honeywell, the world's largest maker of factory and airplane-cockpit controls, added 60 cents to $34.20. MacAndrews & Forbes Holdings Inc. agreed to buy Honeywell's Clarke American check-printing services business for $800 million.

PMC-Sierra Inc., which makes chips for telecommunications switches and routers, jumped 76 cents, or 12 percent, to $7.10 for the best performance in the S&P 500. The company said it agreed to buy a semiconductor business from Kohlberg Kravis Roberts & Co. and Silver Lake Partners for $425 million in cash.

Biogen Idec Inc. gained $2.14 to $40.63. JPMorgan analysts including Ronald Renaud said the company's Tysabri treatment, withdrawn from the market in February, is likely to be reintroduced in 2006. They increased their rating on the shares to ``overweight'' from ``neutral.''

Shares of Kellogg Co., the No. 1 U.S. cereal maker, sank $2.29, or 4.9 percent, to $44.17 for their biggest drop in three years. The company forecast full-year earnings below analysts' estimates, citing higher energy costs.

Spiders, Futures

S&P 500 shares, called Spiders, rose 33 cents to $120.13. Nasdaq-100 tracking shares, known by their QQQQ symbol, advanced 55 cents to $38.87.

S&P 500 futures expiring in December climbed 10.10 to 1209.80 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures jumped 26 to 1586.50.

The Russell 2000 Index, a benchmark for companies with a median market value of $563 million, was up 1.8 percent at 646.61. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, added 109.91, or 0.9 percent, to 12,043.73. Based on the changes in the Wilshire, the value of stocks increased by $137.4 billion.

Apple Computer Inc. (AAPL US)
Biogen Idec Inc. (BIIB US)
Caterpillar Inc. (CAT US)
Chiron Corp. (CHIR US)
Cumulus Media Inc. (CMLS US)
Google Inc. (GOOG US)
Home Depot Inc. (HD US)
Honeywell International Inc. (HON US)
Kellogg Co. (K US)
McDonald's Corp. (MCD US)
Placer Dome Inc. (PDG US)
PMC-Sierra Inc. (PMCS US)
Saks Inc. (SKS US)
Valero Energy Corp. (VLO 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: October 31, 2005 17:28 EST