Dec. 8 (Bloomberg) -- U.S. stocks rose as the dollar rallied, easing concern that international investors would avoid the market. Health-care shares climbed after Merck & Co.'s 2005 earnings forecast exceeded some analysts' estimates.

The dollar's advance ``translated into a big return to confidence in American financial assets,'' said Alan Kral, who helps manage $750 million at Trevor Stewart Burton & Jacobsen Inc. in New York.

General Electric Co. gained after Lehman Brothers Inc. recommended buying the shares because of the company's earnings prospects.

``The trend of corporate profits is sufficiently strong that it'll justify higher moves in the indexes,'' said Kral.

The Standard & Poor's 500 Index added 5.74, or 0.5 percent, to 1182.81. An index of health-care stocks had the biggest rally among the benchmark's 10 industry groups. The Dow Jones Industrial Average rose 53.65, or 0.5 percent, to 10,494.23. The Nasdaq Composite Index gained 11.45, or 0.5 percent, to 2126.11.

Three stocks advanced for every two that dropped on the New York Stock Exchange. Some 1.5 billion shares changed hands on the Big Board, 7 percent more than this year's daily average.

Dollar Climbs

Benchmark indexes got a boost as the dollar reached a three- week high against the yen and rallied versus the euro. The dollar's drop this year has made U.S. equities less attractive to international investors because it diminishes their returns when converted back into their home currencies.

The Dow average, which is up 0.4 for the year in dollar terms, has fallen 2.8 percent when taking into account the gain in the yen. It has lost 5.4 percent when priced in euros.

A weakening dollar may prompt investors outside the U.S. to ``buy less of our dollar-based securities and of course that would hurt the market,'' said Bruce Bittles, chief investment strategist at Robert W. Baird & Co. in Nashville, Tennessee. A falling dollar is also ``inflationary because U.S. producers can raise the price of their goods relative to foreign producers.''

The U.S. currency rose to 104.09 yen in New York from 102.97 late yesterday, and to $1.3329 per euro from $1.3420, according to electronic currency-dealing system EBS. The dollar's gains trimmed its decline this year to 2.8 percent against the yen and 5.5 percent versus the euro.

Stocks rose even as oil prices increased. Oil for January delivery added 1.2 percent to $41.94 a barrel in New York.

Merck, Drugmakers

A gauge of drugmakers advanced 1.6 percent and was the biggest contributor to the S&P 500's rise. For the year, the group has fallen 3 percent for the only decline among 10 industry groups in the benchmark.

Merck gained 80 cents to $28.69. The No. 2 U.S. drugmaker said profit next year will be $2.42 to $2.52 a share, beating the lowest estimate in a Thomson Financial survey of analysts. Merck also reiterated its fourth-quarter earnings forecast even after the loss of $750 million in Vioxx sales and other costs associated with the September withdrawal of the painkiller.

The stock's 13 percent retreat this quarter makes it the Dow average's worst performer.

Pfizer Inc. added 30 cents to $27.50. Sales of Lipitor, the world's biggest-selling medication, may rise 15 percent in each of the next five or six years, said Chief Executive Officer Hank McKinnell. Revenue from the cholesterol-lowering drug would more than double to about $21 billion after six years.

`Time to Buy'

``It's time to buy, it's a bottom for the stocks,'' said Ted Parrish, who manages the $137 million Henssler Equity Fund in Marietta, Georgia. Concerns about Merck's Vioxx and similar drugs are ``priced in and more. We're overweight in health-care stocks -- we're just waiting for their boat to come in.''

Johnson & Johnson climbed 74 cents to $61.15. The biggest maker of medical devices may buy defibrillator maker Guidant Corp. for $24 billion, people familiar with the situation said. The market for pacemakers and implantable defibrillators, which correct irregular heartbeats, may grow more than 24 percent this year to $4.7 billion, analysts estimate.

General Electric, the world's largest company by market value, advanced 40 cents to $35.71 after Lehman raised the shares to ``overweight'' from ``equal weight.'' The company's energy and financial businesses will help General Electric post 15 percent earnings growth over the next three years, analyst Robert Cornell wrote in a note to clients.

Gold shares fell as the dollar's rebound eroded the metal's appeal as an alternative to stocks and bonds, sending gold prices to their steepest decline in seven months. Newmont Mining Corp., the No. 1 gold producer, lost 55 cents to $44.76. Barrick Gold Corp., the third biggest, retreated 49 cents to $23.09.

Texas Instruments

Texas Instruments Inc. dropped 97 cents to $24.05. The No. 1 maker of mobile-phone processors said that fourth-quarter revenue will be $3.02 billion to $3.14 billion, missing an October prediction of $2.96 billion to $3.2 billion, as industrial customers continue to reduce inventory.

``Texas Instruments is one of the bellwether companies in the business because its chips are tied to computers and cell phones,'' said Charles Lieberman, chief investment officer at Advisors Financial Center in Paramus, New Jersey. ``If they are seeing a slowdown, that will harbor badly for the industry.''

National Semiconductor Corp. slid 56 cents to $16 after Banc of America Securities LLC cut the stock to ``sell'' from ``neutral.'' The company, which makes chips that boost battery life in mobile electronics, will likely say tomorrow that fiscal second-quarter net income fell to 15 cents a share, the average estimate of 20 analysts, from 17 cents a year earlier.

Xilinx Inc., the biggest maker of programmable semiconductors, slumped 52 cents to $30.73. Its smaller rival Altera Corp. sank 44 cents to $22.20. Analog Devices Inc., the No. 4 maker of signal-processing chips for mobile phones, slid $1.56 to $36.14. Banc of America also lowered all three companies' share ratings to ``sell.''

Sirius Downgrades

Sirius Satellite Radio Inc., the most active U.S. stock over the past three months, slid $2.11 to $6.90. The stock recorded its biggest decline in 21 months after Bear, Stearns & Co. and Smith Barney said the shares were expensive and lowered their recommendations.

Unisys Corp. lost $1.08, or 9.5 percent, to $10.32 for the second-steepest drop in the S&P 500. The company, which sells server computers and consulting services, said it won't meet analysts' earnings estimates because of slow growth in technology spending.

Altera Corp. (ALTR US)
Analog Devices Inc. (ADI US)
Barrick Gold Corp. (ABX US)
General Electric Co. (GE US)
Johnson & Johnson (JNJ US)
Merck & Co. (MRK US)
National Semiconductor Corp. (NSM US)
Newmont Mining Corp. (NEM US)
Pfizer Inc. (PFE US)
Sirius Satellite Radio Inc. (SIRI US)
Texas Instruments Inc. (TXN US)
Unisys Corp. (UIS US)
Xilinx Inc. (XLNX US)

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

Last Updated: December 8, 2004 16:33 EST