July 11 (Bloomberg) -- U.S. stocks rallied after a sales report from KLA-Tencor Corp. lifted semiconductor makers, this year's worst performers.

KLA-Tencor, the world's biggest maker of equipment to inspect computer chips, said orders during the June quarter exceeded its highest forecast. Energy stocks rose along with chipmakers as higher oil prices boosted Exxon Mobil Corp. and other producers.

Prices dropped initially after earnings from Alcoa Inc. and Lucent Technologies Inc. fell short of some analysts' estimates, increasing concern that profit growth may be slowing.

``There's a sense of doom overhanging the markets,'' Michael Steinhardt, chairman of WisdomTree Investments Inc. in New York and a former hedge-fund manager, said in an interview. ``Before too long, things will look a lot better.''

The Standard & Poor's 500 Index rose 5.18, or 0.4 percent, to 1272.52. The Dow Jones Industrial Average added 31.22, or 0.3 percent, to 11,134.77. The Nasdaq Composite Index gained 11.93, or 0.6 percent, to 2128.86.

KLA-Tencor's shares jumped $3.23, or 8.2 percent, to $42.56 for the steepest rise in the S&P 500 after the company said bookings rose as much as 30 percent from the third quarter. In April, it had forecast a 10 percent gain.

Intel Gains

Intel Corp. the world's biggest chipmaker, added 49 cents to $18.67. National Semiconductor Corp. climbed $1.40, or 6.3 percent, to $23.74, for the second-biggest increase in the S&P 500.

Chip-equipment makers rose with KLA-Tencor. Applied Materials Inc. advanced 35 cents to $16.14. Lam Research Corp. jumped $2.10 to $44.60.

``You get a very economically cutting edge type of company like that saying that orders are good -- therefore the economy is good, earnings are good, and Alcoa was a one off,'' said James Awad, who manages $1.3 billion as chairman of Awad Asset Management in New York.

A measure of semiconductor-related shares rose 2.9 percent. The group has been the worst performer among 10 S&P 500 industry groups, down 15 percent this year on concern profit expansion may slow as the economy weakens.

Alcoa, which was the first Dow average company to report earnings yesterday, had its biggest drop since September 2005 after the world's largest aluminum producer said record profits won't be sustainable.

Alcoa's Shortfall

The company's profit and sales also fell short of analysts' estimates. Alcoa said second-quarter earnings were 85 cents a share, or 89 cents if some labor and strike-preparation costs were excluded. Analysts forecast as much as 93 cents in a Thomson survey. Alcoa shares fell $1.63, or 4.9 percent, to $31.78.

Lucent, the telephone-equipment maker that Alcatel SA is buying, lost 15 cents to $2.19. The company said yesterday per- share profit declined to 2 cents on sales of $2.04 billion in the third quarter ended June 30, according to preliminary results, as demand from U.S. customers slid.

The figures are less than the 4 cents a share in profit and $2.34 billion in sales expected on average in a Thomson survey.

About three stocks rose for every two that fell on the New York Stock Exchange. More than 1.57 billion shares changed hands on the Big Board, eight percent less than the three-month daily average.

A gauge of S&P 500 energy shares advanced 1.8 percent as crude oil rebounded from three days of declines. Oil climbed 0.8 percent to close at $74.16 a barrel in New York after Iran's president said his nation won't back down ``one iota'' on its right to conduct atomic research.

Exxon Mobil

Exxon Mobil, the world's largest publicly traded oil company, rallied 94 cents to $63.98

``Oil, textiles, technology, the big, dull growth companies -- they're cheap, so I feel all right about the market,'' said Steinhardt, who closed his hedge-fund firm in 1995 after producing average annual returns of 24 percent over 28 years.

The S&P 500 Energy and Information Technology Indexes dropped within the past month to their lowest multiples of earnings since at least 1997. They are valued at 11 and 22 times profits, respectively.

Pepsi Bottling Group Inc., the world's No. 2 soft-drink distributor, added to optimism that profit may exceed analysts' estimates. The company said earnings climbed to 61 cents a share in the three months ended June 17, helped by sales of Aquafina water and Lipton tea. Analysts projected 59 cents, according to Thomson. Pepsi Bottling shares rose $1.61 to $33.96.

Chicago Mercantile

Chicago Mercantile Exchange Holdings Inc. tumbled $7.86 to $480.64 after its biggest shareholder, Marsico Capital Management LLC, sold stock. Marsico held 8.2 of the biggest U.S. futures market on June 30, down from 11.5 percent on March 31, according to regulatory filings.

Indian stocks sank after explosions blasted trains and commuter stations in Mumbai, India's commercial hub, killing at least 163 people. It was the nation's worst terrorist attack in 13 years.

American shares of Dr. Reddy's Laboratories Ltd., India's third-biggest drugmaker, dropped 72 cents to $28.27. Software maker Satyam Computer Services Ltd. slipped 44 cents to $32.86. American depositary receipts of HDFC Bank Ltd., India's third- largest lender by market value, slid $1.22 to $51.79.

S&P 500 shares, called Spiders, rose 56 cents to $127.41. Nasdaq-100 tracking shares, known by their QQQQ symbol, added 28 cents to $37.64.

S&P 500 futures expiring in September climbed 5.3 to 1282.30 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures rallied 7.25 to 1545.

The Russell 2000 Index, a benchmark for companies with a median market value of $599 million, advanced 0.8 percent to 714.39. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, gained 52.53, or 0.4 percent, to 12,792.18. Based on the changes in the Wilshire, the value of stocks increased by $65.7 billion.

Alcoa Inc. (AA US)
Applied Materials Inc. (AMAT US)
Chicago Mercantile Exchange Holdings Inc. (CME US)
Dr. Reddy's Laboratories Ltd. (RDY US)
Exxon Mobil Corp. (XOM US)
HDFC Bank Ltd. (HDB US)
Intel Corp. (INTC US)
KLA-Tencor Corp. (KLAC US)
Lam Research Corp. (LRCX US)
Lucent Technologies Inc. (LU US)
National Semiconductor Corp. (NSM US)
Pepsi Bottling Group Inc. (PBG US)
Satyam Computer Services Ltd. (SAY US)

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

Last Updated: July 11, 2006 17:35 EDT