Aug. 12 (Bloomberg) -- Brazilian stocks rallied, rebounding from the Bovespa index’s worst drop in five weeks, after Gol Linhas Aereas Inteligentes SA reported earnings that beat analyst estimates and commodity prices climbed.

Gol rose to the highest price in a year after posting a 353.7 million-real ($191 million) profit. Petroleo Brasileiro SA, the state-controlled oil company, added 2.2 percent as crude prices gained for the first time in a week. Cyrela Brazil Realty SA Empreendimentos & Participacoes, Brazil’s biggest real estate developer, rose the most in four weeks on speculation its earnings report will show a rebound in housing demand.

“We’ve had some very good results in Brazil come out and people are discarding the idea of a strong recession in the world,” said Julio Martins, a partner at Adinvest Consultoria, a Rio de Janeiro-based equity consulting and fund management firm. “Now people are looking for a recovery so stocks should keep attracting capital.”

The Bovespa index rose 1.5 percent to 56,588.26, recovering from a 1.9 percent drop yesterday. The BM&FBovespa Small Cap index gained 0.6 percent to 875.19. Mexico’s Bolsa index advanced 1.1 percent, while Chile’s Ipsa added 0.6 percent.

Brazil’s real rose 0.6 percent against the U.S. dollar, extending its gain this year to 26 percent, the most among the 16 most-traded currencies.

Gol Earnings

Gol jumped 13 percent to 17.90 reais. Brazil’s second- biggest airline benefited as an increase in the real cut costs for dollar-denominated debt and contributed to a drop in jet- fuel expenses. The earnings exceeded the average of five estimates compiled by Bloomberg.

Tam SA, the nation’s largest airline, rose 3.9 percent to 25.70 reais. The company is scheduled to report earnings tomorrow.

Petrobras, as the oil company is known, added 67 centavos to 31.89 reais. Crude gained 1 percent in New York as equities increased and the U.S. Federal Reserve said the economy is “leveling out,” bolstering speculation that energy demand will improve.

Cyrela jumped 5.4 percent to 20.45 reais. The homebuilder is scheduled to report earnings tomorrow.

“Investors are expecting good earnings and when that’s the case the shares gain ahead of time,” said Silvio Araujo, an analyst at Lopes Filho & Associados in Rio de Janeiro.

Rossi Residencial SA, another homebuilder, climbed 5.6 percent to 11.30 reais. The company also is scheduled to report second-quarter results tomorrow.

The Bovespa has jumped 51 percent this year on speculation a rebound in commodity prices and record-low interest rates will bolster growth in Latin America’s largest economy. Rossi and Cyrela have led gains in the index, more than doubling.

The Bovespa’s rally has pushed the index’s valuation to 26.05 times reported earnings, a five-year high and more expensive than the average 17.66 price-to-earnings ratio of emerging market stocks tracked by the MSCI Emerging Markets Index, according to Bloomberg data.

-- With reporting by Telma Marotto, Joao Oliveira and Flavia Lima in Sao Paulo. Editors: Kara Wetzel, Lester Pimentel

To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net

Last Updated: August 12, 2009 16:48 EDT