April 3 (Bloomberg) -- U.S. stocks rose for the third day this week as a rally in commodity producers and Merrill Lynch & Co.'s assurance it has enough capital to weather credit losses overshadowed growing jobless claims and loan delinquencies.

Merrill, the third-largest securities firm, helped financial shares rebound from a 1.4 percent drop after Chief Executive Officer John Thain told Japan's Nikkei newspaper that the company won't need to raise capital. Monsanto Co., the biggest seed producer, advanced the most in a week as corn climbed to a record. Retail shares posted the biggest decline among 24 industries in the Standard & Poor's 500 Index, led by Amazon.com Inc. and Best Buy Co.

The S&P 500 added 1.78, or 0.1 percent, to 1,369.31. The Dow Jones Industrial Average gained 20.2, or 0.2 percent, to 12,626.03. The Nasdaq Composite Index increased 1.9, or 0.1 percent, to 2,363.3. On the New York Stock Exchange, 998 stocks advanced and 859 retreated.

``If we find out that this is winding down and maybe bottoming out, there'll be a jump in those financial stocks,'' Jim Paulsen, chief investment strategist at Wells Capital Management, which manages about $220 billion in Minneapolis, said in an interview on Bloomberg Television. ``Investors ought to think about how to invest for the coming recovery, and that takes you to the more economically sensitive areas.''

$232 Billion Fallout

The S&P 500 recovered most of its loss from yesterday and has gained 4.1 percent in the week after posting its best start to a second quarter in 70 years on April 1. Financial shares contributed the most to today's gain after Thain's comments bolstered speculation that the industry will recover from $232 billion in worldwide credit losses and asset writedowns.

European stocks slumped as a German lender's subprime- related writedowns were double its forecast. Asian shares rose for a second day, buoyed by shares of commodity-related companies.

Merrill rallied 55 cents, or 1.2 percent, to $45.89 after earlier retreating 3.4 percent.

``We have plenty of capital going forward and we don't need to come back into the equity market,'' Thain told the Nikkei. Noting that Merrill had $80 billion in cash at the end of 2007, Thain told the newspaper that a similar amount has been held through the quarter ended in March. His comments were confirmed by company spokeswoman Jessica Oppenheim.

Cash Infusions

Merrill raised $12 billion from investors, including Korea Investment Corp. and Singapore's Temasek Holdings, in the month leading up to its Jan. 17 announcement of a record fourth- quarter loss. The world's biggest banks and securities firms have raised about $136 billion from government and private sources to replenish capital after losses tied to mortgage assets.

Citigroup Inc., the largest U.S. bank, climbed 34 cents to $24.36. The S&P 500 Financials Index advanced 0.4 percent as a group.

The gauge of banks, brokers and insurers had retreated earlier in the day on an American Bankers Association report that late payments on car, credit-card and home-equity loans climbed to a 15-year high.

Thain's statement ``confirms for the Street the expectation that the worst of this horrific capital squeeze may be around the corner,'' said Peter Kenny, a managing director in institutional sales at Knight Equity Markets in Jersey City, New Jersey. ``That's definitely why the market has picked its head.''

Monsanto rallied $5.79 to $117.79 as the price of corn exceeded $6 a bushel for the first time and Credit Suisse analysts led by Mark Connelly boosted their profit estimates for this year and next because of strong demand in its corn seed and weed-killer businesses.

Freeport, RIM

Freeport-McMoRan Copper & Gold Inc. rallied $3.96 to $103.69 as copper prices increased.

``The economy in general is slowing, obviously, but outside the financial sector and housing sector, I don't think it's as bad as some people are portraying,'' Giri Cherukuri, a portfolio manager at Oakbrook Investments LLC, which oversees about $1.2 billion in Lisle, Illinois, said in an interview on Bloomberg Television.

Research In Motion Ltd., the maker of the BlackBerry e-mail phone, jumped $6.79 to $122.58. The company's forecasts exceeded analysts' estimates, signaling that sales may withstand an economic slump and competition from Apple Inc. First-quarter sales will double to as much as $2.3 billion, the company predicted yesterday. That beat the $2.01 billion average of estimates compiled by Bloomberg.

Schering-Plough Corp. gained $1.52 to $15.38 after saying yesterday it will cut 10 percent of its jobs and shut plants to save $1.5 billion annually. The stock had lost 29 percent in the three days since a panel of doctors said that Schering's cholesterol pill Vytorin shouldn't be used as an initial treatment.

Retail Slump

Retailers in the S&P 500 lost 0.9 percent as a group. Amazon.com Inc., the largest Internet retailer, slumped $2.43 to $74.94. Best Buy Co., the biggest consumer electronics retailer, slid $1.41 to $42.53.

The Labor Department said the number of Americans filing first-time claims for unemployment benefits unexpectedly increased by 38,000 to 407,000 in the week that ended March 29. Economists in a Bloomberg survey forecast the number would hold steady at 366,000. The number of people receiving benefits jumped by 97,000 to 2.937 million in the prior week, higher than the 2.86 million forecast by economists.

Jobs Concern

The Labor Department will probably say tomorrow that payrolls decreased by 50,000 in March, the third-straight monthly decline, according to a Bloomberg survey of economists.

Cisco Systems Inc., the largest maker of computer- networking equipment, lost 73 cents to $24.23 after the shares were downgraded to ``neutral'' from ``buy'' at UBS AG.

``Our industry checks show orders are slowing, which gives us concern'' about Cisco's third-quarter results, analysts Nikos Theodosopoulos and Saud Masud wrote in a note.

MEMC Electronic Materials Inc., the Missouri-based maker of silicon wafers, retreated $2.63 to $73.76. First-quarter revenue was about $500 million, compared with the company's earlier prediction of about $560 million. MEMC said unexpected maintenance delayed production.

Chip Stocks Gain

Still, semiconductor companies rallied as a group after Goldman Sachs Group Inc. upgraded Micron Technology Inc. and advised short sellers to repurchase shares they had borrowed and sold in a bet the price would decline. The ``fundamentals' for dynamic random access memory, or DRAM, may improve by the end of the year, Goldman analysts wrote. Micron shares added 40 cents, or 6.3 percent, to $6.79.

SanDisk Corp. gained $1.85 to $26.47. Citigroup Inc. analysts reiterated their ``buy'' recommendation for the biggest maker of digital-camera memory chips and predicted increasing demand for NAND flash memory chips.

The Institute for Supply Management's non-manufacturing index, which captures almost 90 percent of the economy, rose to 49.6 from 49.3 in February. A reading of 50 is the dividing line between growth and contraction.

The Russell 2000 Index, a benchmark for U.S. companies with a median market value of $542.9 million, climbed 0.2 percent to 713.57. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, rose 0.2 percent to 13,801.78. Based on its advance, the value of stocks increased by $33.2 billion.

To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net.

Last Updated: April 3, 2008 17:05 EDT