Nov. 16 (Bloomberg) -- U.S. stocks rallied, sending benchmark indexes to 13-month highs, and commodities gained as retail sales rebounded and Asian government leaders pledged to maintain economic stimulus spending. The dollar fell to a 15- month low and Treasury two-year yields touched the lowest level since January.

Exxon Mobil Corp. led gains in 39 of 40 energy producers in the S&P 500 as the price of oil climbed the most in six weeks. Target Corp. and Sears Holdings Corp. rose as the U.S. government said retail sales grew 1.4 percent in October after slumping the most in nine months in September. American Express Co. surged 2.7 percent after loan defaults decreased for a sixth straight month.

The S&P 500 surged 1.5 percent to 1,109.3 at 4:06 p.m. in New York. The Dow Jones Industrial Average added 136.49 points, or 1.3 percent, to 10,406.96. Both reached the highest levels since Oct. 2, 2008. Europe’s Dow Jones Stoxx 600 Index jumped 1.4 percent and the MSCI Asia-Pacific Index climbed 0.9 percent.

“The retail sales news seems to be overriding any of the other market news today,” said Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, which manages $2.8 billion. “Retail sales being up is going to help most of the market and most of the companies. People are just going to perceive that revenues are going to be stronger.”

Equities climbed from Hong Kong to London after the 21- member Asia-Pacific Economic Cooperation forum, which represents 54 percent of the global economy, said in Singapore that it will maintain measures to shore up the group’s economies. Stocks have climbed for two consecutive weeks as the Group of 20 nations agreed to maintain stimulus and profits at beat estimates at companies from Wal-Mart Stores Inc. to Walt Disney Co.

‘Headwinds’

Federal Reserve Chairman Ben S. Bernanke said economic “headwinds” of reduced bank lending and a weak labor market will probably restrain the pace of the U.S. economic recovery, warranting continued low borrowing costs.

“Significant economic challenges remain,” Bernanke said in a speech to the Economic Club of New York. “The flow of credit remains constrained, economic activity weak and unemployment much too high. Future setbacks are possible.”

The yield on the two-year Treasury note fell four basis points, or 0.04 percentage point, to 0.77 percent after Bernanke’s remarks. The 10-year yield lost seven basis points to 3.347 percent.

The S&P 500 has rebounded 64 percent from a 12-year low in March as a four-quarter contraction in the world’s largest economy ended.

‘Too Early to Withdraw’

“You have a world of policy leaders that think it’s too early to withdraw monetary stimulus,” said Craig Peckham, equity trading strategist at Jefferies & Co. in New York.

The Dollar Index, a six-currency measure of the greenback’s strength, fell 0.6 percent to 74.880 and touched 74.679, the lowest since August 2008. The Reuters/Jefferies CRB Index of 19 raw materials increased 2.8 percent, the steepest advance since September, as a weaker dollar bolstered the appeal of commodities as an alternative investment and currency hedge. Raw-material producers in the S&P 500 rose 2.3 percent as a group.

The U.S. dollar still may be overvalued, even with its recent fall, according to Dan Wantrobski, director of technical research at Janney Montgomery Scott LLC in Philadelphia.

‘Carry Trade’

“Low interest rates have been encouraging speculators to use the dollar for a ‘carry trade,’ where they borrow the currency for next to nothing to invest in higher-yielding assets from other countries,” Wantrobski wrote in a note. “If this is accurate, then the demand for dollars to fuel this carry trade is keeping the Dollar Index higher than it should be.”

Energy shares in the S&P 500 advanced 2.5 percent as a group for the top gain among 10 industries, all of which advanced. Crude oil for December delivery added 3.3 percent to $78.90 a barrel in New York, rebounding from two days of losses.

Devon Energy Corp. rose 4.7 percent to $70.99. The biggest independent U.S. oil and gas producer plans to sell its Gulf of Mexico and overseas assets to raise as much as $7.5 billion to cut debt and fund onshore developments. Smith International Inc. and Peabody Energy Corp gained at least 4.4 percent each.

Barrick Gold Corp., the world’s largest producer of the precious metal, gained 2.6 percent to $43.99. Gold climbed to a record $1,144.20 an ounce on demand for a store of value amid speculation that the dollar will extend its decline.

Newmont Mining Corp. advanced 2.8 percent to $52.39. The largest U.S. gold producer said the sale of a 10 percent stake in its Indonesian venture will be completed today.

‘Pretty Positive’

The rally in gold currently has “pretty positive” implications, Mark Bronzo, a money manager at Security Global Investors, which oversees $21 billion, said in an interview with Bloomberg Radio.

“It’s all part of this commodity trade versus a weaker dollar, which seems to be positive for the stock market for the time being,” he said. “I think it lasts as long as the stimulus remains in effect.”

U.S. Steel Corp. and AK Steel Holding Corp jumped at least 4.8 percent. The steelmakers were added to JPMorgan Chase & Co.’s “Focus List” on prospects for rising prices as demand increases.

Titanium Metals Corp. rallied 10 percent to $10.25, its steepest advance since March. The maker of specialty metals for jet planes said it entered a new supply agreement with Boeing Co. that takes effect when the current agreement expires at the end of next year. The new agreement expires at the end of 2015.

‘Very Positively’

Retailers rallied on the increase in October sales, which followed a 2.3 percent drop in September. Sales at automobile dealerships and parts stores jumped 7.4 percent after a 14 percent plunge the prior month that was larger than previously estimated.

“Any good news on the U.S. consumer will be taken very positively,” said Kevin Divney, chief investment officer at Beaconcrest Capital Management in Boston. “There’s more and more focus on it this time of year leading up to the holiday season. So I think any positive consumption there will be taken very, very seriously.”

Target, the second largest discount chain, jumped 2.7 percent and Sears Holdings Corp. added 4.1 percent.

Nordstrom Inc. gained 3.1 percent to $35.05. The U.S. department-store chain with more than 100 namesake locations was raised to “buy” from “neutral” at Goldman Sachs, which said the company “is a key beneficiary of a recovering high end consumer.”

American Express Write-Offs

American Express rallied 2.7 percent to $41.44. The biggest U.S. credit-card issuer by purchases said write-offs for loans deemed uncollectible decreased to 7.8 percent last month on an annualized basis, compared with 8.4 percent in September, the New York-based lender said today in a regulatory filing.

S&P financial shares rallied as much as 2.4 percent before paring the gains and ending the day up 1.2 percent after banking analyst Meredith Whitney told CNBC that she expects a so-called double-dip recession in the U.S. and that she hasn’t been so bearish in a year.

Shares of Motors Liquidation Co., formed to sell the assets of General Motors during its bankruptcy reorganization, jumped 14 percent to 64 cents. General Motors Co. signaled confidence in its recovery from bankruptcy after it said it generated $3.3 billion in cash in the third quarter and plans to start repaying government loans early.

A measure of automobile-related companies rose 3.3 percent for the top gain among 24 groups in the S&P 500.

Earnings Watch

Per-share earnings have topped estimates at 80 percent of S&P 500 companies that have released third-quarter results, a record in Bloomberg data going back to 1993, even as profits slumped for a record ninth straight quarter. Companies including Home Depot Inc., Target Corp. and Dell Inc. are scheduled to report earnings this week.

Dell rose 3.6 percent to $15.96. The personal-computer maker expanding into mobile phones was restarted “buy” at Goldman Sachs, which said the company will be a “key beneficiary of the PC upgrade cycle.”

Sprint Nextel Corp. jumped 13 percent to $3.50 for the biggest gain in the S&P 500. The third-largest U.S. mobile-phone carrier said it paid off $1 billion in debt, meaning it no longer has an outstanding balance on its $4.5 billion revolving credit facility.

The S&P 500 Real Estate Index of 15 companies jumped 2.4 percent to its highest value since Sept. 22, led by ProLogis.

ProLogis, the world’s biggest warehouse owner, rose 5.1 percent to $14.29 after Cohen & Steers Inc. acquired about 14 million shares of the company for about $190.3 million, according to a Nov. 13 filing.

REITs Gain

Apartment Investment & Management Co. and Ventas Inc. jumped at least 3.7 percent. Deutsche Bank AG purchased about 4 million shares of Apartment Investment for $53.5 million, according to a Nov. 13 regulatory filing. Ventas was raised to “buy” from “hold” by Stifel Nicolaus & Co., which said health-care real-estate investment trusts will post “modest revenue growth” on existing portfolios in 2010 even as revenues are expected to decline in most other property sectors.

Merck & Co. rose 2.2 percent to $33.81. The drugmaker’s Global Human Health President Kenneth Frazier told CNBC that the company won’t pull cholesterol pills Vytorin and Zetia off the market after a study that found they didn’t reopen clogged arteries as well as Abbott Laboratories’ Niaspan.

To contact the reporter on this story: Sapna Maheshwari at smaheshwar11@bloomberg.net.

Last Updated: November 16, 2009 16:42 EST