July 14 (Bloomberg) -- U.S. stocks advanced for a second day as better-than-estimated retail sales boosted consumer shares, while energy producers climbed as natural gas prices jumped the most in a month

Home Depot Inc., Intel Corp. and Walt Disney Co. rallied at least 1.8 percent for the steepest gains in the Dow Jones Industrial Average. El Paso Corp., owner of the largest U.S. network of natural-gas pipelines, climbed 3.4 percent. Goldman Sachs Group Inc. rose to the highest level in 10 months after posting record quarterly profit.

The Standard & Poor’s 500 Index added 0.5 percent to 905.84 at 4:07 p.m. in New York following its steepest rally since June 1 yesterday. The Dow rose 27.81 points, or 0.3 percent, to 8,359.49. More than five stocks advanced for every two that fell on the New York Stock Exchange.

“There’s some anticipation that earnings numbers won’t be as bad as people might have expected a few weeks ago, and some of the economic data is coming in better than it’s come in the past few weeks,” said Eric Green, director of research at Penn Capital, which oversees about $3.6 billion in Philadelphia.

Treasuries declined after the Commerce Department said retail sales increased 0.6 percent in June, the best gain since January, adding to signs the steepest recession in more than 50 years may be easing and crimping demand for the relative safety of government debt. Prices paid to U.S. producers increased last month by twice as much as anticipated, a separate report showed.

‘More Measured’

The S&P 500 jumped 2.5 percent yesterday, the most since June 1, as analyst Meredith Whitney said banks may rally 15 percent. The benchmark index for U.S. equities has climbed 34 percent from its 12-year low on March 9, with financial companies in the index rallying 89 percent collectively, amid speculation the economic contraction is slowing.

“The real move in stock prices was yesterday, so to some extent today’s move is a little bit more measured,” said Hugh Johnson, who manages more than $1.5 billion as chairman of Albany, New York-based Johnson Illington. “This is a good start to the earnings season, a very good start to the earnings season. But there’s a long way to go.”

A group of retailers, hotel chains and other so-called consumer-discretionary companies climbed 1.5 percent, the most of 10 industry groups in the S&P 500, after the retail sales report. Home Depot, the world’s largest home-improvement chain, climbed 2.5 percent to $23.68. Disney, the biggest operator of theme parks, added 1.8 percent to $23.11.

Energy Gains

An index of energy shares rallied 1.2 percent as natural- gas jumped 5.1 percent, even as oil slipped 0.3 percent to $59.52 a barrel. National-Oilwell climbed 3.1 percent to $32.13, while El Paso added 3.4 percent to $8.87. Cabot Oil & Gas Corp. rallied 3.5 percent to $31.27.

Technology stocks led the market lower earlier after Dell Inc. said profitability may suffer this quarter on higher costs. Competitive pricing and the rising cost of components will cause a “modest decline” in second-quarter gross margin, the company said yesterday. Demand has stabilized and sales probably rose from the first quarter, Dell said.

Dell shares slid 8.1 percent to $11.97, their steepest slide since January.

Goldman Sachs shares, which rallied 5.3 percent yesterday after Whitney advised buying the shares, added 0.2 percent to $149.66, the highest price since the last trading day before Lehman Brothers Holdings Inc. filed for bankruptcy in September.

Record Earnings

Second-quarter profit rose to a record, exceeding analysts’ estimates, amid record trading and stock underwriting. Net income in the three months ended June 26 was $3.44 billion, or $4.93 a share, the bank said in a statement. That surpassed the $3.65 per-share average estimate of analysts surveyed by Bloomberg and compared with $2.09 billion, or $4.58 per share, in last year’s second quarter.

Financial shares in the S&P 500 slipped 0.3 percent as a group and were the biggest drag on the index.

“We’ve seen the cream of the crop come out in Goldman, but the rest of the banks, especially the regional banks and the other money-center banks, have not tipped their hat yet,” said Rob Lutts, founder and chief investment officer of Cabot Money Management Inc., which oversees $400 million. “There’s a concern that the balance sheet write-offs and the asset impairments, especially with commercial real estate, are going to hamper their performance.”

CIT Group Inc. jumped 19 percent to $1.61, paring a rally of as much as 31 percent. The century-old lender that’s been unable to persuade the government to back its debt sales said it is in talks with regulators about a rescue before $1 billion of bonds mature next month. The shares had fallen 27 percent in the two previous trading days.

Earnings Watch

Analysts estimate profits at S&P 500 companies fell an average 35 percent in the second quarter and will decrease 21 percent from July through September, according to data compiled by Bloomberg.

Johnson & Johnson climbed 0.9 percent to $58.23 after the maker of health-care products such as Listerine mouthwash reported second-quarter earnings that beat analysts’ estimate by 3 cents a share.

“The period of stabilization is upon us, but it’s going to be slow go from here,” said Matthew Kaufler, a portfolio manager at Federated Clover Investment Advisors, which oversees $2 billion in Rochester, New York. “I would not be surprised to see the market kind of constrained going forward.”

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.

Last Updated: July 14, 2009 16:34 EDT