May 26 (Bloomberg) -- U.S. stocks and the dollar rose and Treasuries fell as a surge in confidence among consumers spurred optimism that the economy will rebound later this year.

Equities advanced for the first time in five days after The Conference Board’s sentiment index surged to 54.9, according to the New York-based research group. The 28-point jump in confidence over April and May is the biggest two-month rally since records began in 1967. The measure reached its lowest point ever in February, with a reading of 25.3.

“We haven’t seen that much improvement in the underlying economy,” Mark Vitner, managing director at Wachovia Corp., said in a Bloomberg Television interview. “Consumers do believe in the green shoot story and that there are signs emerging that the economy will get better.”

The Standard & Poor’s 500 added 2.6 percent to 910.33 in New York as all 10 industry groups advanced. The Dow Jones Industrial Average increased 196.17 points, or 2.4 percent, to 8,473.49.

JPMorgan Chase & Co. advanced 6.2 percent to $36.54 for the biggest gain in the Dow average. Home Depot Inc., the world’s largest home-improvement retailer rose 4.1 percent to $23.80 and helped lead an index of consumer discretionary stocks up 3.8 percent for the biggest advance among 10 groups after financials. Exxon Mobil Corp. led an advance in energy shares as crude oil climbed to a six-month high.

The S&P 500 has surged 35 percent from a 12-year low on March 9 on speculation the global recession is easing and as earnings at companies from Ford Motor Co. to Wells Fargo & Co. beat analyst estimates. The index must rise another 37 percent to reach its last closing price before Sept. 15, when Lehman Brothers Holdings Inc. filed for the biggest bankruptcy in history, freezing financial markets.

Bonds Drop

Treasuries fell, with the difference in yields between two- and 10-year notes reaching the most since October 2003.

Longer-maturity debt led the declines after the Conference Board’s sentiment index surged to 54.9 in May, higher than forecast and the biggest gain since April 2003. The so-called yield curve widened to 2.629 percentage points, the most since it touched 2.659 on Oct. 14, 2003.

The yield on the 10-year note rose nine basis points, or 0.09 percentage point, to 3.55 percent at 4:45 p.m. in New York, according to BGCantor Market Data.

The euro fell against the dollar on speculation last week’s gain by the most since March was too large to sustain, reducing its appeal.

The 16-nation currency depreciated for the first time in seven days, eroding advances that pushed it last week to the highest level in four months. The dollar and yen pared gains versus the euro as U.S. consumer confidence rose to the highest level since September, cutting demand for safety.

The euro dropped 0.2 percent to $1.3982 in New York, from $1.4017 yesterday. It touched $1.4051 on May 22, the highest level since Jan. 2. The 16-nation euro traded at 132.87 yen, compared with 132.92. The dollar increased 0.2 percent to 95.03 yen from 94.83.

Gold fell in New York, ending a four session rise, as the strengthening dollar reduced the metal’s appeal as an alternative investment. Bullion futures slid $5.60, or 0.6 percent, to $953.30.

Crude oil for July delivery rose 78 cents, or 1.3 percent, to $62.45 a barrel.

To contact the reporter on this story: Fabio Alves in New York at falves3@bloomberg.net

Last Updated: May 26, 2009 17:38 EDT