Sept. 4 (Bloomberg) -- U.S. stocks rallied after investors returning from vacation snapped up technology, energy and financial shares, betting the summer sell-off isn't justified by corporate earnings.

Apple Inc., the maker of iPods and Macintosh computers, advanced to a one-month high on speculation sales will exceed estimates. Exxon Mobil Corp., the biggest oil producer, climbed after the price of crude rose to a one-month peak. Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. helped spark a second straight gain in banks and brokerages.

The Standard & Poor's 500 Index added 15.43, or 1.1 percent, to 1,489.42. The Nasdaq Composite Index rose 33.88, or 1.3 percent, to 2,630.24 for its steepest four-day rally in four years. The Dow Jones Industrial Average climbed 91.12, or 0.7 percent, to 13,448.86, held back by a 5.1 percent decline in shares of Home Depot Inc.

Based on profits in the last year, stocks are trading at the lowest price-to-earnings multiple since 1995. Software makers are valued at an average 20.8 times estimated profit, the lowest in at least 12 years, according to data compiled by Bloomberg. Computer company profits are forecast to grow 23 percent next year, the most of any industry, according to an average of analyst estimates.

``Stocks are trading at bargain levels,'' said Jerome Dodson, president of Parnassus Investments, which oversees $1.4 billion in San Francisco. ``The earnings you get for every dollar invested are pretty attractive.''

Fed Funds

Equities were also helped as traders increased bets that the Federal Reserve will cut its benchmark lending rate by 0.5 percentage point to 4.75 after reports showed manufacturing grew at the slowest pace in five months during August and construction spending fell in July.

Concern credit losses would hurt economic growth pushed the S&P 500 down 9.4 percent between July 19 and Aug. 15.

Apple added $5.68, or 4.1 percent, to $144.16. Analyst Gene Munster at Piper Jaffray said Macintosh computer sales probably exceeded his 1.9 million unit estimate in the September quarter. He also said Apple may sell about 804,000 iPhones in the quarter, topping his 800,000 forecast. Munster kept his ``outperform'' rating on Apple shares.

Energy shares rose 2.1 percent as a group, the biggest gain in the S&P 500. Crude oil increased $1.04 to $75.08 a barrel in New York on speculation U.S. fuel supplies dropped last week and signs OPEC won't raise output.

Exxon climbed $1.50 to $87.23. Occidental Petroleum Corp., the fourth-largest U.S. oil company, gained $1.33 to $58.02. Marathon Oil Corp., the biggest refiner in the U.S. Midwest, advanced $1.80 to $55.69.

Yahoo Rallies

Yahoo Inc. rose $1.24, or 5.5 percent, to $23.97. The owner of the most-visited U.S. Web site was named a ``top pick'' at Bear Stearns & Co. on prospects it will be acquired.

``Yahoo remains an attractive acquisition candidate for either traditional media companies seeking to deepen their exposure to the Internet or from technology companies like Microsoft,'' wrote analyst Robert Peck.

Home Depot Inc. slipped $1.95 to $36.36. The world's largest home-improvement retailer plans to purchase $10.7 billion of its shares in a tender offer for $37 each. The price is 3.4 percent below Home Depot's close on Aug. 31.

Utility shares climbed 1.9 percent. Exelon Corp., the largest U.S. utility owner by market value, advanced $2.84 to $73.51 after saying it plans to buy back as much as $1.25 billion of its stock after higher power sales increased profit and a rate dispute was settled in Illinois.

El Paso Increases

El Paso Corp., owner of the largest U.S. network of gas pipelines, increased 56 cents to $16.43. The company said it will carry forward more losses for tax purposes than previously estimated, a move that may shield it from being taxed on a new partnership's unit sale.

Financial shares in the S&P 500 collectively gained for a second day, rising 1.2 percent. Deutsche Bank AG Chief Executive Officer Josef Ackermann told investors there are signs that financial markets are stabilizing and said Germany's biggest bank has had no difficulty borrowing.

``I am optimistic about the environment globally for financial institutions,'' Ackermann said in a statement.

Goldman Sachs, the largest securities firm, rose to a three- week high, adding $4.79 to $180.80. Lehman, the biggest underwriter of U.S. bonds backed by mortgages, climbed $1.63 to $56.46.

Boston Scientific Corp. rose 37 cents to $13.20. The second- largest maker of heart devices said its Taxus device for propping open arteries showed no increased risk of potentially fatal clots in a study.

Leap, Western Union

Leap Wireless International Inc. jumped $10.97, or 15 percent, to $83.47. MetroPCS Communications Inc. offered to buy Leap for about $5.5 billion to create the biggest U.S. cell-phone service for low-income people. MetroPCS will pay about $77.89 a share in stock for the owner of the Cricket and Jump mobile-phone services. That's 7.4 percent more than the closing price on Aug. 31.

Western Union Co. rose $1.27, or 6.7 percent, to $20.10 for the steepest gain in the S&P 500. Analysts at Merrill Lynch & Co. and Morgan Stanley said growth in Mexican remittances in July was positive for the biggest U.S. money-transfer business.

Kulicke & Soffa Industries Inc. rose 50 cents to $9.04. The maker of semiconductor-assembly equipment raised its fourth- quarter sales forecast by 6.6 percent, citing additional orders for wire-bonding products.

Speculation that shares remain cheap helped investors overcome concern that subprime mortgage defaults will send the economy into a recession. Merrill Lynch & Co. analysts cut their earnings estimates for a dozen U.S. banks today, citing risks of a slowing U.S. economy in 2008.

ISM Eases

A report by the Institute for Supply Management showed manufacturing in the U.S. cooled during August as factories trimmed orders in anticipation sales would weaken. The ISM's factory index fell to 52.9, from 53.8 in July. Economists forecast the measure would decline to 53. Readings higher than 50 signal expansion.

Fed futures contracts today showed traders see a 54 percent chance the Fed will lower its target for overnight bank lending to 4.75 percent from 5.25 percent at its next meeting on Sept. 18, up from 46 percent odds on Aug. 31.

NovaStar Financial Inc. fell $1.33, or 16 percent, to $7.16. The subprime mortgage lender canceled a rights offering and said auditor Deloitte & Touche LLP expressed doubt about the company's survival.

The Russell 2000 Index, a benchmark for companies with a median market value of $639 million, gained 1 percent to 800.69. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, added 1.1 percent to 15,007.28. Based on its advance, the value of stocks increased by $199.4 billion.

Apple Inc. (AAPL US)
Boston Scientific Corp. (BSX US)
El Paso Corp. (EP US)
Exelon Corp. (EXC US)
Exxon Mobil Corp. (XOM US)
Goldman Sachs Group Inc. (GS US)
Home Depot Inc. (HD US)
Kulicke & Soffa Industries Inc. (KLIC US)
Leap Wireless International Inc. (LEAP US)
Lehman Brothers Holdings Inc. (LEH US)
Marathon Oil Corp. (MRO US)
NovaStar Financial Inc. (NFI US)
Occidental Petroleum Corp. (OXY US)
Western Union Co. (WU US)
Yahoo Inc. (YHOO US)

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

Last Updated: September 4, 2007 17:40 EDT