Nov. 13 (Bloomberg) -- U.S. stocks rose, capping a second straight weekly advance, as higher-than-estimated earnings at Walt Disney Co. and Abercrombie & Fitch Co. overshadowed an unexpected drop in consumer confidence. The dollar declined against most major counterparts and oil fell to a one-month low.

Disney, the world’s largest media company, added 4.8 percent as higher fees for its ESPN channels helped lift profit by 18 percent. Abercrombie & Fitch rallied 11 percent as earnings excluding some items beat the average analyst estimate by 48 percent. J.C. Penney Co. jumped after raising its annual profit forecast, while Goodyear Tire & Rubber Co. advanced on Goldman Sachs Group Inc.’s recommendation to buy the shares.

The Standard & Poor’s 500 Index rose 0.6 percent to 1,093.48 at 4:04 p.m. in New York. The Dow Jones Industrial Average gained 73 points, or 0.7 percent, to 10,270.47. Stocks in Europe advanced as the euro region’s economy emerged from recession in the third quarter.

“The market has a little Teflon here,” said Mike Ryan, the New York-based head of wealth management research for the Americas at UBS Financial Services Inc., which oversees $655 billion. “That suggests that folks are looking past the current data releases.”

Benchmark equity indexes briefly erased gains in morning trading after confidence among U.S. consumers slid for the second consecutive month amid surging unemployment. The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 66 from 70.6 in October. The index was projected to rise, according to the median forecast in a Bloomberg News survey of economists.

Rally Continues

The S&P 500 gained 2.3 percent this week and on Nov. 11 closed at its highest level since October 2008. The index has rallied 62 percent from a 12-year low in March, recovering almost half of its plunge from a record in October 2007, amid optimism that government stimulus programs and record-low interest rates are helping to drag the economy out of recession.

Walt Disney added 4.8 percent to $30.44, the steepest advance in the Dow. Net income increased to $895 million from $760 million a year earlier. Excluding one-time items, profit of 46 cents a share beat the 41-cent average estimate of 21 analysts. Sales gained 4.5 percent to $9.87 billion in the period ended Oct. 3, topping the $9.3 billion average estimate of 18 analysts.

Abercrombie & Fitch climbed 11 percent to $40.68 for the top gain in the S&P 500 as the teen-clothing retailer reported a third-quarter adjusted profit of 30 cents per share, while analysts in a Bloomberg survey estimated 20 cents.

Record Earnings Beat

Eighty percent of S&P 500 companies that have released results exceeded the average analyst estimate for third-quarter earnings per share, marking the highest proportion for a full quarter in Bloomberg data going back to 1993, even as profits slumped for a record ninth straight quarter.

J.C. Penney added 6.2 percent to $31.21. The third-largest U.S. department store chain raised its annual profit forecast to as much as $1.08 a share from a previous prediction of 90 cents a share maximum it previously predicted, citing better-than- expected results for the year so far.

Consumer discretionary shares posted the steepest advance among 10 industries in the S&P 500, adding 1.6 percent as a group.

McDonald’s Corp. rose following a report it plans to expand in Poland. The newspaper Puls Biznesu cited Grzegorz Chmielarski, a business development director in Poland. The shares gained 2.3 percent to $63.58.

Goodyear, Juniper

Goodyear added 4.4 percent to $14.34 after Goldman Sachs raised the shares to “buy” on prospects for improved earnings amid a “more favorable supply/demand balance in 2010.”

Juniper Networks Inc. rose 5.9 percent to $26.15. The second-largest maker of networking equipment was raised to “outperform” from “market perform” at Oppenheimer & Co.

The Dollar Index, which tracks the currency of six major U.S. trading partners, slid 0.5 percent after a two-day rebound from a 15-month low.

“This market right now seems to be driven by a weaker dollar,” said Robert Pavlik, chief market strategist at Banyan Partners LLC, which oversees about $400 million in New York. “We’re in a slow-growth economic recovery. It’s early on. There’s still more upside potential.”

Nordstrom Inc. slid 1.5 percent to $33.99 after the department-store chain with more than 100 namesake locations predicted its gross margin would widen at most by 20 basis points for the full year. Bill Dreher, an analyst with Deutsche Bank AG projected a 34 basis-point improvement. A basis point is equivalent to 0.01 percentage point.

Sunoco Downgrade

Sunoco Inc. lost 2 percent to $26.68. The largest refiner in the U.S. northeast was cut to “sell” from “neutral” by Goldman Sachs and added to its “conviction sell list.” Sunoco’s “ongoing restructuring is not on- track to yield a materially improved company,” Goldman analysts wrote in a note.

Liberty Global Inc., the international cable company controlled by billionaire John Malone, agreed to buy Unitymedia GmbH for about 2 billion euros ($2.98 billion). The stock fell 8 percent to $21.26.

Esco Technologies Inc. lost 11 percent to $33.27. The maker of radio frequency shielding and filtration products said it expects to break even in the first quarter. Analysts, on average, estimated profit of 41 cents a share, according to a Bloomberg survey.

Genzyme Corp. dropped 7.3 percent to $49.28 for the biggest decline in the S&P 500. U.S. regulators said some lots of the company’s Cerezyme, Fabrazyme, Myozyme, Aldurazyme, and Thyrogen may be contaminated with stainless steel fragments, non-latex rubber, and fiber-like materials from the manufacturing process.

Small-Cap Valuations

Valuations for the smallest U.S. companies have climbed to the highest level in 13 years, raising concern they may start trailing returns from bigger stocks.

The S&P SmallCap 600 Index trades for 34 times its companies’ earnings from the past year, or 56 percent more than the S&P 500. Small-cap equities have gained 69 percent since markets bottomed in March, compared with 61 percent for the S&P 500, according to data compiled by Bloomberg.

Investors poured the most money into U.S. stock funds in 11 months, leading global equity inflows amid a recovery in earnings and on expectations the Federal Reserve will keep borrowing costs low, EPFR Global said. Investors funneled $6.97 billion into U.S. equity funds, contributing to total inflows of $10 billion to stock funds during the week ended Nov. 11, EPFR said in a statement dated yesterday.

Trade Deficit

The trade deficit in the U.S. widened in September by the most in a decade, reflecting rising demand for imported oil and automobiles as the economy rebounded from the worst recession since the 1930s. The gap grew a larger-than- anticipated 18 percent to $36.5 billion, the highest level since January, from a revised $30.8 billion in August, the Commerce Department said.

International Monetary Fund Managing Director Dominique Strauss-Kahn said the global economic recovery will take years and won’t be a one-size-fits-all situation. Asia will lead the recovery, followed by the U.S. and then Europe, he said in Singapore today. Higher joblessness is likely for advanced nations next year, he said.

“The markets can make new highs,” said Richard Jeffrey, chief investment officer of Cazenove Capital Management in London who oversees about $15 billion of assets. “If we look towards Christmas and beyond we aren’t going to see substantial progress made in the near term and into 2010 we could see more volatility,” he told Bloomberg Television.

To contact the reporter on this story: Mary Childs in New York at mchilds4@bloomberg.net.

Last Updated: November 13, 2009 16:31 EST