Nov. 11 (Bloomberg) -- U.S. stocks extended a global advance, sending the Standard & Poor’s 500 Index to a 13-month high, as China’s industrial production surged and Federal Reserve policy makers signaled interest rates will remain at a record low. Gold climbed to an all-time high.

Bank of America Corp. and Home Depot Inc. led the Dow Jones Industrial Average to its highest close since October 2008. Toll Brothers Inc. jumped 16 percent, the most in 17 years, to lead a rally in homebuilders after orders surged and cancellations slowed. Benchmark equity indexes pared gains as a rebound in the dollar snuffed out most of an advance in commodities.

The S&P 500 increased 0.5 percent to 1,098.51 at 4:10 p.m. in New York, its highest close since Oct. 3, 2008. The Dow added 44.29 points, or 0.4 percent, to 10,291.26. Almost two stocks gained for each that fell on the New York Stock Exchange. Some 7.8 billion shares changed hands on all U.S. exchanges, 17 percent less than the three-month average as trading slowed on the Veterans Day holiday. The Treasury market was closed.

“You got people out there saying the bear market rally’s over,” said Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, which manages $214 billion. “They’re smoking dope.”

The S&P 500 has rebounded 62 percent from a 12-year low in March, recovering almost half of its plunge from a record in October 2007. The rally occurred as government stimulus measures and Fed interest rate cuts helped end a four-quarter contraction in the U.S. economy.

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

‘Damn the Torpedoes’

Federal Reserve Bank of Dallas President Richard Fisher said yesterday that economic growth and inflation may persist below ideal levels into 2011, making the central bank’s current interest-rate stance “appropriate.” San Francisco Fed President Janet Yellen raised the prospect of a “jobless recovery” in a speech in Phoenix, while Dennis Lockhart, who heads the Atlanta Fed, predicted a “relatively subdued pace of growth” this quarter and beyond.

Fed officials last week reiterated a pledge to keep the benchmark interest rate near zero for an “extended period.”

“The Fed continues to believe that the biggest economy in the world can’t handle rates above 0.25 percent,” Peter Boockvar, an equity strategist with Miller Tabak & Co., wrote in an e-mail to clients. “’Damn the torpedoes, full speed ahead’ will remain policy.”

Banks, Builders Rally

Financial shares in the S&P 500 climbed 1.4 percent as a group, the steepest gain among 10 industries.

Goldman Sachs Group Inc. added 1.9 percent to $179.85, Bank of America rallied 2.5 percent to $16.43, the top gain in the Dow, and Wells Fargo & Co. climbed 2.5 percent to $28.80.

All 12 shares in a gauge of homebuilders advanced, sending the index up 6.9 percent for its biggest gain since May.

Toll Brothers, the nation’s largest luxury homebuilder, rallied $3.02 to $21.41 after saying orders surged 42 percent in the fiscal fourth quarter and adjusted earnings and sales topped analysts’ estimates.

Pulte Homes Inc., KB Home, Lennar Corp. and D.R. Horton Inc. each rose at least 5.7 percent for four of the top five gains in the S&P 500. Home Depot, the largest home-improvement retailer, climbed 1.8 percent.

The MSCI Asia-Pacific Index rose for a fourth day, adding 0.6 percent. Production in China rose 16.1 percent from a year before, the most since March 2008, the statistics bureau said today. The trade surplus almost doubled from September, to $24 billion, as a drop in exports eased.

‘Rally Has Legs’

Separately, Japanese machinery orders, an indicator of business investment in three to six months, climbed 10.5 percent from a month earlier, according to the Cabinet Office in Tokyo. The median estimate of 25 economists surveyed by Bloomberg was for a 4.1 percent increase.

“This rally has legs,” said Howard Ward, who helps oversee $21.3 billion as chief investment officer for growth equities at the Gamco Global Growth Fund in Rye, New York. “The data, after the laundry list of positive things that we learned last week about the economy, really reinforces the notion that the recovery is for real. Investors who have been sitting on the sideline are getting nervous and putting money to work.”

Gold, Dollar

Newmont Mining Corp., the largest U.S. gold producer, added 1.6 percent to $51.24. The precious metal rose to a record $1,119.10 an ounce on demand for a hedge against further weakness in the U.S. dollar.

The Dollar Index, which tracks the currency against major U.S. trading partners, added 0.1 percent after earlier touching a 15-month low as signs of a global recovery and bets that the Fed will keep borrowing costs low spurred demand for higher- yielding assets.

Regeneron Pharmaceuticals Inc. rose 20 percent to $18.95. The drugmaker said it expanded its existing agreement with Paris-based Sanofi-Aventis SA to develop drugs to treat pain, cancer and arthritis in a deal worth up to $1.28 billion.

Smithfield Foods Inc. gained 9.5 percent to $17.12. The world’s biggest pork processor was raised to “buy” from “hold” at Deutsche Bank AG, which cited a reduction of breeding herd in the U.S. and Canada as well as improving demand from overseas.

VIX Gains

The Chicago Board Options Exchange Volatility Index ended its seven-day losing streak even as stocks rose. The gauge, which measures the cost of using options as insurance against declines in the S&P 500, climbed 0.9 percent to 23.04.

Flowers Foods Inc. dropped 5.9 percent to $22.45. The baker with brands such as Nature’s Own reported third-quarter earnings that trailed the average analyst estimate. The company forecast adjusted earnings for 2009 of at most $1.40 a share, lower than the average analyst estimate of $1.43.

Macy’s Inc. fell 8.1 percent to $17.86. The second-biggest U.S. department-store reported a third-quarter loss and forecast full-year earnings that trailed analyst estimates as sales fell.

Priceline.com Inc. fell 3.6 percent to $196.80, the first decline in eight days. Credit Suisse AG downgraded the online travel agency to “neutral” from “outperform.”

Clearwire Corp. dropped 15 percent to $6.14. The U.S. wireless carrier building out a high-speed network will have to raise $2 billion to $3 billion over the next two years as the company’s cash consumption picks up, Bank of America analysts said.

Investors are growing more optimistic about U.S. equities for the first time since August as a record number of companies beat profit estimates and worker productivity, manufacturing and home sales exceed forecasts.

Users in Brazil, Germany, Spain and Switzerland also became more bullish, according to the Bloomberg Professional Confidence Survey conducted from Nov. 2 to Nov. 6. The 1,232 responses were collected as the MSCI World index snapped a two-week losing streak and the S&P 500 rebounded from its first monthly drop since February.

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

Last Updated: November 11, 2009 16:46 EST