Dec. 8 (Bloomberg) -- Laszlo Birinyi, the investor who accurately predicted this year’s rout in financial shares, said the Standard & Poor’s 500 Index reached a bear market bottom two weeks ago and recommended buying the largest U.S. stocks.

Birinyi, who spent a decade on the trading desk at Salomon Brothers Inc. and is known for pioneering money-flow analysis, said financial stocks will rise over time and shareholders were “too quick to dismiss them all as tainted.” Birinyi’s October 2007 warning that a recovery in banks would be snuffed out presaged a 59 percent plunge in the S&P 500 Financials Index. The measure fell 36 percent since he advised selling the stocks in August following a three-week rally.

“I’m very comfortable saying the market has made the bottom,” Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut, said in an interview with Bloomberg Television. “It’s time to get out of the bunker mentality. You want to be looking at stocks, you want to be considering the market, and you want to get out of this funk that too many investors have been in for the last three or four months.”

The S&P 500 fell 52 percent from an October 2007 record to an 11-year low of 752.44 on Nov. 20. Financial shares lost three quarters of their value, dragged down by almost $1 trillion in losses and writedowns that froze credit and pushed the U.S., Europe and Japan into recessions.

Bull Market Forming

Birinyi, whose money-flow analysis compares the dollar amounts moving into or out of a stock or index to establish whether it is being more aggressively bought or sold, cautioned against betting on a sharp market recovery.

“A bull market is forming, it’s just not going to be any outsized gains over the next three to six months,” he said. “The market is going to do better, but it won’t be up, up and away. With all the concerns and issues around the world, I’d be hesitant about being very, very aggressive.”

Birinyi said he bought shares of General Electric Co. because the company has pledged to keep its dividend. Birinyi also said Dow Chemical Co.’s payout makes the company attractive and Apple Inc. is “good for a trade” because it fell too far.

“The wind is at the back of the large caps,” Birinyi said.

Stocks rose around the world today, sending the Dow Jones Industrial Average to a one-month high, as President-elect Barack Obama pledged to boost the economy with the biggest public-works spending package since the 1950s. The S&P 500 today added 33.63, or 3.8 percent, to 909.70. The benchmark for American equity extended its gain since Nov. 20 to 21 percent. GE rose 5.8 percent to $18.88 today, Apple increased 6.1 percent to $99.72 and Dow Chemical climbed 7.2 percent to $20.37.

Technical End

All 10 industry groups in the S&P 500 have risen at least 9.2 percent since the benchmark’s low last month. Financial stocks led the rally, climbing 46 percent collectively, followed by consumer discretionary and telephone companies.

Today’s gains put a technical end to the 13-month bear market that began after the S&P 500 reached a record close of 1,565.15. An advance of more than 20 percent from a low is the standard definition of a bull market.

Obama said Dec. 6 he will boost investment in roads, bridges and public buildings to create or preserve 2.5 million jobs after companies cut payrolls at the fastest rate in 34 years.

“There’s an awareness now that this is across the board,” Birinyi said. “You have bleeding all over and a Band-aid here and a Band-aid there is not going to form a solution. You’ve got to really take some dramatic action, and I think that’s what investors are responding to today.”

Birinyi started his research and money management firm in 1989.

To contact the reporters on this story: Betty Liu in New York at bliu17@bloomberg.net; Eric Martin in New York at ericmartin21@bloomberg.net

Last Updated: December 8, 2008 19:46 EST