Nov. 3 (Bloomberg) -- Most U.S. stocks rose after Warren Buffett agreed to buy Burlington Northern Santa Fe Corp. and Stanley Works said it will take over Black & Decker Corp., while technology shares fell on an analyst downgrade of chipmakers.

Burlington Northern surged 28 percent after Buffett made what he called an “all-in wager” on the nation’s economy. Black & Decker rallied 31 percent, the most since at least 1980. Energy and raw-materials producers increased as oil advanced and gold climbed to a record. Intel Corp. led the Dow Jones Industrial Average lower as Morgan Stanley reduced its rating on U.S. semiconductor stocks to “cautious.”

About five stocks gained for every two that fell on the New York Stock Exchange. The Standard & Poor’s 500 Index added 0.2 percent to 1,045.41 at 4:11 p.m. in New York. The Dow slipped 17.53 points, or 0.2 percent, to 9,771.91. Stocks in Europe and Asia slid after UBS AG posted a wider-than-estimated loss and Australia raised its benchmark interest rate for the second straight month.

“When Warren Buffett puts money behind something, people then seem to get on it,” said Christopher Sheldon, the Boston- based director of investment strategy at BNY Mellon Wealth Management, which oversees $142 billion globally. “People who are looking at the lackluster jobs growth and the constrained consumer have to look at the other side of this, which is probably what Warren Buffett is doing, which is the outlook for profits.”

Retreat From Year’s High

The S&P 500 climbed for a second day as Buffett’s takeover spurred optimism that equities will continue to rebound after $11.6 trillion in government spending, lending and guarantees returned the economy to growth following four straight quarters of contraction. The S&P 500 has rallied 55 percent from a 12- year low in March.

Federal Reserve Chairman Ben S. Bernanke, who convenes a meeting of the Federal Open Market Committee today, is gambling that by March, he can stop the purchases of mortgage-backed securities that have propped up the housing market. The FOMC will release its monetary policy statement tomorrow.

People “are going to be looking for any indication that the Fed is signaling that it’s eventually going to pull back on monetary stimulus,” said Keith Wirtz, chief investment officer at Fifth Third Asset Management Inc., which oversees $18.6 billion in Cincinnati. “They’re going to sit and read through all the words one by one.”

Railroad Rally

Burlington Northern jumped 28 percent to $97. The takeover, the largest ever for Berkshire, will cost the company $26 billion, or $100 a share in cash and stock, for the 77.4 percent of the railroad that Buffett’s company doesn’t already own. Including its previous investment and debt assumption, the deal is valued at $44 billion, Berkshire said in a statement. Berkshire’s Class A and B shares climbed at least 1.7 percent.

At $100 a share, Buffett is paying 18.2 times Burlington’s estimated 2010 earnings of $5.51 a share, according to the average analyst projection in a Bloomberg survey.

That compares with the 13.4 multiple for the S&P 500 as of yesterday’s close. Omaha, Nebraska-based Union Pacific Corp.’s ratio was 13, while Jacksonville, Florida-based CSX Corp.’s was 13.1, Bloomberg data show. They are the biggest U.S. railroads behind Burlington by 2008 sales. On March 9, Burlington fetched 7.8 times next year’s profit projection. Union Pacific and CSX gained more than 7.3 percent, while Norfolk Southern advanced 5.4 percent.

Transports Gain

A group of 10 transportation stocks in the S&P 500 jumped 5.8 percent, the most since April. An index of industrial shares, which includes railroads, rallied 1.4 percent for the biggest advance among 10 industries.

Black & Decker surged 31 percent to $62. The maker of DeWalt power drills and Price Pfister faucets agreed to be purchased by Stanley Works for $3.5 billion in stock. Stanley Works rallied 10 percent to $49.69. Cognizant Technology Solutions Corp. added 8.2 percent to $41.97. The computer-services provider to Aetna Inc. and Kimberly-Clark Corp. said third-quarter profit rose 21 percent as sales increased more than analysts anticipated.

Intel, the world’s biggest computer-chip maker, slid 2.7 percent to $18.50 as Morgan Stanley reduced its rating on semiconductor stocks and downgraded Intel to “equal-weight.” The brokerage also downgraded Novellus Systems Inc., which fell 5.2 percent to $19.71, and KLA-Tencor Corp., which lost 3.5 percent to $31.70.

Gold Hits Record

Gold jumped to a record after India’s central bank bought 200 metric tons of the metal from the International Monetary Fund, increasing speculation about more official purchases. Gold futures for December delivery rose to as high as $1,088.50 an ounce in New York, beating the previous record set Oct. 14.

Europe’s benchmark index fell 1.2 percent after UBS AG said its third-quarter net loss was 564 million Swiss francs ($552 million), compared with a 283 million-francs profit a year earlier. Analysts surveyed by Bloomberg estimated a loss of 337 million francs on average. UBS shares fell 5.8 percent in Zurich.

European banks also slide after Royal Bank of Scotland Group Plc said it will sell its insurance units and some branches as the lender took an additional 25.5 billion pounds ($41.6 billion) of state aid, making its rescue the world’s most expensive bank bailout.

The Dollar Index, a six-currency gauge of the greenback’s strength, added 0.1 percent to 76.369. The Reuters/Jefferies CRB Index of 19 raw materials gained 1.1 percent. The Dollar Index has rebounded 1.9 percent since sliding to a 14-month low on Oct. 21, the same day the gauge of commodities climbed to a one- year high.

Commodity Producers

Raw-material producers gained 1.2 percent, adding to yesterday’s 1 percent advance. Newmont Mining Corp. jumped 6.7 percent after PT Aneka Tambang, Indonesia’s second-largest nickel producer, was appointed by the Indonesian government to buy a 14 percent stake in company’s local unit.

Owens-Illinois Inc., the world’s largest maker of glass containers, and AK Steel Holding Corp., the fourth-largest U.S.- based steelmaker, each added at least 3.9 percent.

Energy stocks in the S&P 500 rose 1.1 percent as a group. Crude oil for December delivery added 1.9 percent to $79.60 a barrel.

Rowan Cos. advanced 6.3 percent to $24.83 after reporting third-quarter profit excluding some items of 54 cents a share, 5.5 percent higher than the average analyst estimate in a Bloomberg survey.

Earnings Watch

Of 358 companies in the S&P 500 that have reported quarterly earnings since Oct. 7, 84 percent exceeded estimates, poised for a record percentage in data going back to 1993.

Denbury Resources Inc. lost 1.5 percent to $12.90. The U.S. oil and natural-gas producer fell for a second day after it said it will buy Encore Acquisition Co. for about $4.5 billion to add fields in the Rocky Mountains and Gulf of Mexico.

Microsoft Corp. fell 1.3 percent to $27.53. The world’s largest software maker said it is cutting its price for running customers’ e-mail systems, as it tries to keep clients from switching to Google Inc.

Rockwell Collins Inc. lost 3 percent to $49.24. The maker of cockpit instruments and radios said it is looking for “bolt- on, tuck-in acquisitions” after generating a record level of operating cash flow from higher military sales and job cuts. Sales and profit fell in the third quarter as business-jet builders cut production and airlines put off maintenance.

To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net.

Last Updated: November 3, 2009 16:40 EST