June 24 (Bloomberg) -- Most U.S. stocks rose as durable goods orders unexpectedly jumped and earnings topped estimates at Oracle Corp. Equities pared gains and the Dow Jones Industrial Average fell as the Federal Reserve disappointed investors by not increasing its bond-purchase program.

Oracle, the second-largest software maker, rallied 7 percent. General Electric Co. and Caterpillar Inc. advanced as the 1.8 percent increase in bookings for goods meant to last several years added to evidence the recession is easing. Boeing Co. plunged for a second day after delaying the first flight of its 787 Dreamliner, leading declines in the Dow.

About five stocks advanced for every two that fell on the New York Stock Exchange. The S&P 500 added 0.7 percent to 900.94 at 4:04 p.m. in New York after climbing as much as 1.8 percent earlier. The Dow lost 23.05 points, or 0.3 percent, to 8,299.86. The Nasdaq Composite rallied 1.6 percent. Treasuries fell, pushing yields up for the first time in four days.

“Economic figures, such as the durable goods orders, show that we’re not falling off a cliff”, said Frank Ingarra, the Stamford, Connecticut-based manager of the $155 million Hennessy Focus 30 Fund that beat 98 percent of its peers in the past five years. “But Treasury yields are creeping up and that raises concern about higher mortgage rates, financing and inflation down the road. That could be bad for stocks.”

Contraction Slowing

The pace of the economic contraction is slowing and inflation will remain “subdued for some time,” the Fed said at the end of a two-day meeting in Washington. The central bank kept its benchmark interest rate between zero and 0.25 percent and said the rate will stay at “exceptionally low levels” for “an extended period.”

The yield on the benchmark 10-year note, which influences interest rates on mortgages and other consumer debt, rose 0.06 percentage point to 3.7 percent after the Fed kept the size of its $1.75 trillion bond-purchase programs unchanged, failing to ease concern that record government borrowing may lead to higher interest rates.

“Everyone pretty much built up expectations on the quantitative easing part and they didn’t get it,” said Peter Boockvar, equity strategist at Miller Tabak & Co., referring to the Fed’s plan to reduce interest rates through purchases of Treasuries and mortgage bonds.

‘Golden Cross’

The S&P 500, which has retreated 4.8 percent since surging 40 percent from March 9 through June 12, is poised to resume its rally, according to a technical indicator called the “golden cross” that’s considered a bullish signal by analysts who make predictions based on patterns in price charts.

The 50-day moving average for the S&P 500 exceeded its average price for the prior 200 days yesterday for the first time since December 2007. A 50-day average moving higher than a 200-day average is termed a golden cross by technical analysts.

Europe’s Dow Jones Stoxx 600 Index rallied 2.4 percent, snapping a two-day losing streak, as the Organization for Economic Cooperation and Development boosted its forecast for the economy of its 30 member nations for the first time in two years as the U.S. slump shows signs of easing.

The combined economy of the world’s most-industrialized countries will shrink 4.1 percent this year and grow 0.7 percent in 2010, the OECD said. The new projections compare with March forecasts for contractions of 4.3 percent and 0.1 percent.

The U.S. economy is “sort of stabilizing,” while the country’s budget deficit is cause for concern in the medium term, New York University professor Nouriel Roubini, who predicted the financial crisis, told Bloomberg Television.

Oracle Rallies

Oracle advanced 7 percent to $21.26. Excluding some costs, profit was 46 cents a share in the period ended May 31, the company said. Analysts in a Bloomberg survey had estimated 44 cents on average. Oracle President Safra Catz said customers are showing renewed interest in buying software, a sign they expect the recession to ease up.

Technology shares in the S&P 500 rallied 1.4 percent as a group, the steepest advance out of 10 industries, as Apple Inc. and Microsoft Corp. advanced.

“When you see a bellwether like Oracle come out and beat estimates, that can only be a positive for the market,” said Thomas Nyheim, a Greenville, Delaware-based fund manager for Christiana Bank & Trust Co., which oversees $4.6 billion. “Valuations still look attractive on stocks.”

Citigroup Inc. rose 1 percent to $3.04. The U.S. bank that got $45 billion of government funds will raise base salaries by as much as 50 percent to help compensate for a reduction in annual bonuses, a person familiar with the plan said. The company also plans to award stock options to try to keep employees after Citigroup’s market value plummeted 84 percent in the past year.

Legg Mason Rallies

Legg Mason Inc. rallied 11 percent to $24.48 for the top gain in the S&P 500 after the Telegraph newspaper reported that billionaire Nelson Peltz acquired a stake in the fund manager and may push for a sale or breakup.

S&P 500 financial shares advanced 1.1 percent collectively, the second biggest advance among 10 industries.

A gauge of 28 raw-materials producers added 0.8 percent as aluminum, copper, lead and nickel climbed on expectations for higher demand for metals after the OECD raised its forecast.

Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, rose 3.4 percent to $48.80. Alcoa Inc., the largest U.S. aluminum maker, added 2.1 percent to $10.21.

AES Corp. rallied 9.9 percent to $10.58. The Arlington, Virginia-based electricity producer was raised to “overweight” from “equal weight” by Barclays Capital, which increased its price target for the company $2 to $13.

Boeing Tumbles

Boeing had the steepest decline in the Dow average, falling 5.8 percent to $41.32 after tumbling 6.5 percent yesterday. The world’s second-largest commercial planemaker was cut to “underperform” from “perform” by Oppenheimer & Co., which cited a fifth delay in the production of its 787 Dreamliner airliner. Oppenheimer reduced its 787 delivery estimate for 2010 to 18 from 30 and cut its share-price estimate for Boeing to $40 from $42.

Monsanto Co. fell 4 percent to $76.16, reversing an earlier gain of 3.5 percent spurred by better-than-estimated earnings. The world’s biggest seed producer said its profit may drop next year if the seeds business can’t make up for an anticipated 50 percent decline in the Roundup herbicide unit.

Supervalu Plunges

Supervalu Inc. plunged 12 percent to $13.81, the biggest drop in the S&P 500. The second-biggest U.S. supermarket chain said identical store sales and net earnings for its first quarter ending June 20 were hurt by a tougher-than-expected business environment, price cuts and promotional spending. The company said earnings will be “substantially below” analysts’ consensus estimates for the quarter.

Benchmark indexes rose earlier even after purchases of new homes in the U.S. unexpectedly fell in May as builder discounts failed to keep pace with the foreclosure-driven slump in prices for resales.

Sales decreased 0.6 percent to an annual pace of 342,000, the Commerce Department said. The median sales prices fell 3.4 percent from May 2008, compared with a 17 percent drop for existing homes reported yesterday by the National Association of Realtors.

“We still have a high inventory situation” said David Heupel, who helps manage $60 billion at Thrivent Financial for Lutherans in Minneapolis. “It’s important to see a turnover in the housing market in order to get further evidence that we’ve seen a bottom.”

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

Last Updated: June 24, 2009 16:32 EDT