Oct. 19 (Bloomberg) -- U.S. stocks rose, sending benchmark indexes to a one-year high, on better-than-estimated earnings and speculation the economy is healthy enough for policy makers to unwind efforts to shore up the financial system. The dollar fell, while commodity prices and 10-year Treasuries advanced.

Gannett Co., the biggest U.S. newspaper publisher, jumped 8.2 percent on results that beat estimates. Texas Instruments Inc. climbed before reporting earnings. Caterpillar Inc. surged 6 percent after RBC Capital Markets recommended the shares. Banks advanced as the Federal Reserve Bank of New York said it is assessing the use of reverse repurchase agreements to drain record amounts of cash added to the financial system.

“The stock market wants to move higher,” said Michael Levine, a money manager at New York-based OppenheimerFunds Inc., which oversees about $165 billion. “Corporate earnings have been in line or better-than-expected. I see a positive tone through the end of the year.”

The Standard & Poor’s 500 Index climbed 0.9 percent to 1,097.91 at 4:06 p.m. in New York, adding to gains from a back- to-back weekly advance. The Dow Jones Industrial Average jumped 96.28 points, or 1 percent, to 10,092.19. The MSCI World Index of 23 developed countries rallied 1.3 percent. Four stocks rose for each that fell on the New York Stock Exchange.

Earnings at U.S. companies probably will exceed analysts’ third-quarter estimates, extending a rally in stocks to year- end, Nomura Holdings Inc. wrote in a note dated Oct. 16. Thirty- four of the 41 companies in the S&P 500 that reported since Oct. 7, including JPMorgan Chase & Co. and Intel Corp., surpassed analysts’ projections, according to Bloomberg data.

Earnings Watch

More than 130 other companies in the S&P 500 are scheduled to report this week. The benchmark index for American equities has rallied 62 percent from a 12-year low in March on speculation the economy is emerging from the worst recession in seven decades.

“We’ll have lots of earnings reports this week,” said Tom Wirth, senior investment officer at Chemung Canal Trust Co., which manages $1.6 billion in Elmira, New York. “The trend so far has been positive and there’s expectation that will continue. That’s positive for stocks. It’s very possible that we near 1,200 on the S&P 500 by the end of the year.”

Analysts surveyed by Bloomberg estimate profits for S&P 500 companies will rebound 65 percent in the last three months of the year after falling for nine straight quarters, the longest streak since the Great Depression.

Consumer Discretionary Rally

Gannett and Nordstrom Inc. helped lead consumer discretionary stocks in the S&P 500 up 1.4 percent.

Gannett rose 8.2 percent to $14.06. The publisher had third-quarter profit of 44 cents a share on an adjusted basis, beating the average analyst estimate by 3 cents as a decline in print advertising abated.

Nordstrom added 4.2 percent to $35.85. The department store chain had its share-price estimate increased to $40 from $25 at Barclays Plc, which said earnings will continue to improve for the rest of the year because of recovering sales and low inventories.

Eaton Corp. climbed 5.7 percent to $63.89. The Cleveland- based manufacturer reported third-quarter profit excluding some items of $1.21 a share, higher than the 95-cent average estimate of analysts in a survey. Eaton also said earnings this year will be more than previously estimated.

Texas Instruments and Apple Inc. climbed before reporting results. Texas Instruments, the second-largest U.S. chipmaker, rose 3.4 percent to $23.52. Apple, the maker of Macintosh computers, the iPhone and the iPod media player, gained 1 percent to $189.86.

Utilities Rally

DTE Energy Co. helped lead utility companies up 1.5 percent for the biggest gain in the S&P 500 among 10 groups. The owner of Michigan’s largest utility boosted its 2009 earnings outlook on cost reductions, better-than-expected results at its energy- trading unit and tax benefits. Earnings excluding one- time items are expected to be $3.20 to $3.40 a share. The average analyst estimate is $2.89. DTE rose 3.8 percent to $37.90.

Financial shares in the S&P 500 climbed 0.5 percent collectively, reversing a 0.4 percent drop spurred earlier by earnings that trailed estimates at BB&T Corp.American Express Co. gained 2.3 percent and Goldman Sachs Group Inc. added 0.6 percent.

The Fed Bank of New York said that over the past year, it has been working with market participants on operational aspects of reverse repos to ensure the tool will be ready when and if the Federal Open Market Committee decides to use it.

‘Bullish For Stocks’

“It’s very bullish for stocks,” said David Lutz, managing director of equity trading at Stifel Nicolaus & Co. in Baltimore. “A reverse repo is actually a way of tightening. It means the economy is functioning well enough, stimulus has worked, and rates need to go higher. That will be positive overall for U.S. investment flows.”

Pacific Investment Management Co., the world’s biggest manager of bond funds, is considering adding stocks for the first time as it expands its line-up of products to investors, a person familiar with the firm’s plans said. Caterpillar had the biggest gain in the Dow, rising 6 percent to $57.85. The world’s largest maker of construction equipment was rated “outperform” in new coverage at RBC Capital Markets, which cited the company’s cost-cutting initiatives. Caterpillar had its share-price estimate raised by 25 percent to $65 at Bank of America, which boosted its 2010 and 2011 earnings estimates, citing faster recovery in machinery revenues.

Motorola, Ford Rally

Motorola Inc. had the third-steepest gain in the S&P 500, jumping 7.9 percent to $8.47. Oppenheimer & Co. Inc. raised its share estimate for the biggest U.S. mobile-phone maker by 25 percent to $10, saying the introduction of additional devices with other carriers could “add momentum.”

Ford Motor Co. rose 2 percent to $7.57. The only U.S. automaker to decline a federal bailout may report “major upside” to third-quarter profit projections, according to analysts at JPMorgan who estimate earnings of 16 cents a share. Analysts on average estimate a loss of 23 cents.

Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, added 4.3 percent to $79 as copper rose to a five-week high. Gold futures for December delivery added $6.60, or 0.6 percent, to $1,058.10 an ounce in New York as the weakening dollar boosted the appeal of precious metals as an alternative investment.

Europe’s Dow Jones Stoxx 600 Index added 1.5 percent, while the MSCI Asia Pacific Index gained 0.7 percent. Royal Dutch Shell Plc, Europe’s biggest oil company, rose 2.4 percent in London and Cnooc Ltd., China’s biggest offshore producer, climbed 4.2 percent in Hong Kong.

BB&T Tumbles

BB&T, the North Carolina lender that acquired Colonial Bancgroup Inc. in August, said third-quarter profit fell to 23 cents a share, missing the average analyst estimate by 2 cents, as more real-estate borrowers stopped making payments. BB&T shares tumbled 4.3 percent to $27.03.

Hasbro Inc. dropped 3.7 percent to $28.42. The world’s second-largest toymaker said third-quarter sales declined to $1.28 billion on lower prices. Analysts predicted $1.33 billion, the average of 11 estimates.

Today’s gains came on the 22nd anniversary of “Black Monday,” when an increase in U.S. interest rates and slowing economic growth sparked a slump that sent the Dow Jones Industrial Average down 23 percent in one day.

Predictions that U.S. stocks would decline in September and October weren’t wrong, just early, says Mary Ann Bartels, an analyst at Bank of America.

‘Seasonal Weakness’

The S&P 500’s surge from its 12-year low on March 9 compares with rebounds in March 1938 and October 1974. Bartels cited those two periods as precedents in a report today. Using the earlier rallies as a guide suggests the “seasonal weakness” that stocks often suffer in September and October will occur in November, December and January instead, she wrote.

The Chicago Board Options Exchange’s S&P 100 Volatility Index dropped below 20 on an intraday basis for the first time since June 2008 as the rally in stocks prompted investors to pay less for protection from declines in equity prices.

The measure, a precursor to the so-called VIX that tracks options prices on the S&P 500, lost as much as 6.6 percent to 19.81 before ending the day at 20.25. The VXO, as the S&P 100 gauge is known, has fallen from a peak of 87.24 in November after U.S. stocks posted the steepest rally since the 1930s. The VIX added 0.3 percent to 21.49.

Dollar Slumps

The Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against those of six major U.S. trading partners, dropped 0.3 percent to 75.363. The U.S. dollar will extend declines as the global economy’s recovery prompts investors to shift away from U.S. assets, according to Pacific Investment Management.

Fundamental forces are set to put pressure on the dollar as the recovery gathers momentum, Pimco’s strategic adviser Richard Clarida wrote on the company’s Web site. Those forces include massive budget deficits, bets the Fed will keep borrowing costs near zero for an extended period, and prospects for a double-dip recession in the U.S., he said.

“An orderly decline in the dollar may help to rebalance global investment portfolios if, as expected, global investment flows -- both official and private -- continue to diversify away from U.S. assets,” Clarida said.

Treasury 10-year notes rose and the yield fell 3 basis point, or 0.03 percentage point, to 3.38 percent. The yield on the two-year note rose 1 basis point to 0.96 percent.

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

Last Updated: October 19, 2009 16:32 EDT