April 2 (Bloomberg) -- U.S. stocks rallied, extending a global advance, as world leaders agreed on measures to fight the recession and accounting regulators approved a rule change that may boost bank profits. Oil rose the most in three weeks, while the dollar and Treasuries fell.

Caterpillar Inc., Walt Disney Co. and DuPont Co. climbed more than 7.5 percent amid growing speculation the world economy is stabilizing. Wells Fargo & Co. increased 5.9 percent and Goldman Sachs Group Inc. gained 3.6 percent after the Financial Accounting Standards Board voted to relax so-called fair-value rules. Benchmark indexes jumped even as new claims for unemployment insurance benefits swelled to a 26-year high.

The Standard & Poor’s 500 Index rose 2.9 percent to 834.38. The Dow Jones Industrial Average added 216.48 points, or 2.8 percent, to 7,978.08. Both closed at their highest levels since the second week of February. Europe’s Dow Jones Stoxx 600 rose 4.9 percent. The MSCI Asia Pacific Index soared 4.8 percent.

“Right or wrong, the belief is we may have seen the worst of the economic side of things,” said William Stone, the chief investment strategist in the wealth management unit of PNC Financial Services Group Inc., which oversees $110 billion in Philadelphia.

G-20 Meeting

The Group of 20 policy makers, meeting in London, pledged more than $1 trillion in aid to revive the global economy. They boosted the resources of the International Monetary Fund and offered cash to revive trade, while sidestepping the question of whether to deliver more stimulus in their own economies. The G- 20 also called for stricter limits on hedge funds, executive pay, credit-rating companies and risk-taking by banks.

General Electric Co., the biggest maker of power-plant turbines and jet engines, and Exxon Mobil Corp., the largest oil company, contributed the most to the S&P 500’s advance. Industrial companies added 5.5 percent collectively, the biggest gain among the index’s 10 main industry groups. Crude oil rose 8.8 percent to $52.64 a barrel in New York, and copper traded at an almost five-month high.

Companies that depend on discretionary spending by consumers climbed 5.2 percent. CBS Corp., the owner of radio and television stations and billboards; Wyndham Worldwide Corp., the hotel franchiser; and Office Depot Inc., the world’s second- largest office-supplies retailer, posted three of the top four gains in the S&P 500 with advances of 20 percent or more.

Topping Estimates

U.S. stocks advanced yesterday as sales of existing homes unexpectedly increased and a manufacturing gauge topped economists’ estimates, bolstering optimism that the worst of the recession is over. The advance today came even as new jobless claims increased to 669,000 last week, the highest level since 1982, the Labor Department said.

The S&P 500 has climbed 23 percent from its 12-year low on March 9, as banks from Citigroup Inc. to JPMorgan Chase & Co. said they made money in the first two months of 2009 and Treasury Secretary Timothy Geithner unveiled plans to finance as much as $1 trillion in purchases of distressed assets from financial firms.

“We’ve gotten some much better economic news, especially on manufacturing output,” said Joseph Veranth, chief investment officer at Dana Investment Advisors, which manages $2.4 billion in Brookfield, Wisconsin. “A rally of 20 percent is significant and meaningful, especially coming off a low.”

FASB Changes

Financial shares in the S&P 500 added 2.9 percent, extending their gain since March 6 to 54 percent. The changes approved by FASB allow companies to use “significant” judgment in valuing assets. They’re expected to reduce writedowns on certain investments, including mortgage-backed securities. Analysts say the measure, which can be applied to first-quarter results, may boost banks’ net income by 20 percent or more.

Wells Fargo, the second-largest home lender, added 5.9 percent to $15.33. Goldman Sachs rose 3.6 percent to $114.22. The largest U.S. securities firm to convert to a bank was rated “outperform” by Credit Suisse Group AG, which cited its “strong” position in the market and balance sheet.

Wynn Resorts Ltd., the biggest U.S. casino company by market value, rose 25 percent to $26.85 for the S&P 500’s top gain. Rival MGM Mirage surged 19 percent to $3.14 after a person familiar with the matter said buyout firm Colony Capital LLC may invest in MGM and Dubai World’s CityCenter project in Las Vegas.

Dow Chemical Co. rallied 13 percent to $9.94. The biggest U.S. chemicals maker agreed to sell its Morton Salt unit to K+S AG, Europe’s largest salt maker, for $1.68 billion in cash to help finance the acquisition of Rohm & Haas Co.

Gilts Drop

U.K. gilts fell as the government sold 2.25 billion pounds ($3.29 billion) of 30-year bonds, the longest-dated securities offered since the Treasury was unable to find enough buyers at an auction of 40-year debt last week. The bonds were sold at an average yield of 4.257 percent and investors bid for 1.59 times the amount of securities sold.

Treasuries slid for the first time in four days, sending the 10-year note’s yield 10 basis points higher to 2.75 percent, as gains in equities damped demand for the safety of government assets. Investors may require higher yields to keep buying U.S. debt as President Barack Obama’s government borrows record amounts to try to end the U.S. recession, Goldman Sachs said in a report yesterday.

The U.S. needs to borrow $3.25 trillion for the fiscal year ending Sept. 30, including sales to replace maturing securities, according to Goldman.

The MSCI Emerging Markets Index rose 5.9 percent to an almost six-month high on speculation more countries may follow Mexico in taking advantage of new loan conditions from the International Monetary Fund.

Tequila Crisis

Mexico asked for a $47 billion credit line from the IMF yesterday, the most since the so-called Tequila Crisis in 1995. The IMF said last month it would relax loan conditions for developing countries that have low inflation, moderate levels of foreign debt and sound public finances.

The cost to protect against corporate defaults declined for the first time this week.

Contracts on the Markit iTraxx Crossover Index of 45 companies with mostly high-risk, high-yield credit ratings dropped 24 basis points to 938, according to JPMorgan Chase & Co. prices at 10:23 a.m. in London.

The euro extended its gain against the dollar after the European Central Bank cut its key interest rate to 1.25 percent, a smaller reduction than forecast in a Bloomberg survey of economists.

The difference between yields on 30-year, fixed-rate mortgages and 10-year Treasury notes narrowed to 2.23 percentage points from a high of 3.05 percentage points at the end of last year, according to data compiled by Bloomberg. The average gap over the past 10 years is 1.55 points.

“I’m really surprised and encouraged” by this week’s gains in stocks, said Eric Green, director of research at Penn Capital Management, which oversees $3 billion in Cherry Hill, New Jersey. “There’s some real institutional interest in buying stocks here. You could have a sustained rally for a while.”

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.

Last Updated: April 2, 2009 16:27 EDT