July 7 (Bloomberg) -- The deepest recession in a half century has bottomed and U.S. companies’ second-quarter earnings probably beat analysts’ estimates, Laszlo Birinyi said.

The Standard & Poor’s 500 Index will resume the rally that pushed it up as much as 40 percent from a 12-year low in March, Birinyi said. He predicted in May that U.S. stocks were at the start of a bull market that would propel the S&P 500 to a record in two to three years.

“A lot of companies have taken action,” Birinyi, the founder of Westport, Connecticut-based research and money- management firm Birinyi Associates Inc., said in an interview with Bloomberg Television. “Most people think the economy has indeed made a bottom. The consensus is the worst is behind us, and I don’t like to fight the consensus.”

Analysts on average estimate second-quarter earnings at S&P 500 companies fell 34 percent, according to Bloomberg data. About 68 percent of companies beat analysts’ profit predictions in the first quarter, more than the 60 percent that topped estimates in the fourth quarter.

Birinyi on May 20 said the S&P 500 would climb 88 percent in the next two or three years to a record 1,700 as the economy rebounds. While the U.S. equity benchmark rallied as much as 4.7 percent since, it closed yesterday down 0.5 percent from the level when Birinyi made his prediction.

Economic Contraction

The economy contracted by 5.5 percent in the first quarter and 6.3 percent in the fourth quarter of 2008, the most since 1958, Bloomberg data show. It probably shrunk by 2 percent in the second quarter, according to economists’ predictions compiled by Bloomberg, and may expand 0.5 percent in the third.

The S&P 500 dropped 25 percent this year through March 9, the worst annual start ever, bringing its price-to-earnings ratio to 10.19 on a weekly basis, the cheapest since 1985. The index rebounded after the U.S. government and Federal Reserve pledged $12.8 trillion to revive growth and the biggest banks said they were profitable to start the year.

Birinyi’s October 2007 warning that a recovery in banks would be snuffed out presaged an 82 percent plunge in the S&P 500 Financials Index through March 6 of this year. He was early in predicting the end of the bear market, saying on Dec. 8 that the S&P 500 bottomed the prior month, before the measure lost another 23 percent.

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

Last Updated: July 7, 2009 09:49 EDT