Oct. 30 (Bloomberg) -- U.S. stocks rose after the economy contracted less than forecast in the third quarter and investors speculated global interest-rate cuts will stem a further slump.

Intel Corp., Walt Disney Co. and JPMorgan Chase & Co. climbed more than 5.3 percent after the government said the economy shrunk 0.3 percent last quarter. Colgate-Palmolive Co. jumped 7 percent on better-than-estimated earnings. The advance added to a global rally after Hong Kong joined the U.S. in lowering borrowing costs and the Federal Reserve provided $120 billion to spur lending in emerging markets.

The Standard & Poor's 500 Index gained 2.6 percent to 954.09. The Dow Jones Industrial Average added 2.1 percent to 9,180.69. MSCI Inc.'s gauge of emerging-market stocks surged 10 percent, a record advance.

``There weren't any nasty surprises,'' in the economic data, said Jeffrey Davis, chief investment officer at Lee Munder Capital Group in Boston, which manages $4 billion. ``GDP was better than expected. The real economy didn't fall as dramatically as the financial markets. The central bank cuts are bringing a little bit of confidence.''

All 10 industry groups in the S&P 500 advanced after the decrease in GDP was less than the 0.5 percent forecast by economists in a Bloomberg survey. The benchmark for U.S. equities extended its gain this week to 8.8 percent.

Global Rally

Russia's benchmark index rallied 19 percent and South Korea's climbed 12 percent after the Fed provided $120 billion to spur lending in emerging markets. Hong Kong's Hang Seng Index surged 13 percent and Taiwan's Taiex jumped 6.3 percent after their central banks lowered rates. The gains in developing nations pushed the MSCI Emerging Markets Index up 10 percent, the most since at least 1987, and extended its three-day jump to more than 24 percent.

The S&P 500 is still down 35 percent in 2008 and 18 percent in October, poised for its worst month since 1987. The Fed cut its benchmark rate by 0.5 percentage point to 1 percent yesterday and has reduced it from 5.25 percent in the past 13 months, while also creating lending programs to channel more than $1 trillion into the financial system in an effort to stem a recession that threatens to worsen corporate profits.

Twenty-five of the 30 stocks in the Dow average advanced today, with half of them gaining more than 2 percent. Intel, the world's largest chipmaker, led the gains with an 8.2 percent jump to $16.17. Disney, the second-biggest U.S. media company, added 5.7 percent to $25.33. JPMorgan, the largest U.S. bank by market value, rallied 5.4 percent to $37.62.

`Adverse Feedback Loop'

Stocks briefly pared their gains in the final hour of trading after Federal Reserve Bank of San Francisco President Janet Yellen said recent data on the U.S. economy is ``deeply worrisome'' and the government should consider new ways to help homeowners and stem foreclosures.

``We have a long way to go before the credit crunch shows significant healing,'' Yellen said at a speech in Berkeley, California. ``We are in the grip of an adverse feedback loop,'' in which tighter credit conditions are exacerbating economic weakness.

Colgate increased $4.23 to $64.23. The world's largest maker of toothpaste said third-quarter profit rose to $499.9 million from $420.1 million a year earlier, driven by demand in Latin America and higher prices. Sales jumped 13 percent to $4 billion, matching the average analyst estimate.

Office Suppliers Climb

Staples Inc. rose $2.48, or 16 percent, to $18.42. The biggest U.S. office-supplies retailer forecast third-quarter profit that exceeds some analysts' estimates and reiterated its long-term earnings projections.

Other office-supply retailers jumped. Office Depot Inc., the second-largest, rallied the most in the S&P 500, adding 49 percent to $3.12. The company is undervalued based on its potential profits, according to Colin McGranahan, an analyst at Sanford C. Bernstein & Co.

OfficeMax Inc. soared 46 percent to $7.07. The rival of Staples and Office Depot said its third-quarter results will be delayed because of an analysis of a charge tied to Lehman Brothers Holdings Inc. and predicted ``no adverse impact'' on its operations or liquidity from the firm's bankruptcy.

American Express Co. rallied 85 cents, or 3.4 percent, to $26.06. The largest U.S. credit-card company by purchases said it will slash 7,000 jobs and freeze hiring and management raises to save as much as $1.8 billion next year.

Intercontinental Exchange Inc., known as ICE, surged 41 percent to $87. The second-largest U.S. futures market said it will buy the Clearing Corp., its partner in a plan to guarantee trades in the $55 trillion credit-default swap market.

Legg Mason Gains

Legg Mason Inc. rose 23 percent to $20.76 after saying it plans to cut about one-third of the jobs at Legg Mason Capital Management, the first layoffs at its investment unit run by Bill Miller, after assets fell by 53 percent this year. The shares added to a 30 percent rally yesterday spurred by profit that topped analysts' estimates.

Exxon Mobil Corp. gained 40 cents to $75.05 after reporting third-quarter profit before one-time items that was the highest ever for a U.S. corporation. The world's biggest energy company netted $14.8 billion, up 58 percent from a year earlier. The stock's gain was limited as crude futures dropped 2.3 percent to $65.96 a barrel. UBS AG cut its forecast for oil prices next year by 43 percent because the global economic slowdown may reduce demand.

Hartford Financial Services Group Inc., the insurer that got an investment from Germany's Allianz SE this month, plunged 52 percent to $9.62 after reporting its first unprofitable quarter in five years on writedowns in investments in financial firms. The shares were downgraded to ``neutral'' from ``buy'' at Merrill Lynch & Co., which said the company may need to raise capital.

Insurers Slide

Assurant Inc. dropped 25 percent to $25.35 for the second- biggest decline in the S&P 500. The home insurer posted a third- quarter loss on investments and costs for two U.S. hurricanes. Profit excluding investment losses was 70 cents a share, missing the 88-cent estimate of 14 analysts in a Bloomberg survey.

Cigna Corp. dropped the most in six years, tumbling $4.27, or 22 percent, to $15.58, after reporting a 53 percent decline in quarterly profit tied to shrinking health-plan membership and falling values of stocks held by its annuities business.

Avon Products Inc. sank 15 percent to $22.57. The world's largest door-to-door cosmetics seller cut its profit-margin forecast because of a slowdown in North American sales and the strengthening of the U.S. dollar.

Earnings Watch

Earnings for the 309 companies in the S&P 500 that have reported third-quarter results have dropped an average of 12 percent from a year earlier, according to Bloomberg data. Still, 206 of the companies have beaten analyst estimates, compared with 97 that missed.

A slump in the final 12 minutes of trading yesterday erased a 3.1 percent rally in the S&P 500 that was spurred by the Fed's rate cut. Some traders attributed the drop to a report that General Electric Co. Chief Executive Officer Jeffrey Immelt said he's asking managers to match this year's profit in 2009, even if revenue declines. GE spokesman Russell Wilkerson later said the initial comments were taken out of context and that Immelt was not making any kind of forecast about 2009.

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

Last Updated: October 30, 2008 17:08 EDT