Jan. 13 (Bloomberg) -- Most U.S. stocks gained for the first time in three days as a rebound in oil prices lifted energy producers and improving credit markets boosted banks, overshadowing concern the profit slump is worsening.

Exxon Mobil Corp. and Chevron Corp. gained at least 1.4 percent as crude rose for the first time in six days. JPMorgan Chase & Co. and Citigroup Inc. rallied more than 5.3 percent after three-month bank borrowing rates declined to the lowest level since June 2003. Alcoa Inc. tumbled 5.1 percent after reporting a wider-than-estimated loss as the recession decimated demand for aluminum, while General Electric Co. slumped 5.6 percent as Barclays Plc reduced its earnings estimate.

About seven stocks rose for every five that fell on the New York Stock Exchange. The Standard & Poor’s 500 Index gained 0.2 percent to 871.79. The Dow Jones Industrial Average slipped 25.41 points, or 0.3 percent, to 8,448.56. The Russell 2000 Index added 1.1 percent.

“The stock market is cheap by big-picture standards,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago, which oversees about $60 billion. “Anyone buying in today has to be looking past the valley and into 2010 and 2011. Credit conditions underneath the surface are improving pretty consistently.”

The S&P 500 has dropped 3.5 percent in 2009 as companies from Alcoa to Intel Corp. and Wal-Mart Stores Inc. spurred concern earnings will deteriorate amid the recession, while the unemployment rate in the U.S. climbed to the highest level in almost 16 years.

Earnings Slump

Profits for companies in the S&P 500 probably fell 20 percent in the fourth quarter of 2008, a sixth straight quarter of declines, according to analysts’ estimates compiled by Bloomberg. Income probably dropped 65 percent at raw-materials producers.

The S&P 500’s valuation slid to less than 15.5 times reported earnings today, the cheapest level since 1991. The index is trading at 11.8 times its companies’ estimated profits over the next 12 months, compared with a 2008 low of 9.8 on Nov. 21, when the S&P 500 began its rebound from an 11-year low.

Stocks in Europe and Asia declined today. Europe’s Dow Jones Stoxx 600 Index sank 1.4 percent and the MSCI Asia Pacific Index slid 3.6 percent.

Exxon, the largest U.S. oil company, climbed $1.38, or 1.8 percent, to $77.92. Chevron, the second-biggest, added $1, or 1.4 percent, to $71.82.

Crude Snaps Losing Streak

Crude oil for February delivery rose as much as 5.1 percent to $39.50 a barrel on the New York Mercantile Exchange after Saudi Arabia said it will make deeper supply cuts than announced to bolster prices. Crude pared that gain to an advance of 0.7 percent, and the S&P 500 Energy Index ended the day up more than 2 percent.

Declines in measures of borrowing costs suggest that government efforts to slash interest rates and lend unprecedented amounts of cash directly to banks are helping thaw credit markets.

The London interbank offered rate, or Libor, that banks charge each other for three-month loans slid seven basis points to 1.09 percent, the lowest level since June 2003, according to British Bankers’ Association data. The difference between how much the U.S. Treasury and banks pay for three-month loans, the so-called TED spread, dropped below 100 basis points for the first time in five months.

Banks Rebound

The KBW Bank Index of 24 companies climbed 1.8 percent, its first advance in five days. The gauge rebounded after sliding as much as 2.4 percent today to below its 12-year closing low in November.

JPMorgan climbed 5.8 percent, the most in a month, to $26.35. The bank, which moved up its earnings announcement to Jan. 15 from Jan. 21, is forecast to post per-share profit close to zero, according to the average analyst estimate in a Bloomberg survey.

Citigroup rose 5.4 percent to $5.90. The Financial Times reported that Chief Executive Officer Vikram Pandit has decided to reverse his previous backing for the company’s “financial supermarket” structure and split the troubled group into a “bad bank” and a “good bank.” The move is being made to ensure the company’s survival, the Financial Times reported, citing people close to the situation.

Varian Medical Systems Inc. climbed 8.5 percent to $36.96. The maker of radiation treatment systems said it expects first- quarter orders to increase as much as 13 percent.

Alcoa, GE, Boeing

Alcoa slid 51 cents to $9.55. The largest U.S. aluminum producer reported a fourth-quarter net loss of $1.19 billion because of “historic” price declines and said demand for the metal may continue to weaken in 2009.

General Electric Co. dropped 5.6 percent to $14.94. The company’s fourth-quarter profit may be at the low end of its forecast, said Barclays Capital analyst Robert Cornell, who also predicted that tax benefits at GE Capital will contribute a “substantial” portion to per-share results. He lowered his per-share estimate by 6 cents to 36 cents.

Boeing Co. dropped 2.9 percent to $42.46. The world’s second-largest commercial-plane maker was cut to “neutral” from “outperform” at Credit Suisse Group AG, which said deterioration in credit availability may cut demand for new jets. Precision Castparts Corp. lost 7.4 percent to $56. The maker of metal forgings for jet engines also was cut to “neutral” from “outperform” by Credit Suisse.

Slashed Forecasts

Economists slashed forecasts for U.S. growth in 2009 and projected Federal Reserve policy makers won’t be able to start raising interest rates until 2010, according to a monthly Bloomberg News survey.

The world’s largest economy will contract 1.5 percent this year, a half percentage point more than projected last month, according to the median of 59 forecasts in the survey.

Fed Chairman Ben S. Bernanke warned that a fiscal stimulus won’t be enough to spur an economic recovery and that the government may need to buy or guarantee banks’ tainted assets to revive growth.

“Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system,” Bernanke said in the text of a speech at the London School of Economics. “More capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets.”

Adobe Systems Inc. fell 7 percent to $22.10. The world’s biggest maker of graphic-design programs was downgraded to “underperform” from “market perform” by analysts at Friedman, Billings, Ramsey & Co., who expect slowing revenue and said the company’s shares rose too far, too fast.

Lexmark International Inc. dropped 13 percent, the most in the S&P 500, to $24.63. The second-biggest U.S. printer maker posted a bigger decline in fourth-quarter revenue than it had forecast and said it will cut 375 jobs as demand wanes amid the recession.

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

Last Updated: January 13, 2009 16:30 EST