Oct. 28 (Bloomberg) -- U.S. stocks surged to their first weekly advance in October after a report showed economic growth accelerated last quarter without spurring inflation.

The market's recovery from three days of losses gained momentum after Karl Rove, President George W. Bush's top political adviser, avoided indictment by a federal grand jury investigating the leak of a covert CIA agent's name.

``You are seeing a relief rally,'' said Edgar Peters, chief investment officer at PanAgora Asset Management in Boston, which oversees $17 billion in assets. ``After all the days of selling we've been having, we can finally buy now.''

Microsoft Corp., the world's largest software maker, gained after accelerating its share buyback plan to $19 billion.

The S&P 500 added 19.51, or 1.7 percent, to 1198.41, cutting its month-to-date loss to 2.5 percent. The Dow Jones Industrial Average rose 172.82, or 1.7 percent, to 10,402.77, the biggest rally since April. All 30 of its members except International Business Machines Corp. finished higher.

The Nasdaq Composite Index advanced 26.07, or 1.3 percent, to 2089.88.

For the week, the S&P 500 and Dow climbed 1.6 percent and 1.8 percent, respectively. The Nasdaq gained 0.4 percent.

GDP Report

Evidence that the economy was able to withstand higher energy prices following Hurricane Katrina helped support share prices today.

The economy expanded at a 3.8 percent annual rate during the July-through-September period. The Commerce Department's initial third-quarter gross domestic product estimate compares with a 3.3 percent pace in the previous quarter. Economists in a Bloomberg News survey expected a 3.6 percent gain.

The GDP report's personal consumption expenditures index that excludes food and energy, a measure favored by Fed policy makers, rose at a 1.3 percent annual rate, the slowest since the second quarter of 2003.

Some investors said they were relieved that Rove, Bush's deputy chief of staff, wasn't charged today in a special prosecutor's two-year investigation into the disclosure of a CIA agent's name. Rove has made four appearances before the jury and his role remains under investigation.

`Somewhat Beneficial'

``Not having Karl Rove indicted at this time is somewhat beneficial,'' said Michael Kahn, who helps manage $750 million at A.R. Schmeidler in New York. ``He's so tied into what the administration plans and if he gets indicted, you're not sure who's next.''

I. Lewis Libby, Vice President Dick Cheney's chief of staff, resigned after he was indicted with obstruction of justice, making a false statement and perjury.

Microsoft advanced 68 cents to $25.53 and was the biggest contributor to the S&P 500's gain. The company, which had been buying back $2 billion in stock a quarter, will repurchase the shares by December next year. Microsoft also said revenue this quarter will be as much as $12 billion, falling short of a Thomson Financial estimate of $12.3 billion. Per-share profit will be 32 cents to 33 cents, while analysts expected 35 cents.

Still, Credit Suisse First Boston analyst Jason Maynard raised Microsoft's rating to ``outperform'' from ``neutral,'' citing the potential for the company to beat its own forecasts.

Gateway Inc., the third-largest U.S. personal-computer maker, added 14 cents to $2.69. The company yesterday reported third-quarter net income of 4 cents a share, beating the average analyst estimate in a Thomson survey by 1 cent amid higher sales of computers to retailers.

JDS Uniphase Corp., the biggest maker of parts for fiber- optic networks, climbed 15 cents to $2.07. The company said fiscal first-quarter revenue will be above the midpoint of its previous forecast of $240 million to $260 million.

Avon Products

Shares of Avon Products Inc., the world's largest door-to- door seller of cosmetics, jumped $3.08, or 13 percent, to $27.79 for the biggest gain in the S&P 500. The company reported third- quarter revenue of $1.88 billion, while analysts in a Thomson survey expected $1.85 billion.

Archer Daniels Midland Co. rose $1.05 to $24.30 after the grain processor said it will benefit from cheap grain supplies.

Chevron Corp., the No. 2 U.S. oil company, increased 88 cents to $57.38 even as third-quarter profit was $1.64 a share, missing the average analyst estimate by 27 cents.

Five stocks rose for every one that fell on the New York Stock Exchange. About 1.75 billion shares changed hands on the Big Board, 11 percent more than the three-month average.

Bristol-Myers

Bristol-Myers Squibb Co. dropped 53 cents to $21.14. The drugmaker cut its full-year per-share earnings forecast to $1.48 to $1.58 from a July estimate of $1.49 to $1.59. Bristol-Myers also said it may end development of a diabetes drug after regulators last week requested more safety information.

RealNetworks Inc., owner of the Rhapsody online music service, fell 78 cents to $7.50. The company forecast per-share fourth-quarter earnings of $1.42 to $1.48. Analysts expected $1.48, according to a Thomson survey.

Maxim Integrated Products Inc. lost $4.36, or 11 percent, to $34.60 for the worst performance in the S&P 500. The maker of semiconductors for consumer electronics said quarterly profit, excluding some costs, matched the average analyst estimate. Prudential Equity Group Inc. analyst Mark Lipacis cut the stock's rating to ``neutral weight'' from ``overweight,'' saying he expects growth to slow in the first half of 2006.

The Russell 2000 Index, a benchmark for companies with a median market value of $563 million, was up 1.8 percent at 635.33. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, added 190.94, or 1.6 percent, to 11,933.82. Based on the changes in the Wilshire, the value of stocks increased by $238.68 billion.

Archer Daniels Midland Co. (ADM US)
Avon Products Inc. (AVP US)
Bristol-Myers Squibb Co. (BMY US)
Chevron Corp. (CVX US)
Gateway Inc. (GTW US)
JDS Uniphase Corp. (JDSU US)
Maxim Integrated Products Inc. (MXIM US)
Microsoft Corp. (MSFT US)
RealNetworks Inc. (RNWK US)

To contact the reporter on this story: Sophie Hayward in New York at Shayward2@bloomberg.net.

Last Updated: October 28, 2005 17:15 EDT