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Stocks Advance on Optimism About Global Economic Growth

Photographer: Ron D'Raine/Bloomberg

Caterpillar Inc., the world’s largest maker of construction equipment, rose 4.5 percent and Alcoa Inc., the biggest U.S. aluminum producer, climbed 3.2 percent. Close

Caterpillar Inc., the world’s largest maker of construction equipment, rose 4.5 percent... Read More

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Photographer: Ron D'Raine/Bloomberg

Caterpillar Inc., the world’s largest maker of construction equipment, rose 4.5 percent and Alcoa Inc., the biggest U.S. aluminum producer, climbed 3.2 percent.

U.S. stocks rallied, with the Standard & Poor’s 500 Index gaining the most in two weeks, as reports from China, Japan and Australia boosted optimism about the global economy.

Caterpillar Inc., the world’s largest maker of construction equipment, rose 5.5 percent and Alcoa Inc., the biggest U.S. aluminum producer, climbed 4.2 percent. BP Plc’s U.S. shares jumped 12 percent, the most since October 2008, as JPMorgan Chase & Co. said the rout in the stock has overshot the potential damage from the Gulf of Mexico oil spill. Goldman Sachs Group Inc. fell to the lowest in more than a year on reports of a new regulatory probe.

The S&P 500 climbed 3 percent to 1,086.84 as of 4 p.m. in New York as 496 stocks in the benchmark index rose and energy producers surged the most in 14 months. The gauge fell 0.6 percent yesterday as a late-day slide erased a 1.5 percent rally. The Dow Jones Industrial Average increased 273.28 points, or 2.8 percent, to 10,172.53.

“It looks like economic growth is picking up in China and Japan while Europe isn’t doing as poorly as we had feared,” said Robert Schaeffer, a money manager at Becker Capital Management Inc. in Portland, Oregon, who oversees about $2.5 billion. “We’re beginning to see stocks that look reasonably attractive after the pull-back, so for example we’ve just taken a position in Bank of America.”

Economic Reports

Global stocks surged, sending the MSCI World Index up 2.4 percent, after China’s exports jumped the most in six years in May, rising 48.5 percent from a year earlier and topping economist estimates. Japan’s economy grew at an annualized 5 percent rate in the first quarter. Australian employers added workers in May for a third straight month, and the European Central Bank increased its forecast for growth among countries using the euro. The shared currency rallied more than 1 percent.

General Electric Co., the world’s largest engine maker, rose 2.4 percent to $15.68. S&P 500 industrial companies gained 3.5 percent collectively, the second-most in the S&P 500 among 10 groups after energy producers. DuPont Co., the third-largest U.S. chemical maker, rose 4 percent to $36.99 to help lead commodity producers to the third-biggest advance.

U.S. stocks rallied even after more Americans than anticipated filed applications for unemployment benefits last week, a sign firings remain elevated. Initial jobless claims dropped by 3,000 to 456,000, Labor Department figures showed. Economists surveyed by Bloomberg News projected 450,000 claims, according to the median forecast. The number of people receiving unemployment insurance fell to the lowest level since 2008, while those getting extended payments climbed.

‘Not Majorly Disappointing’

“It’s disappointing, but not majorly disappointing,” said Kevin Caron, a market strategist at Stifel Nicolaus & Co. in Florham Park, New Jersey, which has about $90 billion in client assets. “The improvement in the employment numbers has slowed. It’s not to say things are not improving, they are. It’s just that they’re improving at a snail’s pace.”

The U.S. government posted a smaller budget deficit in May than forecast as a growing economy helped bring in more tax revenue, Treasury Department statistics showed.

Shares of companies dependent on economic growth led the advance. Alcoa climbed 4.2 percent to $11.25. Caterpillar rose 5.5 percent to $59.95 for the biggest gain the Dow. Cliffs Natural Resources Inc., North America’s largest iron-ore producer, jumped 8 percent to $54.87.

Disney Ad Sales

Walt Disney Co., the world’s biggest media company, increased 3.6 percent to $34.11 after its ABC television network sold about $2.4 billion in advertising before the coming television season. Average prices for prime-time shows rose 8 percent to 9 percent, said a person familiar with the matter, who asked not to be identified because the figures aren’t public.

Bank of America Corp., the largest U.S. bank, rallied 3 percent to $15.46.

Goldman Sachs slipped 2.2 percent to $133.77 for the biggest retreat in the S&P 500 and the stock’s lowest price since May 14, 2009. The bank’s $2 billion Hudson Mezzanine collateralized debt obligation, sold in 2006, is the target of a probe by the Securities and Exchange Commission, according to a person with knowledge of the matter.

The inquiry into the CDO may not lead to any additional actions against the New York-based securities firm, said the person, who declined to be identified because the investigation isn’t public. Michael DuVally, a spokesman for Goldman Sachs, declined to comment, as did SEC spokesman John Nester. The Financial Times reported the probe yesterday.

BP Defended

BP’s U.S. shares gained 12 percent to $32.78, while the London-traded shares lost 6.7 percent to a seven-year low of 365.5 pence. The largest oil and natural-gas producer in the Gulf of Mexico has tumbled 44 percent in London and 46 percent in New York since April 20 amid growing pressure from U.S. lawmakers for the company to halt and clean up the oil spill that is fouling the Louisiana coast.

“BP’s loss of relative value has overshot a worst case,” Fred Lucas, a London-based analyst at JPMorgan, wrote today in a report. “The sum of clean up costs ($5 billion), a fine under the Clean Water Act ($8.1 billion) and litigation ($16 billion) is around $29 billion. In order to stay below a 30 percent gearing threshold, this might require asset divestments of $10 billion. Adjusted for the sector’s weakness, BP’s market value has fallen by twice this figure.”

‘Relief Rally’

Exxon Mobil Corp., the largest U.S. energy company, increased 3.1 percent to $61.89 as energy companies in the S&P 500 gained 4.9 percent, the most since March 2009. The group had tumbled 15 percent through yesterday since the April 20 explosion triggered the worst oil spill in U.S. history.

“Energy stocks are having a relief rally from very oversold levels,” said Eric Marshall, who helps oversee about $1 billion as research director of Dallas-based Hodges Capital Management Inc. “Some of the selling has capitulated at least for the short term, and there are opportunities if you can get comfortable with the uncertainty of the political risk.”

Anadarko Petroleum Corp., the Texas oil company that owns a 25 percent stake in BP’s well, rose the most in the S&P 500, jumping 12 percent to $39.15.

Other oilfield-services providers and drillers gained. Baker Hughes Inc., which was raised to “overweight” from “neutral” at JPMorgan, increased 11 percent to $42.42. Halliburton Co. advanced 7.4 percent to $24.22.

To contact the reporters on this story: Esme E. Deprez in New York at edeprez@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

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