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U.S. Stocks Advance as Caterpillar Rallies on Earnings Results

April 29 (Bloomberg) -- U.S. stocks gained, extending a weekly rally in the Standard & Poor’s 500 Index, as companies such as Caterpillar Inc. (CAT) and Goodyear Tire & Rubber Co. (GT) reported earnings that topped analysts’ estimates.

Caterpillar jumped 2.5 percent after also raising its forecast amid a surge in sales in developing countries and Goodyear surged 12 percent after posting record sales. Microsoft Corp. (MSFT) lost 3 percent after sales missed analysts’ predictions. Research In Motion Ltd. (RIM), the maker of the BlackBerry, tumbled 14 percent after cutting its earnings forecast.

The S&P 500 rose 0.2 percent to 1,363.61 at 4 p.m. in New York. The Dow Jones Industrial Average climbed 47.23 points, or 0.4 percent, to 12,810.54. Both gauges are trading at their highest levels in almost three years.

“The earnings reports have been as expected or slightly better,” said Michael Shinnick, a South Bend, Indiana-based money manager at Wasatch Advisors Inc., which oversees $10.5 billion. “Companies like Caterpillar with exposure to global growth were very strong. However, there are some pockets of softness with debate over future strength as we saw with Microsoft.”

The S&P 500 rose 2 percent this week and gained 2.9 percent this month. The measure has rallied 8.4 percent in 2011 as higher-than-estimated profit and economic reports from manufacturing to housing bolstered investors’ confidence. Earnings-per-share beat estimates at more than three-quarters of the 298 companies in the S&P 500 that reported since April 11, data compiled by Bloomberg show.

S&P 500 Forecast

Thomas J. Lee, JPMorgan Chase & Co. (JPM)’s chief U.S. equity strategist, raised his 2011 year-end estimate for the S&P 500 to 1,475 from 1,425, citing first-quarter earnings growth. He also boosted his 2012 earnings-per-share estimate for companies in the U.S. equity benchmark gauge to $105 from $102.

“First-quarter results have been impressive and are a reminder that S&P 500 earnings-per-share results can remain resilient despite weaker U.S. gross domestic product growth,” Lee wrote in a report dated yesterday. “The most encouraging aspect of first-quarter earnings has been the strength in top- line growth.”

Sales have grown 10 percent for S&P 500 companies that have reported quarterly results since April 11, exceeding analysts’ estimates at 71 percent of the companies. Stocks rallied yesterday, as higher-than-estimated sales at companies such as Sprint Nextel Corp. outweighed a report that the U.S. economy grew at a slower pace than forecast in the first quarter.

Economic Data

Lower-than-estimated data on business activity and consumer confidence underscored the Fed’s assessment this week that it will probably keep interest rates near zero for an extended period to bolster a “moderate” economic expansion.

The Institute for Supply Management-Chicago Inc. said today its business barometer fell to 67.6 in April from 70.6 the prior month, trailing the median forecast in a Bloomberg News survey of economists for a drop to 68.2. The Thomson Reuters/University of Michigan final index of consumer sentiment rose to 69.8 from March’s 67.5 reading that was the lowest since November 2009. The gauge was projected to increase to 70, according to the median economist estimate.

Government data showed consumer spending in the U.S. climbed in March as Americans spent more on food and fuel, indicating further income gains are needed to boost the biggest part of the economy.

Caterpillar

Caterpillar climbed 2.5 percent to $115.41 for the biggest gain in the Dow. The world’s largest maker of construction equipment is betting on higher mining-equipment sales with its $8.6 billion acquisition of Bucyrus as Asian demand drives up commodity prices. Business outside the U.S. is “booming,” Chief Executive Officer Doug Oberhelman told investors and analysts at a construction-equipment conference in Las Vegas last month.

Industrial companies in the S&P 500 climbed 0.3 percent collectively, the second-most among 10 industries in the benchmark index.

Goodyear Tire & Rubber rallied 12 percent to $18.15 for the biggest gain in the S&P 500. The largest U.S. tiremaker reported first-quarter adjusted earnings of 51 cents a share, more than quadrupling the 11-cent average estimate made by analysts.

Motorola Mobility Holdings Inc. rose 8.6 percent to $26.06. The handset maker, spun off in January from parent Motorola Inc., reported a narrower first-quarter loss than analysts projected as it sold more Droid and Atrix phones.

SunPower Corp. (SPWRA) jumped 35 percent to $21.69. Total SA, Europe’s third-biggest oil producer, offered to buy as much as 60 percent of the second-largest U.S. solar module manufacturer at a price of $23.25 a share.

‘Inflation Risk’

Energy stocks surged 1.5 percent, the biggest rally out of 10 industries in the S&P 500, as the price of oil climbed higher, capping an unprecedented eighth straight month of gains.

“Earnings numbers are so far looking pretty strong,” said Thomas Nyheim, a Greenville, Delaware-based money manager for Christiana Trust, which oversees $7.5 billion. “But the one thing that keeps coming up is inflation risk, and we’re beginning to see some of that cost pressure coming through in the reports. There’s still a lot of caution in the market.”

Microsoft, RIM

Microsoft declined 3 percent, the most in the Dow, to $25.92. The world’s biggest software maker reported third- quarter sales in the Windows division that missed analysts’ predictions as consumers shunned its products in favor of tablets such as Apple Inc.’s iPad.

RIM sank 14 percent, the most since September 2009, to $48.65. The Waterloo, Ontario-based company cut its earnings forecast for the quarter ending May 28 to a range of $1.30 a share to $1.37 a share. Last month, the company had forecast profit of $1.47 a share to $1.55 a share. Before today, it had lost 2.7 percent this year.

Mike Abramsky, an analyst at RBC Capital Markets in Toronto, slashed his price estimate for RIM stock to $55 from $90 and his rating to “sector perform” from “top pick.” At least four other analysts -- Jefferies & Co. Inc.’s Peter Misek, Cormark Securities Inc.’s Richard Tse, Gleacher & Co. Securities’ Stephen Patel and National Bank Financial’s Kris Thompson -- reduced their ratings on the stock.

Bank of America Corp. (BAC) and JPMorgan paced losses in financial companies after the two were listed as among 16 investment banks facing the first-ever European Union antitrust probes into the swaps market. Charlotte, North Carolina-based Bank of America slid 1.1 percent to $12.28, while New York-based JPMorgan slumped 0.5 percent to $45.63.

To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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