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U.S. Stocks Rise Amid Jobless-Claims Report, Corporate Earnings

U.S. stocks rose, sending the Standard & Poor’s 500 Index higher a second straight day, as initial jobless claims fell more than forecast and higher-than- estimated earnings bolstered optimism.

PetSmart Inc. (PETM), a pet-store chain, and Dollar Tree Inc. (DLTR), a discount retailer, added at least 7.1 percent after reporting earnings that beat estimates. Intel Corp. (INTC), KLA-Tencor Corp. (KLAC) and Applied Materials Inc. (AMAT) slumped more than 1.5 percent as Goldman Sachs Group Inc. cut their ratings, citing increased competition from tablet computers and excess supply.

The S&P 500 rose 0.1 percent to 1,342.38 at 1 p.m. in New York. The index yesterday posted the biggest gain in three weeks. The Dow Jones Industrial Average advanced 33.15 points, or 0.3 percent, to 12,593.33 today.

“The rally will accelerate,” said Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., which oversees $358.2 billion. “We had an excellent jobless claims number, which tells me that we’re going to see a solid jobs report. The Fed has indicated that it will be vigilant and watching the pace of jobs recovery. I don’t believe we’ll see a QE3. Still, we’ll continue with easy policy.”

The S&P 500 yesterday snapped a three-day drop amid higher- than-estimated earnings and as the Federal Reserve signaled continued low interest rates. The index rose 6.6 percent in 2011 through yesterday as profits at 72 percent of the 450 companies that reported results since April 11 beat the average analyst projection, according to data compiled by Bloomberg.

Jobless Claims

Stock futures extended gains before the open of regular trading as a government report showed that fewer Americans than forecast filed applications for unemployment benefits last week, making it more likely that the surge in April was caused by temporary events rather than a deterioration in the labor market.

Jobless claims declined by 29,000 to 409,000 in the week ended May 14, Labor Department figures showed today in Washington. The median estimate of economists in a Bloomberg News survey called for a drop to 420,000. The number of applications were the lowest in a month.

Stocks briefly turned lower after a report showed that sales of existing homes unexpectedly declined in April, indicating the industry is struggling to gain traction as the economy expands. Separate figures showed that manufacturing in the Philadelphia unexpectedly grew in May at the slowest pace in seven months, a sign the world’s largest economy may get less of a boost from the industry that led it out of the recession.

Earnings Season

PetSmart added 7.1 percent to $45.50. The pet-store chain said profit in the first-quarter was 61 cents a share, exceeding the average analyst estimate of 55 cents.

Dollar Tree gained 3.8 percent to $63.66. The discount retailer reported first-quarter profit of 82 cents a share. On average, the analysts surveyed by Bloomberg estimated earnings of 75 cents.

Intel slumped 1.8 percent to $23.45. Goldman Sachs lowered its rating on the world’s largest chipmaker, to “sell” from “neutral” yesterday. The bank said its analysis shows that processors out-shipped PCs by about 10 percent in the first quarter. It said Intel’s longer-term threat is from tablets such as Apple Inc.’s iPad, which run on ARM-based chips, eating into the PC market.

Chip Orders

Goldman Sachs downgraded KLA to “sell” from “neutral,” citing its vulnerability to weakness at Intel. Applied Materials was cut to “neutral” from “buy” because of lower 2012 capital spending by chip makers. The bank said orders for semiconductors are likely to decline in the next six quarters.

KLA dropped 4.1 percent to $41.08, while Applied Materials slid 1.5 percent to $14.28.

LinkedIn Corp., the first major U.S. social-media company to sell shares to the public, rallied 133 percent to $104.85 in its trading debut. The company raised $352.8 million in an initial public offering after pricing its shares at $45 each, at the top end of the range. At the IPO price, the company has a market value of $4.25 billion, or 11.3 times projected annual sales. That compares with 13.8 for Facebook Inc. and 8.3 for Salesforce.com Inc. (CRM)

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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

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