U.S. Stocks Gain as Leading Indicators Boost Economic Optimism

U.S. stocks rose, with the Standard & Poor’s 500 Index trimming its worst weekly drop since September, as better-than-forecast growth in a gauge of leading indicators fueled optimism the economy will weather Europe’s debt crisis.

Hewlett-Packard Co. (HPQ) rose 2.5 percent after adding Relational Investors LLC’s Ralph Whitworth to its board. Boeing Co. (BA) gained 2 percent after winning a provisional order for 230 planes from Lion Air. Salesforce.com Inc. (CRM), the largest maker of online customer-management software, lost 10 percent as billings missed some estimates.

The S&P 500 advanced 0.3 percent to 1,220.24 at 1:38 p.m. New York time after falling 0.4 percent earlier. It has retreated 3.4 percent this week. The Dow Jones Industrial Average increased 59.52 points, or 0.5 percent, to 11,830.25. November options on U.S. stocks and indexes expire today.

“Until we have some sense of stability in Europe, the volatility we have seen in the markets will continue,” Mark Bronzo, who helps manage $24 billion at Security Global Investors in Irvington, New York, said in an e-mail. “Better economic growth in the U.S. will provide support for the markets and potentially set the stage for a nice rally if and when Europe does stabilize.”

The S&P 500 fluctuated earlier as investors watched developments in Europe’s debt crisis. The Conference Board’s index of U.S. leading indicators climbed more than forecast in October, signaling the world’s largest economy will keep growing in 2012. The U.S. economy may end 2011 expanding at its fastest pace in 18 months as analysts increase their forecasts for the fourth quarter.

Boosting Forecasts

Economists at JPMorgan Chase & Co. in New York now see gross domestic product rising 3 percent in the final quarter, up from a previous prediction of 2.5 percent. Macroeconomic Advisers in St. Louis increased its forecast to 3.2 percent from 2.9 percent at the start of November, while Morgan Stanley boosted its outlook to 3.5 percent from 3 percent.

“The next big catalyst for the stock market will probably be a growing appreciation that not only is the U.S. economy not recessing, but U.S. economic growth is actually accelerating,” James Paulsen, who helps oversee about $333 billion as chief investment strategist at Minneapolis-based Wells Capital Management, said in an e-mail.

Stocks erased gains earlier today as Deutsche Presse- Agentur reported that Germany’s Foreign Ministry said the nation was considering the possibility of “orderly defaults” beyond Greece. The euro snapped a four-day slump as European Central Bank purchases pushed down Italian and Spanish bond yields and speculation grew that the International Monetary Fund may play a larger role in fighting the debt crisis.

Joining the Board

Hewlett-Packard jumped 2.5 percent to $27.98. Whitworth, whose Relational Investors held about 17.5 million Hewlett- Packard shares as of Sept. 30, is joining the board’s compensation committee and its finance and investment committee. The stock retreated 35 percent this year through yesterday.

“It’s definitely a positive development,” said Brian Marshall, an analyst at ISI Group in San Francisco. “The board needs help, and Ralph has the background to help them.”

Boeing added 2 percent to $67.43. The commitment consists of 201 of the new 737 MAX model, which features upgraded engines, and 29 extended-range 737-900s. President Barack Obama attended a signing ceremony today for the deal in Indonesia, which coincided with a summit of Southeast Asian leaders.

Salesforce.com tumbled 10 percent to $113.25. Billings rose 29 percent in the fiscal third quarter from a year earlier, said Pat Walravens, an analyst at JMP Securities LLC, who has an “outperform” rating on the shares. That missed his 33 percent growth estimate. The figure is seen as a benchmark of momentum at the company, whose shares had climbed more than 10 percent in the past six weeks before today.

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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