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U.S. Stocks Gain as S&P 500 Index Posts Best Start Since 1987; Euro Rises

U.S. stocks advanced, giving the Standard & Poor’s 500 Index its best start to a year since 1987, as semiconductor companies and homebuilders gained. The euro rose as the International Monetary Fund proposed boosting its lending resources by as much as $500 billion.

The S&P 500 rose 1.1 percent to 1,308.04 at 4 p.m. New York time, closing above 1,300 for the first time since July. It has surged 4 percent this year. Computer-related companies led gains today among 10 MSCI World (MXWO) Index industries after ASML Holding NV (ASML), Europe’s biggest semiconductor-equipment maker, forecast higher first-quarter orders and Linear Technology Corp. (LLTC)’s sales beat projections. Builders climbed after industry confidence increased. The euro added 1 percent to $1.2859.

The IMF may increase its resources to help safeguard economic growth after identifying a potential need for $1 trillion in financing in coming years. The World Bank cut its growth forecast by the most in three years, saying a euro-region recession threatens to worsen a slowdown in emerging markets such as India and Mexico.

“Earnings momentum is slowing somewhat, but we’re still seeing growth,” Peter Jankovskis, who helps manage about $2.5 billion at Oakbrook Investments in Lisle, Illinois, said in a telephone interview. “That’s something that investors should be encouraged by. The economic data points continue to be upbeat. We’re in a mode for decent growth.”

Earnings Reports

At least 48 companies in the S&P 500 are scheduled to report quarterly results this week. The entire S&P 500 probably will report a 4.6 percent increase in per-share earnings during the September-December period, analysts’ estimates compiled by Bloomberg show.

Stocks rose today as a gauge of confidence among American homebuilders rose in January to the highest level in more than four years as sales and buyer traffic improved. U.S. industrial production rebounded in December, reflecting gains in demand for business equipment, automobiles and construction materials.

The world economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, the Washington-based World Bank said today. The euro area may contract 0.3 percent, compared with a previous estimate of a 1.8 percent gain. The U.S. growth outlook was cut to 2.2 percent from 2.9 percent.

Semiconductor companies and makers of chip-building equipment rallied 3.9 percent, the most among 24 industries in the S&P 500. Linear surged 12 percent. In Europe, ASML slumped 3.5 percent after rising as much as 3 percent.

Four-Year High

Confidence among U.S. homebuilders rose in January to the highest level in more than four years, driving a rally in the group. The National Association of Home Builders/Wells Fargo sentiment gauge increased to 25 this month, exceeding the median forecast of economists surveyed by Bloomberg News.

PulteGroup Inc. rose 5.9 percent. Lennar Corp. (LEN) advanced 4.4 percent.

U.S. stock-index futures fell earlier after Bank of New York Mellon Corp. (BK) and PNC Financial Services Group Inc. (PNC) missed the average analyst profit projection.

Only 47.1 percent of S&P 500 companies that posted quarterly results between Dec. 1 and yesterday exceeded the average projection, according to data compiled by Bloomberg. So- called positive surprises have surpassed 50 percent at a comparable point in every other quarterly reporting period for the past four years. The previous low was 51.5 percent in the third quarter of 2008, during the global financial crisis.

Goldman Sachs

Goldman Sachs Group Inc. (GS) surged 6.8 percent today. The fifth-biggest U.S. bank by assets beat the average analyst earnings estimate by 50 percent as the company cut compensation in response to falling revenue.

Some of the largest financial companies also climbed. JPMorgan Chase & Co. (JPM) added 4.7 percent, while Bank of America Corp. (BAC) advanced 4.9 percent.

The euro rallied against 10 of 16 major counterparts as Greek Prime Minister Lucas Papademos resumed negotiations with bondholders. An official told reporters that the government could forge an agreement with private creditors by the end of this week.

The dollar fell against the euro on reduced demand for a refuge as U.S. data showed industrial production increased 0.4 percent in December after contracting 0.3 percent the month before. The pound weakened against the euro as Britain’s unemployment rate rose to a 16-year high of 8.4 percent.

Crude oil futures declined 0.1 percent to $100.59 a barrel, after rising as much as 1.3 percent and tumbling 0.9 percent. Natural gas declined 0.6 percent, extending its seven-day retreat to 19 percent.

TransCanada Corp.’s shares fell 1.1 percent after the Obama administration denied a permit for the company’s Keystone XL oil pipeline. The company will be allowed to file a revised route that avoids an environmentally sensitive area in Nebraska.

Wheat futures fell to a one-month low on speculation that global grain supplies will be ample, as rains ease drought concerns in South America while output may increase in the U.S. and Australia. Wheat futures for March delivery fell 2.1 percent.

To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net; 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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