Oct. 5 (Bloomberg) -- U.S. stocks climbed, sending the Standard & Poor’s 500 Index to the highest level since May, after American service industries expanded more than forecast and speculation grew that the Federal Reserve will join Japan’s efforts to stoke economic growth.
Boeing Co., Bank of America Corp. and DuPont Co. rose more than 3 percent, leading gains in the Dow Jones Industrial Average following the Institute for Supply Management’s report and the Bank of Japan’s announcement that it will cut rates and buy bonds. Banks rallied as JPMorgan Chase & Co. said they will likely beat third-quarter profit estimates. Chevron Corp. rose 2.6 percent after the oil company said it will buy back stock.
The S&P 500 rallied 2.1 percent, the most since Sept. 24, to 1,160.75 at 4 p.m. in New York. The index must gain 0.4 percent to reach its level on May 5, the day before the 20-minute crash that briefly erased $862 billion from the value of U.S. shares. The Dow advanced 193.45 points, or 1.8 percent, to 10,944.72. Both measures reached the highest levels since May.
“Investors are voting they’re a little more comfortable with the business outlook,” said Peter Sorrentino, who helps oversee $13.3 billion at Huntington Asset Advisors in Cincinnati. “Investors are trying to get out of currencies and into anything else that will retain wealth while monetary authorities try to bludgeon currencies down.”
Stocks extended gains and the Dollar Index fell after the ISM gauge, which covers 90 percent of the world’s largest economy, rose to 53.2 from 51.5. The median economist forecast called for a reading of 52, according to Bloomberg data. Equities surged worldwide after the Bank of Japan decided to cut its interest rate to “virtually zero” and create a fund to buy bonds and other assets to stoke the economy.
Boeing gained 3.4 percent to $68.60. Bank of America climbed 3.1 percent to $13.56. DuPont rose 3 percent to $45.77.
Banks posted the biggest advance among 24 groups in the S&P 500, rising 3.2 percent. JPMorgan said the industry will top estimates because of strong sales of mortgage loans and higher net interest income.
Marshall & Ilsley Corp. jumped 5.9 percent to $7.53. Zions Bancorporation advanced 3.6 percent to $21.91. Citigroup Inc. climbed 2.5 percent to $4.13. Bank of America Corp. increased 3.1 percent to $13.56.
Chevron gained 2.6 percent to $83.39. The company said it will buy $500 million to $1 billion of stock each quarter.
Harley-Davidson Inc. surged 9.1 percent to $32.09 for the biggest gain in the S&P 500. The biggest U.S. motorcycle maker had its share-price estimate increased to $36 from $33 by RBC Capital Markets, which said the company’s U.S. retail sales increased in September after falling the previous four months.
Apple Inc. climbed 3.7 percent to $288.94. Jefferies Group Inc. gave the company a “buy” recommendation in new coverage, the 48th positive recommendation among 51 analyst calls tracked by Bloomberg. The maker of Mac computers, iPhones and iPad table devices is “vastly underestimated,” analyst Peter Misek wrote in a report.
Misek gave the shares a price estimate of $365. The stock has the most positive recommendations among 1,657 companies in the MSCI World Index. There are no “sell” ratings on Apple, Bloomberg data show, while three brokerages rate the shares as “hold.”
Google Inc. rose 3 percent to $538.23. The online search company’s Android software has become the most popular operating system in the U.S. among new smartphone buyers, topping Apple’s iPhone and Research In Motion Ltd.’s BlackBerry, according to Nielsen Co.
Iron Mountain Inc. fell the most in the S&P 500, dropping 8.6 percent to $20.45. The information management company forecast 2011 earnings excluding some items of $1.26 a share at most, trailing the average analyst estimate of $1.31 in a Bloomberg survey.
American Express Co. declined the most in the Dow, slipping 2 percent to $38.28 after slumping 6.5 percent yesterday following its decision to fight a U.S. antitrust complaint. Larger rivals Visa Inc. and MasterCard Inc. settled the case, agreeing to no longer bar merchants from steering customers to alternative forms of payment.
Visa rallied 2.4 percent to $74.99 today, while MasterCard increased 1.5 percent to $225.90.
Convertible securities are beating the U.S. corporate bond market by the most in more than 10 years as investors wager stocks will outperform company debt paying record-low yields. Debentures that can be exchanged for shares returned 4.42 percentage points more than company bonds in September, the biggest gap since August 2000, according to Bank of America Merrill Lynch index data.
Investors are seeking to profit from the rally in equities by buying convertible bonds, which are deemed safer than stocks should the economy slip back into recession. Junk bond prices are above par for the first time since 2007 and the S&P 500 trades at 15 times the past 12 months’ earnings, a 28 percent discount based on its 20-year average, according to data compiled by Bloomberg.
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