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U.S. Stocks Advance on Optimism Europe Will Contain Debt Crisis

July 21 (Bloomberg) -- U.S. stocks rallied, extending a weekly gain for the Standard & Poor’s 500 Index, as European officials announced 160 billion euros ($230 billion) in aid for Greece to stop the region’s debt crisis from spreading.

Morgan Stanley jumped 11 percent, the most since April 2009, after the largest brokerage posted the only gain in trading revenue among major U.S. banks. Motorola Mobility Holdings Inc. soared 12 percent after Carl Icahn urged the handset maker to explore alternatives for its patents. Medco Health Solutions Inc. rose 14 percent after Express Scripts Inc. agreed to buy the pharmacy-benefits manager for $29.1 billion.

The S&P 500 added 1.4 percent to 1,343.80 at 4 p.m. in New York, extending its gain this week to 2.1 percent. The Dow Jones Industrial Average climbed 152.50 points, or 1.2 percent, to 12,724.41.

“They’re making sure Greece is properly funded, and hopefully settle down any infection that comes from Greece to the rest of the market, like we’ve seen hitting Italy and Spain,” Madelynn Matlock at Huntington Asset Advisors in Cincinnati said in a telephone interview. She helps oversee $14.8 billion. “You’re seeing rhetoric on what is possible in aiding Greece and how we can make it work.”

Equities climbed as euro-area leaders redoubled efforts to end the region’s 21-month sovereign bond crisis as they risked a temporary default to ease Greece’s debt burden and erected a firewall around Spain and Italy. Spooked by a bond market selloff last week, leaders empowered their 440-billion euro rescue fund to buy debt across stressed euro nations after eight hours of talks in Brussels. The fund can also aid troubled banks and offer credit-lines to repel speculators.

Obama, Boehner

The S&P 500 extended gains after the New York Times reported that President Barack Obama and House Speaker John Boehner were close to a “major budget deal,” boosting optimism the world’s biggest economy will avoid defaulting on its debt. Jay Carney, Obama’s spokesman, and Boehner responded to the story by saying there is no deal.

Carney said the administration is “absolutely confident” an agreement to avert a default can be reached before an Aug. 2 deadline. S&P reiterated today that there is a 50 percent chance it will lower the U.S. credit rating within three months because of the impasse.

Quarterly reports from corporations have helped boost U.S. stocks this week. Among 100 S&P 500 companies that have reported earnings since July 11, 86 percent exceeded the average analyst estimate, according to data compiled by Bloomberg.

Trading Revenue

Morgan Stanley rose 11 percent to $24.20. It reported a second-quarter loss that was smaller than analysts estimated and the only gain in trading revenue among major U.S. banks.

Trading revenue at Morgan Stanley rose 14 percent from the first quarter, while Goldman Sachs Group Inc. posted a 47 percent drop earlier this week. The results may help Morgan Stanley Chief Executive Officer James Gorman convince investors the firm can reach his goals of increasing profitability and gaining market share in trading.

Financial shares had the best performance out of the 10 main groups in the S&P 500 for the second straight day, increasing 2.5 percent for the biggest gain since December. Bank of America Corp. rose 3.9 percent to $10.23. JPMorgan Chase & Co. added 3.3 percent to $42.29.

Motorola Mobility climbed 12 percent to $25.19. Icahn urged the company to explore alternatives for its patents after Nortel Networks Corp. sold wireless-technology intellectual property for $4.5 billion.

Medco, Robert Half

Medco rallied 14 percent to $63.83. Buying Medco gives Express Scripts the scale to become dominant among companies that handle drug benefits for corporate and government clients.

Robert Half International Inc. jumped 15 percent, the most since 2005, to $29.77. The staffing company reported second-quarter profit excluding some items of 25 cents a share, beating the average analyst estimate by 14 percent.

Technology companies in the S&P 500 gained 0.5 percent as a group, the second-worst performance among 10 industries.

Intel Corp. declined 0.8 percent to $22.81 for the only decline in the Dow. While second-quarter profit at the world’s largest chipmaker beat the average analyst estimate by 6.7 percent in a Bloomberg survey, it was “poor earnings quality,” according to Nomura Holdings Inc.’s Romit Shah.

Seagate Technology Plc lost 17 percent, the most since January 2009, to $14.13 after the world’s second-largest maker of hard-disk drives forecast first-quarter earnings that missed analysts’ estimates.

To contact the reporter on this story: 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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