U.S. Stocks Rally Most in 7 Weeks Amid Economic Optimism

U.S. stocks rose, giving benchmark indexes their biggest advance in seven weeks, as reports on employment and manufacturing topped estimates while consumer confidence climbed in October to a more than four-year high.

Eight of 10 groups in the Standard & Poor’s 500 Index advanced. Caterpillar Inc., Microsoft Corp. and Bank of America Corp. climbed more than 3.4 percent to lead gains in the Dow Jones Industrial Average. Visa Inc. rose 3.7 percent after reporting fourth-quarter profit that beat analysts’ estimates. Macy’s Inc. climbed 6.4 percent after raising its sales forecast. Pfizer Inc. lost 1.3 percent after the world’s largest drugmaker narrowed its forecast for 2012.

The S&P 500 gained 1.1 percent to 1,427.59 in New York. The Dow advanced 136.16 points, or 1 percent, to 13,232.62. Both gauges posted their biggest advance since Sept. 13. Volume for exchange-listed stocks in the U.S. was about 6.8 billion shares, or 14 percent above the three-month average.

“One of the major concerns of the market is a deceleration of growth,” Mark Freeman, who oversees about $14 billion as chief investment officer at Westwood Holdings Group Inc. in Dallas, said in a phone interview. “The data is actually saying that deceleration has basically stopped and the growth rate has stabilized. When we look at fundamentals, the economy still supports earnings growth going into next year.”

Economic Reports

Companies expanded payrolls in October by the most in eight months, the Institute for Supply Management’s U.S. factory index rose to 51.7 in October from 51.5 a month earlier, and the Conference Board’s consumer sentiment index increased to 72.2, the highest since February 2008, reports showed today. A Chinese purchasing manager’s index climbed to 50.2 in October, a sign economic growth is picking up after a seven-quarter slowdown.

Tomorrow’s monthly employment report from the Labor Department may provide more clues for investors to gauge the strength of the economy before the presidential election. Payrolls increased by 125,000 workers in October and the jobless rate rose to 7.9 percent, according to the median forecasts of economists surveyed by Bloomberg.

The jobs report is the last before the Nov. 6 presidential election, and may help sway voters trying to decide between giving President Barack Obama another four years in office or to change course with Republican challenger Mitt Romney.

October Loss

The S&P 500 fell 2 percent in October, ending four months of gains, as concern grew that slowing economic growth will curb earnings. The benchmark index rallied 15 percent from a June low to a four-year high on Sept. 14 as central banks around the world stepped up stimulus to boost the economy. The S&P 500 reversed a loss in the final hour of trading yesterday as equity markets reopened following a two-day shutdown because of Hurricane Sandy.

Forty-one companies in the S&P 500 post results today, according to data compiled by Bloomberg. Earnings have exceeded projections at 72 percent of companies that have released third-quarter results, while sales have trailed estimates at 59 percent of firms, Bloomberg data show.

Companies whose earnings are most tied to economic swings rose the most among 10 S&P 500 industry groups as commodity, technology and industrial shares climbed more than 1.8 percent. Intel Corp. added 2.9 percent to $22.26, while Microsoft jumped 3.4 percent to $29.52. Caterpillar Inc., the largest builder of construction and mining machinery, rose 3.4 percent to $87.65.

Banks, Homebuilders

The Morgan Stanley Cyclical Index climbed 2.6 percent, the most since Sept. 6. Bank of America rallied 4.5 percent to $9.74, while JPMorgan Chase & Co. increased 2.8 percent to $42.84. D.R. Horton Inc. gained 4.2 percent to $21.84, helping drive an S&P measure of homebuilders up 2.6 percent.

Visa advanced 3.7 percent to $143.88. The world’s biggest payments network reported an 89 percent increase in quarterly net income to $1.66 billion. Adjusted profit per share was $1.54, beating the $1.50 average analyst estimate.

Macy’s climbed 6.4 percent to $40.52. The second-biggest U.S. department-store chain boosted its forecast for same-store sales in the second half of the year, to a 4 percent gain compared with the year-ago period. The company had previously estimated an increase of 3.7 percent.

Ross Stores Inc. and Target Corp. posted October same-store sales that trailed analysts’ estimates as consumers held back on discretionary spending ahead of the U.S. presidential election and Hurricane Sandy diverted some traffic.

Ross Stores dropped 6.3 percent to $57.13. The operator of apparel and home accessories stores said sales rose 4 percent, falling short of the average projection for a 4.3 percent gain from analysts surveyed by researcher Retail Metrics Inc.

Target slipped 1.3 percent to $62.94. The second-biggest U.S. discount retailer posted a 2.4 percent increase in same-store sales, missing the 2.9 percent estimate.

Abercrombie & Fitch

Abercrombie & Fitch Co. climbed 8.7 percent to $33.23. The teen-clothing retailer didn’t update its sales figures. The absence of pre-announcement “may mean more limited downside risk, and could provide relief” to the stock, Roxanne Meyer, an analyst with UBS AG, wrote in a note to clients.

JDA Software Group Inc. rallied 17 percent to $44.76, the highest level since it went public in 1996. RedPrairie Corp., backed by private-equity firm New Mountain Capital LLC, will pay $45 a share for the Scottsdale, Arizona-based company in a $1.9 billion deal that merges two providers of software for managing corporate supply chains.

VeriSign Inc. jumped 11 percent to $41.15. The operator of Web domain name registries said it expects to continue to run registry for .com names, as regulators review its contract for that business. The Department of Justice has “substantially concluded” its own review process while the Commerce Department may extend its evaluation beyond Nov. 30, the company said.

Pfizer slipped 1.3 percent to $24.55 after the drugmaker narrowed its full-year adjusted earnings guidance to $2.14 a share to $2.17 a share, from $2.12 to $2.22 a share. The company said it was buying as much as $10 billion in shares.

Exelon Corp. dropped 6.2 percent to $33.58. The largest U.S. power company by 2011 sales said it may cut its dividend for the first time to maintain an investment grade credit rating as power prices decline.

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