U.S. Stocks Rally Following Durable Goods Report, Nike Earnings

U.S. stocks rallied, sending the Standard & Poor’s 500 Index to a four-month high, after a rebound in demand for capital goods and better-than-estimated earnings at Nike Inc. eased concern that the economic recovery is faltering.

Alcoa Inc., the largest U.S. aluminum producer, and Caterpillar Inc. helped lead gains among materials producers and industrial stocks after a government report showed orders for durable goods excluding transportation equipment rose at twice the pace forecast by economists. Nike rallied 2.5 percent as orders surged in China. Hewlett-Packard Co. added 2.1 percent after an analyst said the world’s largest computer maker may announce a 2011 earnings forecast that exceeds estimates.

The S&P 500 Index surged 2.1 percent to 1,148.67 at 4 p.m. in New York, the highest since May 13, capping the longest weekly rally since April and heading for the best September since 1939. The Dow Jones Industrial Average advanced 197.84 points, or 1.9 percent, to 10,860.26.

“The economy will slowly, slowly get better,” said Todd M. Morgan, chairman of Bel Air Investment Advisors LLC in Los Angeles, which manages $5 billion. “Stocks are the cheapest financial assets out there. The amount of cash in individual hands is enormous, they will get back in.”

September’s Gain

The S&P 500 has climbed 9.5 percent in September as technology bellwethers announced buybacks, dividends and acquisitions. The benchmark for U.S. equities has declined 5.6 percent from this year’s high in April on concern that American unemployment and widening budget deficits in Europe would derail global growth.

Stock futures extended gains after orders for U.S. capital equipment rebounded 4.1 percent in August from a 5.3 percent decline in July, signaling a slowdown in business investment may be less severe than some economists projected. Durable-goods orders excluding transportation climbed 2 percent in August, the Commerce Department said in Washington. Economists in a Bloomberg survey had predicted an increase of 1 percent, according to the median forecast.

Caterpillar, the world’s biggest maker of construction and mining equipment, advanced 4.6 percent to $79.73 for the biggest gain in the Dow as industrial stocks jumped 2.8 percent, the most among 10 industry groups in the S&P 500. Alcoa rallied 3.9 percent to $12.20, helping a gauge of materials producers to a 2.4 percent increase.

The benchmark gauge kept its gains after a report showed sales of new homes held steady at 288,000 in August, unchanged from a July figure that was revised higher. Economists surveyed by Bloomberg forecast house sales would rise to 295,000.

‘Reason to Be Bullish’

“We’ve moved from August’s extreme volatility to a situation where the market isn’t selling off on the bad news and rises much more on the good news,” said Oliver Pursche, co-manager of the GMG Defensive Beta Fund and president of Suffern, New York-based Gary Goldberg Financial Services, which manages $500 million. “It’s one more reason to be bullish rather than remain in a defensive stance.”

The S&P 500 should gain an additional 6.6 percent this year to begin a decade of 8 percent annual returns as concerns of a return to a recession prove unfounded, BlackRock Inc. Vice Chairman Bob Doll said last night in Toronto.

“The economic recovery is becoming self-sustaining,” said Doll, whose company oversees $3.4 trillion and is the world’s largest asset manager. “Given how scared corporations got and how much they cut costs, that has created an immense opportunity for earnings.”

German Confidence

European equities climbed as German business confidence unexpectedly rose to a three-year high in September. The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, increased to 106.8 from 106.7 in August. Economists had predicted a drop to 106.4, according to the median of 36 forecasts in Bloomberg News survey.

Nike gained 2.5 percent to $79.57, the highest since the world’s largest maker of athletic shoes went public in 1980. Total orders for shoes and clothes for delivery between September and January grew 10 percent to $7.1 billion, the company said yesterday. Orders for China surged 25 percent, outpacing all other regions on demand for basketball-related sportswear, compared with a 15 percent gain in North America and declines of 7 percent in Western Europe and 8 percent in Japan.

Hewlett-Packard advanced 2.1 percent to $40.98. The company will likely provide a 2011 earnings forecast that exceeds the average estimate of $4.99 a share when it hosts a meeting with analysts on Sept. 28, according to Barclays Plc.

Oracle, Chipmakers

Oracle Corp. fell 0.6 percent to $26.96. The world’s second-largest software maker may buy a chipmaker, Chief Executive Officer Larry Ellison said at the company’s annual meeting. ARM Holdings Plc, the U.K. designer of chips that power Apple Inc.’s iPhone, jumped 7.6 percent to $19.79 after Ellison’s comments. Advanced Micro Devices Inc., the second-largest maker of microprocessors, added 6.9 percent to $6.84, while the biggest maker of computer-memory chips, Micron Technology Inc., rallied 7.9 percent to $7.19 for the second-largest gain in the S&P 500.

For-profit schools fell, reversing earlier gains, after U.S. Education Secretary Arne Duncan said gainful-employment legislation will go forward. The department will delay the release of proposed limits on the colleges’ access to student grants and loans until early 2011 from Nov. 1, Duncan said.

Education Management Corp. slid 3.7 percent to $12.23, Career Education Corp. dropped 6.3 percent to $20.38 and Corinthian Colleges Inc. declined 3.1 percent to $6.30.

Hertz Global Holdings Inc. rose 6.8 percent to $11.16 after the vehicle rental company said its $1.44 billion offer for Dollar Thrifty Automotive Group Inc. is its “best and final” bid in its takeover fight with Avis Budget Group Inc.