US Stocks Rally, Dow Jumps Most in Three Months, on Intel

July 15 (Bloomberg) -- U.S. stocks rallied, sending the Dow Jones Industrial Average to its best gain in three months, after Intel Corp. forecast sales that beat analysts’ estimates and gauges of manufacturing improved. Treasuries fell for a third day and the dollar and yen dropped.

Intel jumped 7.3 percent, the most since March, after saying computer makers boosted chip orders in anticipation of stronger demand. General Electric Co. and Caterpillar Inc. added at least 5.2 percent as better-than-projected Federal Reserve gauges of New York manufacturing and industrial output spurred optimism the economy is recovering. American Express Co. surged 11 percent after saying write-offs will be less than forecast.

The S&P 500 added 3 percent to 932.68 at 4:05 p.m. in New York, extending its biggest three-day advance since March. The Dow climbed 256.72 points, or 3.1 percent, to 8,616.21. The MSCI World Index of 23 developed nations surged 2.8 percent.

“There’s no doubt that the catalyst started with the report from Intel,” said Tom Wirth, senior investment officer at Chemung Canal Trust Co., which manages $1.5 billion in Elmira, New York. “It seems obvious to me that there’s more optimism, that we’ve seen the bottom and things are getting progressively better.”

Benchmark indexes extended gains, with the Dow and S&P 500 climbing to their highest levels since June 12, as minutes from the Federal Open Market Committee’s June meeting showed policy makers expect the U.S. economy to contract 1 percent to 1.5 percent this year, less than they anticipated in April, even as unemployment climbs to as high as 10 percent.

The S&P 500 has risen 6.1 percent so far this week as better-than-estimated retail sales boosted consumer shares and companies from Goldman Sachs Group Inc. to Johnson & Johnson reported earnings that beat analysts’ estimates.

Rebound From March Low

The S&P 500 has rallied 38 percent from its 12-year low on March 9 amid speculation the economic contraction is slowing. It rose above its average price over the past 50 sessions today for the first time in eight trading days.

Earnings topped estimates by an average 20 percent for the 16 companies in the S&P 500 that released second-quarter results since July 8, according to data compiled by Bloomberg. Analysts estimate profits slumped an average 35 percent in the period and will decrease 21 percent from July through September, according to Bloomberg data.

‘Trend Higher’

“It looks like we want to trend higher in this earning season,” said Peter Kenny, managing director in institutional sales at Knight Equity Markets in Jersey City, New Jersey. “The fact that Intel and Goldman Sachs, two enormous players globally, have positive numbers and positive surprises does give the market some buoyancy.”

Intel climbed 7.3 percent to $18.05, the highest price since October. The chipmaker forecast third-quarter revenue will reach as much as $8.9 billion. Analysts on average projected $7.86 billion.

Microsoft Corp. jumped 4.4 percent to a nine-month high of $24.12 for its biggest gain since April 24. The world’s largest software maker will report earnings next week.

S&P 500 technology shares led the market higher, adding 4.2 percent collectively. The group has rallied 28 percent so far this year for the biggest gain among 10 groups and helping propel the benchmark for U.S. stocks to a 3.3 percent gain in 2009.

Advanced Micro Devices Inc., the second-largest maker of personal-computer processors, advanced 8.7 percent to $3.86, climbing the most since May 4.

Cisco, Altera

Cisco Systems Inc. rallied the most since March, adding 5.8 percent to $19.81. The largest maker of networking equipment was given a “buy” recommendation in new coverage at Citigroup Inc., which said “we expect the shares to outperform in the early stages of an economic recovery.”

Altera Corp., the second-biggest maker of programmable semiconductors, posted second-quarter profit excluding some items that beat the average analyst estimate by 23 percent, according to Bloomberg data. The shares rallied 4.2 percent to $17.26.

A gauge of industrial shares added 3.4 percent after the Fed Bank of New York’s July general economic index climbed to minus 0.6, the highest level since April 2008, from minus 9.4 the prior month. Economists in a Bloomberg survey had estimated a reading of minus 5. Readings below zero for the Empire State index signal manufacturing is contracting. Caterpillar added 6 percent to $33.84, while GE advanced 5.2 percent to $12.24.

Financials Advance

S&P 500 financial shares gained 4.1 percent collectively for the second-steepest advance among 10 industries.

American Express Co. added 11 percent to $27.22, its steepest jump since May 4. The shares have almost tripled since hitting a 14-year low on March 6, the session before the S&P 500 slid to a 12-year low. The largest U.S. credit-card company by purchases said net write-offs for the second half of the year may be better than its previous forecast after uncollectible loans fell in June. Jefferies & Co. raised the shares to “buy” from “underperform.”

The New York Stock Exchange halted trading in CIT Group Inc. amid speculation regulators are close to a plan that would rescue the New York-based company. The century-old commercial lender facing $1 billion of bonds maturing next month and pleading for a federal bailout climbed 19 percent yesterday after tumbling 27 percent in the previous two trading days.

A U.S. aid package including a temporary loan may be announced in the next 24 hours, Reuters reported, citing a person familiar with the matter.

Commodities Gain

Exxon Mobil Corp. gained 3.4 percent to $68.44, helping lead a group of energy shares up 3.5 percent for the best advance since June 1. Crude oil rose the most in six weeks, gaining 3.4 percent to $61.54 a barrel, after a report showed a bigger-than-forecast drop in U.S. inventories.

Alcoa Inc., the largest U.S. aluminum producer, gained 5.7 percent to $10.14. Freeport-McMoRan Copper & Gold Inc., the world’s biggest publicly traded copper producer, increased 5.7 percent to $50.91.

Barrick Gold Corp. added 3.4 percent to $33.94 as gold rose to the highest in almost two weeks. The U.S. dollar fell against 16 major currencies except the Japanese yen, signaling investors’ appetite for riskier assets increased. The yen fell against all the major currencies, including the greenback.

Newspaper Rally

Gannett Co., the largest U.S. newspaper owner, jumped 29 percent to $4.50 for its steepest gain in three months and the biggest advance on the S&P 500. Gannett posted earnings that topped estimates after enforcing its second week of unpaid leave this year, cutting salaries and halting a print edition of the Tucson Citizen to save money.

New York Times Co. gained 8.1 percent to $5.46, the most since May 4.

Today’s rally came even as a survey of Bloomberg users showed investor sentiment for U.S. stocks fell to the lowest level since March and confidence in equities around the world declined as prospects for the global economy worsened in June.

The Bloomberg Professional Confidence Survey’s measure for the S&P 500 dropped 14 percent to 39.59 in July, its second consecutive drop. Readings below 50 show participants expect equity prices will decrease in the next six months.

The rebound in the S&P 500 since March 9 shows few hallmarks of a bull market and stocks will probably stagnate for years, ISI Group Inc.’s Jeffrey deGraaf said.

Rally for Real?

The S&P 500 is at a level it first surpassed in 1997 even after the steepest quarterly advance in a decade, and is down more than 40 percent from its October 2007 peak. The main benchmark for American equities probably will continue to make “no net price progress” for at least two more years, deGraaf, the top-ranked technical analyst in Institutional Investor magazine’s poll for the past four years, said in an interview.

Yum! Brands Inc. lost the most on the S&P 500 after saying growth in same-store sales this year will be lower than it had expected. The owner of the Taco Bell and KFC chains slid 5.5 percent to $34.05, its worst drop this year.

Abbott Laboratories, the maker of the arthritis drug Humira, lost 2.6 percent to $45.28 in the second-biggest drop on the index. The company lowered its third-quarter forecast after saying second-quarter profit fell as sales missed estimates.

Treasuries fell for a third day, sending the 10-year note yield up 13 basis points to 3.61 percent, after U.S. industrial production.

Almost 10 billion shares changed hand on all U.S. exchanges today, 3.8 percent less than the three-month daily average.