U.S. Stocks Gain Most Since November on Factory Orders, Profits

U.S. stocks advanced the most in more than three months as improving earnings and better-than- expected reports on manufacturing bolstered optimism that the economy is gaining momentum.

The Standard & Poor’s 500 Index climbed for four straight days as manufacturing increased more than economists forecast. Technology companies increased for a third week after Hewlett- Packard Co., the largest personal-computer maker, boosted its profit forecast. Stocks maintained gains even after the Federal Reserve boosted the rate it charges for direct loans to banks for the first time since 2006.

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“Earnings continue to meet or beat expectations,” said Don Wordell, a fund manager for Atlanta-based RidgeWorth Capital Management, which oversees about $62 billion. “The majority of economic data coming out is more positive and creates an encouraging feedback loop back to the market.”

The S&P 500 Index rose a second week, adding 3.1 percent to 1,109.17 as all 10 industry groups climbed at least 0.8 percent. The Dow average rose 303.21, or 3 percent, to 10,402.35 as Bank of America Corp. led gains by 29 of 30 constituents.

The Philadelphia Fed’s general economic index rose to 17.6 in February from 15.2, its sixth straight advance. The median forecast in a Bloomberg survey was 17. The New York Fed’s general economic index rose to 24.9 this month, higher than anticipated, from 15.9 in January. Readings above zero in the so-called Empire State Index signal growth in the area covering New York and parts of New Jersey and Connecticut. The number of Americans filing first-time claims for unemployment insurance unexpectedly increased last week.

Discount Rate

The Fed raised the discount rate to 0.75 percent from 0.5 percent on Feb. 18 and said the move will encourage financial institutions to rely more on money markets, rather than the central bank, for short-term loans. It was the first increase in the discount rate in more than three years.

“The weak employment data and inflation data are a bullish signal for the market,” Kevin Shacknofsky, who manages $2.5 billion for Alpine Mutual Funds in Purchase, New York. “It suggests there’s no real rush for the Fed to raise interest rates for a while.”

Hewlett-Packard rose 4.8 percent to $50.79 after raising its 2010 sales forecast for the second time in three months. The company boosted its profit estimate to between $4.37 and $4.44 a share, excluding some costs, up from as much as $4.35 in November. Technology companies in the S&P 500 rose 2.7 percent.

Industrials Gain

The factory reports pushed industrial stocks 4.4 percent higher for the biggest gain among 10 industry groups in the S&P 500. Deere & Co. helped lead gains after climbing 7.9 percent to $57.28 for its biggest jump in four months. The world’s largest maker of farm machinery posted profit that topped analysts’ estimates and raised its 2010 forecast as projections improved for agricultural-equipment sales in the U.S. and Canada.

Cliffs Natural Resources Inc. helped lead raw-materials producers to a 4.2 percent gain, the second-biggest industry gain. North America’s largest iron-ore producer climbed 17 percent to $53.60 after posting fourth-quarter profit excluding some items of 76 cents a share, almost double the average analyst estimate.

Consumer Credit

Bank of America gained 9.9 percent to $15.88 after the biggest U.S. lender said overdue credit card payments declined in January as the unemployment rate fell. Bank of America, JPMorgan Chase & Co. and American Express Co., three of the biggest U.S. card lenders, said late payments on credit-card loans fell to 7.35 percent, the lowest in a year, from 7.44 percent in December.

Abby Joseph Cohen, the Goldman Sachs Group Inc. strategist known for calling the bull market in the 1990s, said Feb. 17 on Bloomberg Radio that the S&P 500 may rise to between 1,250 and 1,300, saying ”the market overall is likely undervalued.” The prediction calls for a rally of as much as 17 percent from yesterday’s close.

Berkshire Hathaway Inc., Home Depot Inc. and Campbell Soup Co. are among the 61 companies in the S&P 500 scheduled to release quarterly results next week.

The combined per-share earnings for the S&P 500 are $17.43 based on fourth-quarter reports by 423 companies, according to Bloomberg data, compared with a per-share loss of 9 cents in the year-earlier period, according to Standard & Poor’s. Per-share profit declined from the year-earlier figure in each of the past nine quarters, a record slump.

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