Aug. 29 (Bloomberg) -- U.S. stocks rose, sending the Standard & Poor’s 500 Index to the highest level in almost a month, amid optimism the economy will recover and after Hurricane Irene failed to shut financial markets.

Only three stocks in the benchmark gauge declined today as all of its 10 groups advanced. The S&P 500 Insurance Index of 22 stocks rallied 4.8 percent as Hurricane Irene’s estimated cost declined with the storm losing strength en route to New York. Bank of America Corp. rose 8.1 percent after agreeing to sell about half its stake in China Construction Bank Corp. in a deal generating $8.3 billion in cash proceeds.

The S&P 500 rose 2.8 percent to 1,210.08 at 4 p.m. in New York, the highest level since Aug. 3. The Dow Jones Industrial Average gained 254.71 points, or 2.3 percent, to 11,539.25, paring this year’s drop to 0.3 percent. About 6.6 billion shares changed hands on U.S. exchanges at 4:10 p.m., 21 percent below the three-month average, data compiled by Bloomberg show.

“I still do not buy into the recession,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, said in a telephone interview. His firm manages $278 billion. “There’s no way the U.S. is going into a recession. Pessimism can’t get much worse than it’s been. Is growth going to be slow? Yes. But if we avoid a recession, stocks are pretty attractive.”

The S&P 500 has fallen as much as 18 percent from a three- year high on April 29 amid concern about a global economic slowdown. Gauges of financial, industrial and energy shares, which are most-tied to the economy, led the declines in the index, slumping at least 22 percent over that period.

Consumer Spending

Equities climbed today after Americans’ spending increased more than economists forecast while incomes grew at the projected pace. Benchmark gauges also rose as two Greek banks, EFG Eurobank Ergasias SA and Alpha Bank SA, discussed merging. Equities in Greece rallied the most in more than 20 years.

Stocks rose even after a report showed that the number of contracts to purchase previously owned U.S. homes fell in July for the first time in three months, a sign that lower prices and borrowing costs aren’t luring in buyers.

Investors are paying less for equities than they have during every recession since Ronald Reagan was president amid growing concern that the economy is on the edge of another recession. The S&P 500 has lost 13 percent in the past five weeks, sending its price-earnings ratio down to 12.9. That’s 3.5 percent less than the average multiple during the 10 contractions since 1949 and a level last reached in 1982, according to data compiled by Bloomberg.

Stimulus Tools

Stocks dropped and then rebounded on Aug. 26 after Federal Reserve Chairman Ben S. Bernanke ‘s speech in Jackson Hole, Wyoming, in which he said the central bank still has tools to stimulate the economy without signaling he will use them. He echoed comments from dissenting members of the Federal Open Market Committee who said data aren’t pointing to a recession.

“Some positive thinking here has some value -- to at least making investors think twice before they dump stocks,” Madelynn Matlock, who helps oversee $14.8 billion at Huntington Asset Advisors in Cincinnati, said in a telephone interview. “Central bankers don’t think there’s any really immediate screaming problem to deal with and have taken that more positively. Plus, there’s the fact that valuation is a whole lot better than it was a couple of months ago. In addition, the absence of any bad news in Europe is good news.”

All Groups Rise

All 10 groups in the S&P 500 rose between 1.2 percent and 4.2 percent, with gains being led by financial and industrial stocks. The Morgan Stanley Cyclical Index of companies most- dependent on economic growth added 4.3 percent.

Insurers jumped. Hartford Financial Services Group Inc. added 13 percent to $19.42, while Travelers Cos. increased 5.1 percent to $50.75.

Hurricane Irene’s estimated cost to insurers fell to about $2.6 billion, according to Kinetic Analysis Corp. That compares with a projection last week from the Silver Spring, Maryland- based company of as much as $14 billion when Irene was forecast to make landfall in New York as a Category 2 hurricane. Total economic losses, including those that aren’t insured, may be about $7 billion.

Bank of America gained 8.1 percent to $8.39. The bank will sell 13.1 billion shares in a private transaction with a group of investors, the Charlotte, North Carolina-based company said today in a statement.

The KBW Bank Index added 4.5 percent as all of its 24 stocks gained. JPMorgan Chase & Co. advanced 4 percent to $37.64. Citigroup Inc. added 4.9 percent to $31.29.

Pfizer Rallies

Pfizer Inc. added 3.7 percent to $18.88. The drugmaker won U.S. approval to sell a drug to treat lung cancer. The treatment, crizotinib, is the leading candidate among more than 20 tumor-fighting medicines the company is developing to help replace sales expected to be lost to generic drugs.

Monsanto Co. slumped 1.3 percent to $69.78. The world’s biggest seed company said 100,000 acres of corn in Iowa and Nebraska may harbor rootworms that developed resistance to the company’s insect-killing biotechnology.

Newmont Mining Corp., the largest U.S. gold producer, and Home Depot Inc., the largest U.S. home improvement retailer, fell less than 0.1 percent.

--Editors: Joanna Ossinger, Jeff Sutherland

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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