Oct. 15 (Bloomberg) -- U.S. stocks rose, driving the Standard & Poor’s 500 Index to the largest weekly gain since July 2009, amid optimism over corporate earnings and steps by European leaders to support the region’s banks.
Caterpillar Inc., Walt Disney Co. and DuPont Co. jumped at least 7.6 percent to lead the Dow Jones Industrial Average, which rallied a third straight week, the longest stretch since April, and erased its 2011 loss. Energy, raw-material and technology shares led gains by all 10 industries in the S&P 500 and added at least 7.5 percent. Apple Inc. closed at a record high and Google Inc. completed a nine-day streak of gains.
The S&P 500 climbed 6 percent this week to 1,224.58, the highest level since Aug. 3. The measure has surged 11 percent since Oct. 3, when it closed within 1 percent of a bear market, or 20 percent plunge, from its high in April. The Dow rose 541.37 points, or 4.9 percent, to 11,644.49 this week.
“It’s cautious but a little more optimistic,” John Carey, a Boston-based money manager at Pioneer Investments, said in a telephone interview. The firm oversees about $250 billion. “People are shifting their attentions back toward earnings with announcements under way this week. They’re hopeful that, at least for now, disaster can be averted in Europe.”
Stocks rallied the most since August on Oct. 10 after German Chancellor Angela Merkel and French President Nicolas Sarkozy said they will deliver a plan to recapitalize European banks by Nov. 3. The Group of 20 began talks yesterday to address the debt crisis. The S&P 500 has rebounded after dipping below 1,100 in early October for the first time in more than a year and posting its biggest quarterly loss since the end of 2008.
The S&P 500 extended its weekly advance yesterday, rising 1.7 percent, after a report on U.S. retail sales beat estimates.
The Citigroup Economic Surprise Index for the U.S. turned positive for the first time since April 29, the day the S&P 500 peaked at an almost three-year high. It climbed to 2.2, up from minus 117.20 on June 3. The reading four months ago showed reports were missing the median economist projection in Bloomberg surveys by the most since January 2009.
Corporate earnings helped drive U.S. stocks higher this week. Alcoa Inc., the first company in the Dow to report results for the third quarter, announced earnings that trailed analysts’ projections, while Google Inc. jumped the most in a week since April 2008 after sales and profit beat estimates. The owner of the world’s most popular search engine rallied 15 percent to $591.68.
“The systemic fear is definitely subsiding,” Robert Carey, chief investment officer at First Trust Portfolios LP, said in a telephone interview. The Wheaton, Illinois-based firm oversees about $46 billion. “We’ve got earnings coming in better than expected, and valuations are quite low on a price- to-earnings basis, so there really isn’t a lot of downside risk to the market.”
Profit for S&P 500 companies will climb 17 percent in the third quarter and rise 18 percent to a record $99.77 for all of 2011, according to analyst estimates compiled by Bloomberg. The S&P 500 is trading for 11.1 times forecast earnings for 2012, compared with its five-decade average of 16.4 times reported income, according to data compiled by Bloomberg.
It’s time to “extend risk,” Jonathan Golub, chief U.S. market strategist at UBS AG, wrote in a note dated Oct. 10. “As macro concerns subside, stocks which have experienced the greatest price declines are likely to snap back the quickest.”
Most Since 2009
Golub said industrial, raw-material and energy shares are the most attractive. Those groups are among the ones that fell the most since the S&P 500 dropped from a three-year high at the end of April. This week, the Morgan Stanley Cyclical Index advanced 8.5 percent, the biggest gain since July 2009. Caterpillar surged 11 percent to $84.09. Walt Disney added 8.7 percent to $34.47. DuPont climbed 7.6 percent to $45.09.
Energy stocks rallied the most out of 10 groups in the S&P 500 this week. Crude oil rose to a three-week high as the S&P GSCI Index of 24 commodities jumped the most in 10 months. Denbury Resources Inc. rose 22 percent to $14.30, the second- biggest gain in the S&P 500. Range Resources Corp. climbed 21 percent to $72.46.
Apple surged 14 percent to $422. The world’s biggest technology company by market value released the iPhone 4S in the U.S., Australia, Canada, France, Germany and Japan. U.S. sales may reach as much as 4 million units this weekend, according to Boston-based Yankee Group.
Google jumped 15 percent to $591.68. Demand for online advertising vaulted third-quarter sales at the world’s biggest Internet-search company past analysts’ estimates.
Harman International Industries Inc. soared 23 percent, the most in the S&P 500, to $37.47. Relational Investors LLC, the money manager run by activist investor Ralph Whitworth, boosted its stake in the maker of audio systems for homes and vehicles to 3.86 percent and urged the company to add independent directors.
Liz Claiborne Inc. surged 63 percent, a record weekly gain, to $7.60. It announced a plan to sell brands including its namesake to J.C. Penney Co. and rename the company to focus on the Juicy Couture, Kate Spade and Lucky Brand lines.
--With assistance from Nikolaj Gammeltoft and Jeff Kearns in New York. Editors: Nick Baker, Jeff Sutherland
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