Sept. 4 (Bloomberg) -- U.S. stocks rose, snapping three weeks of declines, as better-than-estimated growth in private employment and manufacturing raised optimism the economy will avoid a recession.
Caterpillar Inc., Alcoa Inc. and General Electric Co. rallied more than 4.6 percent. Bank of America Corp. and JPMorgan Chase & Co. advanced at least 6.8 percent as the Federal Deposit Insurance Corp. said U.S. lenders posted their biggest quarterly profit in almost three years. J.C. Penney Co. and Macy?s Inc. helped pace a 5 percent gain for a gauge of retailers in the Standard & Poor?s 500 Index as sales increased.
The S&P 500 advanced 3.8 percent to 1,104.51, the biggest weekly gain since the period that ended July 9. The Dow Jones Industrial Average gained 297.28 points, or 2.9 percent, to 10,447.93, after losing 4.7 percent in the previous three weeks.
?Investors are breathing a sigh of relief,? said Peter Sorrentino, who helps oversee $13.3 billion at Huntington Asset Advisors Inc. in Cincinnati. ?The jobs report was a pleasant surprise. Companies are adding capacity. The retail numbers were encouraging and show the consumer is not continuing to retrench. We?re not going to spiral downward from here. It all sets a positive tone for the stock market.?
The S&P 500 has rallied four straight days, the longest winning streak win seven weeks, trimming its loss since a 19- month high in April to 9.3 percent. The U.S. equity benchmark rebounded from the biggest August plunge in nine years as companies in the U.S. added more jobs than forecast in August and the Institute for Supply Management?s factory index unexpectedly increased.
Home Sales
Other reports this week showed that U.S. retail sales improved and pending home sales unexpectedly rose.
Caterpillar, the largest maker of construction equipment, gained 6.3 percent to $70.08. Alcoa, the largest U.S. aluminum producer, advanced 5.4 percent to $10.88. GE, the world?s biggest maker of jet engines, power-generation equipment and locomotives, jumped 4.6 percent to $15.39.
The benchmark index for U.S. stock options fell to the lowest level in four months. The VIX, as the Chicago Board Options Exchange Volatility Index is known, retreated 13 percent to 21.31 for the biggest weekly slide in two months. The index, which measures the cost of using options as insurance against declines in the S&P 500, has fallen by more than half from this year?s peak close of 45.79 on May 20.
Bank Profit
Financial companies had the biggest gain of 10 industry groups in the S&P 500 after the FDIC said U.S. lenders posted their biggest quarterly profit in almost three years, even as the number of banks at risk of failure rose to 11 percent of insured institutions. Bank profits totaled $21.6 billion in the second quarter, an increase from $18 billion in the first quarter, the FDIC said.
Bank of America advanced 6.8 percent to $13.50, while JPMorgan rose 7 percent to $39.17.
Morgan Stanley jumped 6.5 percent to $26.66 after the Federal Reserve approved China Investment Corp.?s application to take as much as a 10 percent stake in Morgan Stanley through the conversion of premium equity units that it purchased in 2007.
Retailers rallied after sales at stores open at least a year rose last week by 3 percent from the year before, according to Johnson Redbook Research. J.C. Penney advanced 6.9 percent to $21.59. Macy?s increased 6.5 percent to $20.87.
?Organic Recession?
?The markets are reacting positively because people had it in their minds that this stock market priced in a double dip,? said Barry Knapp, the chief U.S. equity strategist at Barclays Plc in New York. ?The probability of an organic recession has gone down. On balance we?ve seen some increased interest in the market.?
U.S. stocks fell on Aug. 30, with the S&P 500 dropping 1.5 percent, after a smaller-than-forecast gain in personal incomes added to concern the economic rebound may slow further. The index then rallied four straight days.
?The market is schizophrenic,? Paul McCulley, a partner at Pacific Investment Management Co. in Newport Beach, California, said in a Bloomberg Television interview. ?It would be foolish to have a table-pounding view short term on what stocks will do. You get data on one side and then data on the other side, and the marketplace is suffering from unusual uncertainty.?
Research In Motion Ltd., the maker of the BlackBerry smartphone, lost 2.6 percent to $44.78. A Sanford C. Bernstein & Co. survey found more companies opting for rival devices such as Apple Inc.?s iPhone.
Campbell Soup Co. slumped 3.4 percent to $36.21. The world?s largest soup maker gave a full-year earnings forecast that trailed some analysts? estimates after U.S. soup sales slumped 5 percent last quarter.
National Semiconductor Corp., the maker of analog chips that control power in electronic devices, is scheduled to report quarterly results on Sept. 9. Earnings at 472 S&P 500 companies that reported quarterly results since July 12 beat the average analyst projection by 10 percent, according to data compiled by Bloomberg.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net.