Stock rally offsets growth gloom

United States stocks rallied, extending the market's best monthly gain since 1974, on better-than-estimated earnings at Best Buy and ConAgra Foods and prospects for lower labour costs at General Motors.

Treasury one-month bill rates turned negative for the first time since December.

Best Buy, the largest US electronics chain, jumped 13 per cent and ConAgra, maker of Banquet frozen dinners and Slim Jim meat snacks, rose 9.2 per cent. GM climbed 14 per cent after saying 7500 union members signed up for buyouts.

The Standard & Poor's 500 Index added 2.3 per cent to 832.86, up 13 per cent in March.

The Dow Jones Industrial Average added 174.75 points, or 2.3 per cent, to a six-week high of 7924.56. The Nasdaq Composite rallied 3.8 per cent, erasing its loss for the year.

Stocks extended gains as an auction of seven-year Treasuries eased concern that demand for Government debt is dwindling.

"I wouldn't be surprised to see this rally take the S&P up to 1000," said Tom Wirth, senior investment officer at Chemung Canal Trust in Elmira, New York. "It's been one data point after another that's come in better than expected."

Stocks added to an advance yesterday triggered by Government data showing unexpected growth in durable-goods orders and new-home sales.

Those reports tempered reaction to Commerce Department data that said the economy shrank last quarter at a 6.3 per cent annual pace, more than previously estimated while less than the average in a Bloomberg survey.

Stocks climbed to their highs of the day and Treasuries rose after the Government's US$24 billion sale of seven-year notes drew a yield of 2.384 per cent, close to the 2.385 per cent forecast in a Bloomberg News survey of 10 firms.

The auction spurred optimism that the Government will be able to continue its record bond sales without spurring higher interest rates.

S&P 500 companies are projected to report profit decreased 36 per cent on average in the first quarter and 30 per cent in the next, according to analysts' estimates compiled by Bloomberg.

Forecasts show earnings will decline until at least the third quarter, bringing the total slump to nine straight quarters, the longest since Bloomberg began tracking the data in 1998.

GM rose 14 per cent to US$3.41, the steepest gain in the Dow. The retirements and buyouts of 12 per cent of GM's union workforce open slots for the carmaker to hire replacement workers for half the current union rate.

Treasury one-month bill rates turned negative for the first time since December as investors sought the most easily traded securities to bolster balance sheets at the end of the quarter.

Gold rose for a second straight day on speculation the dollar will slide, boosting demand for the precious metal as an alternative asset.

The dollar is down 4.5 per cent this month against a basket of six major currencies. Analysts said spending by Governments to ease the recession might spark inflation, curbing the greenback's appeal.

- BLOOMBERG