US stocks advanced the most in more than three months last week 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, 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. "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 per cent to 1109.17 as all 10 industry groups climbed at least 0.8 per cent. The Dow average rose 303.21, or 3 per cent, to 10,402.35 as Bank of America 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 were above zero in the 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.
The Fed raised the discount rate to 0.75 per cent from 0.5 per cent on February 18 and said the move would 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, said. "It suggests there's no real rush for the Fed to raise interest rates for a while."
Hewlett-Packard rose 4.8 per cent to $50.79 after raising its 2010 sales forecast for the second time in three months.
Technology companies in the S&P 500 rose 2.7 per cent.
- BLOOMBERG
