U.S. Stocks Jump as Drop in Oil Prices Spurs Consumer Rally

Oct. 16 (Bloomberg) — U.S. stocks rose for the first time in three days after oil retreated below $70 a barrel, brightening the outlook for consumer companies and overshadowing the biggest slump in industrial production since 1974.

Wal-Mart Stores Inc. and McDonald’s Corp. added more than 5 percent on expectations lower fuel prices will bolster consumer spending. The Dow Jones Industrial Average reversed a decline of as much as 380 points as 23 of its 30 companies advanced.

“You get down to a point where energy starts to be more of a positive than a negative,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, which manages $30 billion. “This is some evidence that the market is not inclined to push to new lows.”

The S&P 500 advanced 26.49 points, or 2.9 percent, to 934.33 at 3:31 p.m. in New York. The Dow Jones Industrial Average rallied 268.97 points, or 3 percent, to 8,846.88. The Nasdaq Composite jumped 3.2 percent to 1,679.86. About five stocks gained for every two that fell on the New York Stock Exchange.

Benchmark indexes halted a two-day retreat that threatened to erase a 12 percent gain in the S&P 500 on Oct. 13, when the market rallied the most since the 1930s on speculation the government’s plan to invest $250 billion in banks will ease the credit crisis.

Stocks retreated earlier, sending the S&P 500 down as much as 4.6 percent, after Citigroup Inc. said bad loans may rise to a record high and the government said industrial production slumped 2.8 percent in September.

Wal-Mart, McDonald’s

Wal-Mart, the world’s biggest retailer, rallied $4.20 to $54.25. McDonald’s, the largest restaurant chain, added $3.40 to $54.95.

Oil fell to the lowest level since June 2007 and gasoline tumbled after a U.S. government report showed stockpiles increased more than twice as much as forecast. Crude for November delivery fell $4.67, or 6.3 percent, to $69.87 a barrel at the 2:30 p.m. close of floor trading in New York and touched $68.57 a barrel, the lowest since June 27, 2007.

Yahoo! Inc. climbed as much as 17 percent after Microsoft Corp. Chief Executive Officer Steve Ballmer said a deal with the owner of the most-visited U.S. Web site may still make economic sense for shareholders of both companies. The shares pared their gains to 11 percent after Microsoft later e-mailed a statement saying it has “no interest” in acquiring Yahoo! Inc. and there are no discussions between the companies.

Peabody, Archer Daniels

Peabody Energy Corp. gained 14 percent, the third-most in the S&P 500. The largest U.S. coal producer rose $3.44 to $27.68 after saying third-quarter profit grew more than 11-fold and 59 percent more than the average estimate of analysts surveyed by Bloomberg, on increased output and higher prices.

Archer Daniels Midland Co., the world’s largest grain processor, added $1.43, or 8.9 percent, to $17.52. The stock was raised to “buy” from “neutral” by Merrill analysts, who increased their 2009 earnings estimate, saying the company will pay less from crops as their prices decline.

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