U.S. Stocks Gain on GDP, Rate Cuts; Alcoa, Intel Advance

Oct. 30 (Bloomberg) — U.S. stocks rose after the economy contracted less than forecast in the third quarter and investors speculated global interest-rate cuts will stem a further slump.

Intel Corp., Merck & Co. and Alcoa Inc. gained more than 5 percent after the government said the economy shrunk 0.3 percent last quarter. Colgate-Palmolive Co. climbed 7.4 percent on better-than-estimated earnings. The advance added to a global rally after Hong Kong joined the U.S. in lowering borrowing costs and the Federal Reserve provided $120 billion to spur lending in emerging markets.

The Standard & Poor’s 500 Index jumped 24.03, or 2.6 percent, to 954.12 at 10:16 a.m. in New York. The Dow Jones Industrial Average added 213.3, or 2.4 percent, to 9,204.26. The Nasdaq Composite Index increased 46.01, or 2.8 percent, to 1,703.22. Eleven stocks rose for each that fell on the New York Stock Exchange.

“There weren’t any nasty surprises,” in the economic data, said Jeffrey Davis, chief investment officer at Lee Munder Capital Group in Boston, which manages $4 billion. “GDP was better than expected. The real economy didn’t fall as dramatically as the financial markets. The central bank cuts are bringing a little bit of confidence.”

All 10 industry groups in the S&P 500 advanced at least 1.4 percent after the decrease in GDP was less than the 0.5 percent forecast by economists in a Bloomberg survey. The benchmark for U.S. equities extended its gain this week to 5.4 percent.

Global Rally

Russia’s benchmark index rallied 18 percent, South Korea’s climbed 12 percent and the Czech Republic jumped 9.2 percent after the Fed provided $120 billion to spur lending in emerging markets. Hong Kong’s Hang Seng Index surged 13 percent and Taiwan’s Taiex jumped 6.3 percent after their central banks lowered rates.

The S&P 500 is still down 35 percent in 2008 and more than 18 percent in October. The Fed cut its benchmark rate by 0.5 percentage point to 1 percent yesterday and has reduced it from 5.25 percent in the past 13 months, while also creating lending programs to channel more than $1 trillion into the financial system.

A slump in the final 12 minutes of trading yesterday erased a 3.1 percent rally in the S&P 500 that was spurred by the rate cut. Some traders attributed the drop to a report that General Electric Co. Chief Executive Officer Jeffrey Immelt said he’s asking managers to match this year’s profit in 2009, even if revenue declines. GE spokesman Russell Wilkerson later said the initial comments were taken out of context and that Immelt was not making any kind of forecast about 2009.

Commodities Rebound

Alcoa, the biggest U.S. aluminum producer, rose 53 cents to $11.68. Newmont Mining Corp., the nation’s largest gold producer, gained $1.38 to $27.28. Gold, crude oil and corn extended the biggest surge in commodity prices in five decades on speculation the rate cuts may revive demand for raw-materials consumption.

Colgate increased $4.45 to $64.45. The world’s largest maker of toothpaste said third-quarter profit rose to $499.9 million from $420.1 million a year earlier, driven by overseas sales and higher prices. Sales jumped 13 percent to $4 billion, matching the average analyst estimate.

Hartford Financial Services Group Inc., the insurer that got an investment from Germany’s Allianz SE this month, plunged 32 percent to $13.60 after reporting its first unprofitable quarter in five years. The shares were downgraded to “neutral” from “buy” at Merrill Lynch & Co., which said the company may need to raise capital.

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