U.S. Stocks Drop, Ending Longest S&P 500 Winning Streak in Year

U.S. stocks fell, halting the longest rally in a year, after allegations of fraud at Goldman Sachs Group Inc. heightened concern the government will crack down on Wall Street and wiped out the week’s advance.

Goldman Sachs sank 10 percent this week, the most since March 2009, after the Securities and Exchange Commission sued the bank and one of its vice presidents for misstating and omitting key facts about a collateralized debt obligation. The 1.6 percent retreat in the Standard & Poor’s 500 Index yesterday erased gains earlier in the week spurred by better-than- estimated results at companies from Intel Corp. to CSX Corp. and JPMorgan Chase & Co.

The S&P 500 slipped 0.2 percent to 1,192.13. Before yesterday, the index was headed for a seventh straight weekly advance, the longest since May 2007. The Dow Jones Industrial Average rose 21.31 points, or 0.2 percent, to 11,018.66. The Russell 2000 Index of small companies jumped 1.7 percent.

“I was very impressed with the earnings we got and the market was doing so well, but then you get a punch in the gut with these Goldman Sachs issues,” said Don Wordell, who oversees the RidgeWorth Mid-Cap Value Equity Fund, which has beaten 97 percent of its peers during the past five years. “It brings investors back to reality. There’s a tremendous amount of skepticism.”

Failure to Disclose

Goldman Sachs, the most profitable firm in Wall Street history, erased its advance for 2010 and ended the week at $160.70, the lowest price since March 3. The SEC said the bank created and sold CDOs tied to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against them. Goldman Sachs said the claims are “completely unfounded.” Paulson wasn’t accused of wrongdoing.

Google Inc. fell 2.8 percent to $550.15. The owner of the world’s most popular Internet search engine reported profit that missed some analysts’ estimates, underscoring the rising cost of pursuing growth in new markets.

Raw-material producers in the S&P 500 collectively dropped 1.9 percent for the biggest retreat among 10 groups. Alcoa Inc., the largest U.S. aluminum producer, fell 3.3 percent to $13.91 on first-quarter sales that missed the average analyst estimate.

“The key question is: Is this the peak quarter in terms of earnings growth as the comparisons get more difficult as the year proceeds?” said Peter Tuz, president of Chase Investment Counsel, which manages $2.8 billion in Charlottesville, Virginia.

Earnings Season

Microsoft Corp., Apple Inc., Johnson & Johnson and Coca- Cola Co. are among the 129 companies in the S&P 500 scheduled to report quarterly results next week. Total profit for the stock index rose 35 percent during the first three months of the year, according to average analyst estimates compiled by Bloomberg.

Massey Energy Co., which runs a West Virginia coal mine where 29 people were killed in an April 5 explosion, tumbled 9.5 percent to $42.27 after President Barack Obama ordered a crackdown on safety violations nationwide. The decline was the biggest in the S&P 500 after Goldman Sachs.

Intel rallied 6.1 percent, the most since December, to $23.92. The world’s largest chipmaker predicted rising sales this quarter and record profit margins for the year, fueling optimism of a strengthening rebound in technology spending. A measure of computer companies in the S&P 500 climbed 1.4 percent for the biggest gain among 10 main groups in the S&P 500.

CSX Rallies

CSX rose 2.8 percent to $54.44. The third-largest U.S. railroad posted first-quarter profit above the average analyst estimates on increased shipping volumes and more revenue from each carload.

“A lot is already baked in,” said Noman Ali, who manages $3 billion of U.S. stocks at MFC Global Investment Management in Toronto. “Unless companies can beat estimates meaningfully and then raise guidance for the rest of the year, I see the market correcting down because of the strong rally we’ve had year-to- date.”

JPMorgan ended the down 0.9 percent for the week at $45.55. The bank rallied 4.1 percent on April 14 after beating first- quarter profit forecasts and reporting record fixed-income trading revenue. The gains were erased as concern stemming from the SEC lawsuit against Goldman Sachs dragged bank shares lower.

The allegations against Goldman Sachs were announced as Obama tries to pass the most sweeping overhaul of financial regulations since the 1930s. The proposed legislation would mean stronger oversight of derivatives trading and hedge funds, a consumer financial-protection authority and a system for unwinding large systemically important firms when they fail.

European Stocks Snap Six Weeks of Gains; Mining Stocks Slide

European stocks dropped for the first week in seven as U.S. regulators sued Goldman Sachs Group Inc. for fraud and consumer confidence unexpectedly declined, overshadowing a European Union-led agreement to rescue Greece.

Xstrata Plc fell 4.8 percent, leading mining stocks lower. Deutsche Bank AG, Germany’s biggest lender, slid 3.6 percent. ING Groep NV retreated 1.4 percent. Deutsche Lufthansa AG dropped as a cloud of ash from an Icelandic volcano forced the cancellation of flights in northern Europe. Royal Bank of Scotland Group Plc rose after Bank of America Merrill Lynch said the lender may return to profit this year.

The Stoxx Europe 600 Index slipped 0.7 percent to 267.81 this week, its biggest drop since February, after a sell-off in the last hour of trading as the Securities and Exchange Commission accused Goldman Sachs and one of its vice presidents of defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages.

“There is hardly any room for negative surprises such as the SEC charge at Goldman Sachs,” said Ineke Valke, and Amsterdam-based strategist at Theodoor Gilissen Bankiers, which manages about $7 billion. “Markets will now probably enter a period of moving sideways until there is some confirmation on economic recovery in the longer term. Momentum seems to have passed.”

Aid Package

The Stoxx 600 has climbed 5.5 percent this year as the European Union agreed a $61 billion aid package to help Greece tackle the region’s biggest budget deficit and the U.S. Federal Reserve pledged to maintain record-low interest rates for an extended period to secure the economic recovery.

National benchmark indexes decreased in 12 of the 18 western European markets. Germany’s DAX fell 1.1 percent and France’s CAC 40 retreated 1.6 percent. The U.K.’s FTSE 100 decreased 0.5 percent. Greece’s ASE added 0.2 percent, paring two weeks of losses.

The Stoxx 600 dropped for the first two months of 2010 amid concern that Greece, Portugal and Spain will struggle to rein in their budget deficits.

Euro-region finance ministers agreed a rescue package for Greece last weekend after the nation’s borrowing costs surged to an 11-year high. They said they would offer as much as 30 billion euros ($40.5 billion) in three-year loans in 2010 at below market rates. Another 15 billion euros would come from the International Monetary Fund.

Yields Rise

EU finance ministers meeting in Madrid on April 16 said Greece doesn’t have an immediate plan to trigger the rescue package even as the country’s bond yields rose to the highest since before the bailout plan was announced.

Greek Prime Minister George Papandreou asked for a meeting with the EU, the IMF and the European Central Bank. Talks will begin in Athens on April 19.

EFG Eurobank Ergasias SA, Greece’s second biggest lender, added 3.1 percent while Pireaus Bank SA gained 4.9 percent.

In the U.S., the Federal Reserve on April 14 said in its Beige Book business survey that the economy expanded “somewhat” across most of the U.S. in March as consumer spending and manufacturing improved, signaling the recovery is broadening without gaining much speed.

Sales at U.S. retailers climbed in March more than anticipated, signaling consumers will play a bigger role in a broadening economic recovery. Purchases increased 1.6 percent last month, the most in four months, and gains for February and January were revised up, Commerce Department figures showed April 14. Sales excluding autos rose 0.6 percent, also surpassing expectations.

U.S. Confidence

The Reuters/University of Michigan preliminary U.S. consumer sentiment index fell to 69.5 in April, the lowest level in five months, indicating Americans are discouraged about the labor market. Economists had projected the sentiment index would rise to 75, according to the median of 69 economists in a Bloomberg News survey.

The first-quarter earnings season began in the U.S. this week, with analysts predicting combined profit for S&P 500 companies increased 30 percent from a year earlier, according to estimates compiled by Bloomberg. For Europe’s Stoxx 600, earnings will climb 45 percent in 2010, the data show.

China Growth

China’s growth accelerated to the fastest pace in almost three years in the first quarter, increasing speculation that the government may move to cool the economy. Gross domestic product rose 11.9 percent from a year earlier, the country’s statistics bureau reported on April 15, topping the median 11.7 percent estimate in a Bloomberg News survey of economists. [bn:WBTKR=DBK:GY] Xstrata, the world’s fourth-largest copper producer, slipped 4.8 percent. Basic-resources stocks retreated as Alcoa Inc. reported earnings that disappointed investors and China increased down- payment ratios for some home purchases, saying “more forceful” steps are needed to cool speculation. BHP Billiton Plc, the world’s biggest mining company, slid 4 percent.

Deutsche Bank [] slipped 3.6 percent while ING, the Netherlands’ biggest financial-services company, decreased 1.4 percent. Societe Generale SA, France’s second-biggest lender, fell 2.8 percent.

Airlines dropped as a cloud of ash from a volcano in Iceland shut airports in northern Europe. Deutsche Lufthansa AG, Europe’s second-biggest airline, fell 2.5 percent. British Airways Plc tumbled 5.2 percent.

Royal Bank of Scotland Group Plc soared 8.1 percent after an analyst at Bank of America Merrill Lynch said Britain’s biggest government-owned bank may return to profit this year.

“RBS is one of the most geared banks into recovery in Europe,” wrote Michael Helsby. “We think it can turn a profit in 2010 and that profitability can recover strongly thereafter driven by rising margins, tight cost control and falling bad debts.”

Canadian Stocks Decline as Suncor Energy, Goldcorp Retreat

Canadian stocks fell the most in two months, sending the main index to its first weekly decline since March 19, as commodity producers declined on a stronger U.S. dollar after China took steps to cool its economy.

Suncor Energy Inc., Canada’s biggest oil and gas company, dropped 3.3 percent as oil futures slid the most in two months. Goldcorp Inc., the country’s second-largest gold producer, lost 2.1 percent as the metal retreated more than $22 an ounce. Teck Resources Ltd. slumped 4.5 percent after raised minimum mortgage rates and down payment ratios for some home purchases.

The Standard & Poor’s/TSX Composite Index decreased 140.86 points, or 1.2 percent, to 12,070.66, for a 0.9 percent decline this week. The index retreated to its lows of the day after the Securities and Exchange Commission sued Goldman Sachs Group Inc. for fraud tied to collateralized debt obligations.

The Canadian benchmark had climbed 8.8 percent from Feb. 5 to yesterday as the Reuters/Jefferies CRB Commodity Price Index rallied 8.2 percent on speculation growth in emerging markets would spark greater demand for energy and raw materials. Companies in those industries make up 45 percent of Canadian stocks by market value.

“The markets are a little bit nervous about the fact that at one point, China will have to raise rates and slow down lending,” said Stephen Gauthier, a money manager at Demers Valeurs Mobilieres in Montreal, which oversees C$150 million ($148 million).

China’s cabinet said “more forceful” steps are needed to cool speculation after property prices rose at a record pace in March.

Dollar Rises

The U.S. dollar rose for a second day against the euro after European Union finance ministers said Greece lacks an immediate plan to trigger a rescue package.

Crude oil slumped 2.7 percent in New York to an April low of $83.23 a barrel. Suncor declined 3.3 percent to C$33.65. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, decreased 2.2 percent to C$77.06. Cenovus Energy Inc., the oil company spun off from EnCana Corp. in December, slipped for the first time in seven days, losing 3.3 percent to C$29.16.

Gold futures retreated 2 percent, the most since Feb. 4. Goldcorp fell 2.1 percent to C$39.44. Barrick Gold Corp., the world’s largest producer, dropped 1.2 percent to C$39.65. Jaguar Mining Inc., which mines gold in Brazil, tumbled 5.8 percent to C$10.63 after saying its costs increased in the first quarter due to currency fluctuations.

Drilling Results

Andean Resources Ltd., which explores for gold in Argentina, surged 6.3 percent to a record C$3.06 after announcing drilling results.

Teck, Canada’s largest base-metals producer, lost 4.5 percent to C$42.67 as copper and zinc retreated. Teck also sells coal for use in Chinese steel mills.

An index of Canadian banks erased earlier gains and fell 0.4 percent after the SEC announced its case against Goldman Sachs. Toronto-Dominion Bank, which has 1,051 U.S. branches, dropped 1.1 percent to C$76.13. Bank of Nova Scotia, Canada’s third-largest bank, declined 0.6 percent from a 22-month high to C$51.81.

Air Canada jumped 6.8 percent to C$2.50 after Raymond James Financial Inc. analyst Ben Cherniavsky raised his rating on the country’s biggest airline to “strong buy” from “outperform.” Passenger traffic and cargo demand are increasing, Cherniavsky wrote.

MDS Inc., the provider of medical products and services, led the S&P/TSX with a 4.6 percent climb to C$9.05. RBC analyst Douglas Miehm set a 12-month price forecast of $9.50 on the company’s U.S.-listed shares.

Oil falls below $85 on demand doubts, dollar

Oil prices fell below $85 a barrel on Friday as doubts over U.S. crude demand re-emerged and the dollar strengthened, making imports more expensive for emerging economies where consumption is surging.

The dollar .DXY gained 0.2 percent against a basket of currencies on Thursday, while European stock markets were sluggish following Asian equity losses.

U.S. crude for May delivery fell 94 cents to $84.57 a barrel by 1105 GMT, more than $2 lower than an 18-month high above $87 reached last week.

"The dollar is a bit stronger and equity markets are not too friendly today and that is having a negative impact (on oil prices)," said Eugen Weinberg, oil analyst at Commerzbank in Frankfurt.

"We've seen this for the last month that oil prices are more affected by macro factors impacting sentiment rather than fundamental factors," Weinberg added.

An unexpected jump in the weekly number of U.S. workers filing new jobless benefit claims raised doubts over the strength of economic recovery in the world's largest energy consumer, weighing on oil prices.

The May London Brent crude oil contract reached 18-month highs just before it expired on Thursday, jumping to a premium over the front-month U.S. crude contract of over $1.60.

The June contract, now the front-month contract, was trading about $1 higher than the equivalent contract for U.S. crude on Friday, shedding 76 cents to $86.83.

BRENT VS U.S. CRUDE

Strong economic data out of China painted a more positive outlook for demand across Asia, giving relative support to prices of Brent crude, the benchmark for most of the oil produced in Europe, Africa and Asia.

May Brent settled at $87.17 on Thursday, the highest close since front-month Brent ended at $90.25 on October 3, 2008. Brent's $87.58 intraday peak was the highest since $87.99 was struck on October 7, 2008.

Barclays Capital's technical team said in a note to clients that a corrective phase that had dominated the last week or so of oil trading was now over and the next targets were significantly higher.

"Following five days of modest lower closes, Brent crude is pressuring the top of a bullish flag-like pattern," Barclays Capital said. Brent is ready to test $88.15 per barrel, then

$90.00.

U.S. Stocks Advance on Optimism About Earnings, Economy Growth

U.S. stocks rose, sending the Standard & Poor’s 500 Index toward its longest weekly winning streak since 2007, as optimism that earnings and the economy are growing overshadowed an unexpected increase in jobless claims.

Intel Corp., Caterpillar Inc. and General Electric Co. helped lead the Dow Jones Industrial Average higher after Federal Reserve reports showed factory production increased 0.9 percent in February and regional data indicated the gains extended into this month. United Parcel Service Inc. rallied 5.3 percent after lifting its earnings forecast. Mariner Energy Inc. surged 42 percent after Apache Corp. agreed to buy the company.

The Standard & Poor’s 500 Index increased 0.1 percent to 1,211.67 at 4 p.m. in New York, poised for a seventh straight weekly advance. The Dow Jones Industrial Average rose 21.46 points, or 0.2 percent, to 11,144.57 today.

“There’s plenty of fuel out there that could propel stocks higher,” said Hank Smith, who helps oversee $6 billion as chief investment officer of Haverford Trust Co. in Radnor, Pennsylvania. “Corporate earnings continue to accelerate. That’s adding confidence about the economic recovery.”

Equities fluctuated in early trading amid concern the market has risen too far, too fast. The S&P 500’s relative strength index, a gauge of momentum, has been above 65 for 29 straight days, the longest stretch since 1986, according to Bloomberg data. A reading above 70 is a signal to sell for many technical analysts. The S&P 500’s RSI has topped 70 for five straight days and rose to almost 79 today.

79 Percent Rally

The S&P 500 has rallied 79 percent from a 12-year low in March 2009 to the highest level in 18 months. Combined profit for S&P 500 companies will increase 30 percent in the first quarter from a year earlier, according to analyst estimates compiled by Bloomberg.

Benchmark indexes opened lower after the Labor Department announced that initial jobless claims rose to 484,000 last week, an increase of 24,000 from the previous week and above the 440,000 estimated by economists in a Bloomberg survey.

Industrial shares advanced the most of 10 groups in the S&P 500, led by UPS and First Solar Inc. Health care and financial shares were the worst performers with losses of at least 0.3 percent.

UPS jumped 5.3 percent to $68.89, its highest price since June 2008 and biggest gain in a year, after the company boosted its full-year forecast and reported first-quarter earnings excluding some items of 71 cents a share. Analysts expected 57 cents, according to a Bloomberg survey. Piper Jaffray upgraded UPS shares to “overweight” from “neutral.” FedEx Corp. added 1.7 percent to $95.62.

First Solar

First Solar rose 4 percent to $137.90, its highest price in three months. U.S. solar power developers including First Solar and SunPower Corp. added 481 megawatts of the renewable energy last year, according to the Solar Energy Industry Association.

Intel continued its rally after boosting its gross margin forecast for 2010 and reporting earnings that exceeded analyst estimates on April 13. The world’s largest chipmaker gained 3 percent to $24.22, its highest price since August 2008, after rising 3.3 percent yesterday.

Google Inc. and Advanced Micro Devices Inc. reported earnings after the market closed today. Google, owner of the world’s most popular search engine, reported first-quarter profit that fell short of some analysts’ estimates as ad sales didn’t grow enough to satisfy investors. Its shares slumped 4.5 percent to $568.69 in extended traded after gaining 1.1 percent in the regular session.

AMD Earnings

AMD, the second-largest maker of microprocessors, reported first-quarter sales that beat analysts’ predictions, adding to evidence that personal-computer demand is increasing. AMD rose 5 cents to $10.21 in after-hours trading after a 2.7 percent rally in the regular session.

Bank of America Corp. rose 0.4 percent to $19.48 and GE gained 0.8 percent to $19.50 ahead of their profit announcements tomorrow morning.

Crude oil fell for the sixth time in seven days, dropping 0.4 percent to $85.51 a barrel at the close of floor trading on the New York Mercantile Exchange as the jobless and industrial- production reports signaled energy demand may be slow to recover.

The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, added as much as 0.7 percent, halting a four-session slump.

Apache to Buy Mariner

Mariner Energy soared 42 percent, the most since the company was spun off from Forest Oil Corp. in 2006, to $25.68. Apache, the largest independent U.S. oil producer by market value, agreed to buy the company for about $26.22 per share in cash and stock. Apache shares lost 1.3 percent to $106.67.

E*Trade Financial Corp. shares gained 4.7 percent to $1.78 after TD Ameritrade Holding Corp. Chief Executive Officer Fred Tomczyk told Reuters his company has the “firepower” for an acquisition.

Yum! Brands Inc. climbed 2.6 percent to $42.78 after the owner of Taco Bell and other restaurant chains reported an 11 percent rise in first-quarter profit, helped by sales growth in China.

American Superconductor Corp. climbed 9.7 percent to $31.89 after Deutsche Bank AG raised its recommendation for the maker of wind turbine components and transmission lines to “buy” from “hold.”

Macerich Co. fell 6.5 percent to $40.90, the biggest drop in six months, to lead a decline in real estate investment trusts after selling 30 million shares in a secondary offering at $41 a share. Kilroy Realty Corp. and Medical Property Trust Inc. also slumped after selling shares.

“There’s a general notion out there that these things are pricey,” said Rich Moore, managing director at RBC Capital Markets in Solon, Ohio. “When one guy goes out and does an offering, it sort of confirms that these things are pricey. It confirms that management thinks these things are at the peak too. It just goes to everybody’s suspicion.”

REITs posted the five biggest losses in the S&P 500, with Kimco Realty Corp., Health Care REIT Inc., Simon Property Group Inc., Apartment Investment & Management Co. and Vornado Realty Trust retreating at least 3.5 percent.

Asian Stocks Decline on U.S. Jobless Claims, China Tightening

Asian stocks fell after U.S. jobless claims unexpectedly rose, China announced measures to cool the real-estate market and commodity prices dropped.

Sony Corp., which gets 23 percent of its sales in the U.S., sank 1.3 percent in Tokyo. Sharp Corp., a Japanese company seeking to expand its share in China’s mobile-phone market, declined 1.2 percent after that nation raised down payment ratios for some home purchases. BHP Billiton Ltd., the world’s biggest mining company, lost 0.3 percent after oil and copper prices retreated in New York.

“Concern about China’s tightening may weigh on the Asian stock markets,” said Kazuhiro Takahashi, a general manager at Daiwa Securities Capital Markets Co. in Tokyo.

The MSCI Asia Pacific Index declined 0.2 percent to 128.83 as of 9:26 a.m. in Tokyo, with three stocks falling for each one that advanced. The gauge has risen 0.7 percent this week, its third-straight weekly gain, as China reported an 11.9 percent increase in first-quarter gross domestic product and U.S. earnings beat analyst estimates.

Japan’s Nikkei 225 Stock Average fell 0.7 percent and South Korea’s Kospi index lost 0.2 percent. Australia’s S&P/ASX 200 Index and New Zealand’s NZX 50 Index were little changed.

Futures on the Standard & Poor’s 500 Index declined 0.4 percent. The gauge fluctuated yesterday before closing 0.1 percent higher. The number of Americans filing claims for jobless benefits increased in the week ended April 10, while economists had projected a drop, a Labor Department report showed. Factory production rose 0.9 percent in March, the Federal Reserve said.

China’s cabinet yesterday increased down payment ratios for some home purchases, saying “more forceful” steps are needed to cool speculation. China’s economic growth in the first quarter was the fastest pace in almost three years.

The MSCI Asia Pacific Index has climbed 13 percent from its low this year on Feb. 8 amid growing confidence in the global recovery. Companies in the MSCI gauge trade at an average 16.5 times estimated profit, compared with 15.5 times for the S&P 500.

Gold rises on Greece worries, defies dollar rise

Gold climbed toward $1,160 an ounce on Thursday, defying a stronger dollar against the euro, as lingering worries over Greece's debt crisis boosted buying of the metal as a hedge against uncertainties.

Bullion's gains in the face of a stronger greenback indicate that the negative correlation between the metal and the dollar has lessened as problems in the euro zone prompted risk-averse investors pile into gold as a safe haven.

"We have a disconnect between gold and the dollar, and that will continue as long as Greece and the euro zone are still in the news," said Frank McGhee, head precious metals trader of Integrated Brokerage Services in Chicago.

Euro zone ministers agreed on Sunday to make available 30 billion euros in loans with a further 15 billion from the International Monetary Fund. But uncertainty remained over how the financial assistance would be implemented.

"Until there is a firm resolution, you will continue to see gold to benefit despite euro's losses."

Spot gold was at $1,158.90 an ounce at 3:07 p.m. EDT (1907 GMT), against $1,153.90 late in New York on Wednesday.

U.S. gold futures for June delivery settled up 70 cents at $1,160.30 an ounce on the COMEX division of the

NYMEX.

A stronger greenback usually leads to weakness in dollar-denominated gold as it is more costly to non-U.S. investors, and the metal is also seen as an alternative global currency to the U.S. dollar.

Gold priced in euros was boosted from the single currency's losses as investors focused on Greece's debt woes, trading just below a record high.

The euro fell as the cost of insuring against a Greek default rose, underscoring persistent concerns about Greece's ability to service its debt.

Usually this would pressure gold, but the metal has recently broken its usual positive link to the euro this year as debt fears rise.

"Greece is an ongoing story. It can't be resolved that quickly. There have to be concerns there," said Credit Agricole analyst Robin Bhar. "That is going to be a reason to hold gold, so there are some positives."

Wang Tao, a Reuters market analyst, said that further correction is likely if $1,152 is broken.

A minor wave pattern on the intraday chart indicates a possible "c" wave developing that is targeting $1,137.51, subject to a break at $1,144.75, he said.

PALLADIUM, PLATINUM GROUP RETREAT

Among other precious metals, platinum group metals declined after Wednesday's sharp rally driven by worries about production shortfall and optimism about demand from exchange-traded fund and a global auto recovery.

Palladium fell as traders cashed in gains after the metal rose on Wednesday to a two-year high at $548.50 an ounce. It was last at $541.50 on Thursday against $546.

Platinum was at $1,717.50 an ounce against $1,726, while silver was a penny higher at $18.40 an ounce versus $18.39, its close late in New York on Wednesday..

Global stocks edge higher, euro falls broadly

U.S. stocks rose for a sixth straight day on Thursday on another round of results that beat expectations but the euro fell broadly amid renewed uncertainty over whether Greece will seek money from a bailout package.

A stronger U.S. dollar kept a lid on most commodity prices while U.S. Treasuries rose as dour news in the labor market overshadowed signs of improvement elsewhere in the economy.

U.S. oil prices ended lower as the firmer dollar and mixed U.S. economic data pulled crude back from earlier gains that followed data showing an annual growth rate in China of 11.9 percent, the fastest pace since 2007.

An upbeat profit forecast from United Parcel Service (UPS.N) lifted U.S. transportation shares, but concerns about a rise in weekly jobless claims limited Wall Street's gains.

New U.S. jobless claims unexpectedly soared last week to a seasonally adjusted 484,000 due to applications delayed by the Easter holiday. Markets had expected a dip to 440,000.

"We continue to see better-than-expected numbers across a variety of sectors, which shows economic improvement," said Channing Smith, vice president of Capital Advisors, Tulsa, Oklahoma. "But ultimately we need to see good labor market data to confirm that the recovery is in place."

Shares of UPS rose 5.3 percent after it posted results from the first quarter that were sharply above consensus and the company raised its profit outlook, the latest bellwether to exceed expectations this earnings season.

The Dow Jones industrial average .DJI closed up 21.46 points, or 0.19 percent, at 11,144.57. The Standard & Poor's 500 Index .SPX was up 1.02 points, or 0.08 percent, at 1,211.67. The Nasdaq Composite Index .IXIC was up 10.83 points, or 0.43 percent, at 2,515.69.

Concerns over any Greek aid added to the allure of safe-haven bonds and gold even after Greece asked for official talks with European authorities and the International Monetary Fund, a step toward Athens obtaining emergency loans.

Benchmark 10-year Treasury notes were trading 6/32 higher in price to yield 3.84 percent.

The euro fell broadly, snapping five straight days of gains, while the cost of insuring against a Greek default rose and the Greek-German government bond yield spread widened to near record levels.

The euro was on track for its biggest one-day fall against the dollar in three weeks, off 0.5 percent at $1.3574.

The yield spread of 10-year Greek government bonds against German Bunds closed slightly wider at 413 basis points after widening to 436 basis points earlier in the session.

"There was all this talk from the capitals in Europe saying they have to pass legislation first in order to get the loans going," said Richard Franulovich, senior currency strategist, at WestPac in New York. "Then Germany is saying Greece needs to approach it before it can pass legislation. That has caused a bit of consternation and concern."

U.S. gold futures ended a tad higher, despite a dollar rise, as persistent worries about Greece prompted buying.

The June contract settled up 70 cents at $1,160.30 an ounce.

U.S. oil prices ended lower as the stronger dollar and mixed economic data pulled crude back from earlier gains that followed robust Chinese gross domestic product.

Front-month U.S. crude for May delivery fell 33 cents, or 0.38 percent, to settle at $85.51 a barrel, after ending 2 percent higher the previous day.

ICE Brent crude for May rose $1.02 to settle at $87.17, highest close since front-month Brent ended at $90.25 on October 3, 2008. Brent's $87.58 intraday peak was the highest since $87.99 was struck on October 7, 2008.

The dollar was up against a basket of major currencies, with the U.S. Dollar Index .DXY up 0.51 percent at 80.602.

U.S. oil falls on economic data, Brent up at expiry

U.S. oil prices ended slightly lower on Thursday as a stronger dollar and mixed U.S. economic data outweighed robust data from China.

Front-month U.S. crude for May delivery fell 33 cents, or 0.38 percent, to settle at $85.51 a barrel. The market had ended 2 percent higher the previous day, and rose again in early trade after China posted strong growth in the first quarter.

"We are looking at the data from China and this is very supportive for the market," said Christophe Barret, oil analyst at Credit Agricole Corporate and Investment Bank. "But I think the growth was anticipated and was already in the prices."

In London, Brent crude futures ended up sharply as the front-month May contract expired on Thursday, even as the approaching expiration of May crude oil options helped keep U.S. oil prices curbed, sources said.

ICE Brent crude for May rose $1.02 to settle at $87.17, highest close since front-month Brent ended at $90.25 on October 3, 2008. Brent's $87.58 intraday peak was the highest since $87.99 was struck on October 7, 2008.

Brent traded at a premium to U.S. benchmark West Texas Intermediate crude a fourth consecutive day due partly to the approaching contract expiration and traders also cited rising stockpiles at the Cushing, Oklahoma, delivery point for WTI, among other factors.

At settlement on Thursday, the Brent futures premium to WTI of $1.66 was the highest since mid-December.

A strike by Gabon's main oil union has cut about 60 percent of the African nation's 250,000 barrels per day of crude production, which competes with Brent.

The euro fell against the dollar, snapping five straight days of gains, on concern about how Greece will manage its debt, helping offset the negative impact earlier of strong Chinese data on the greenback.

A stronger dollar can pressure oil as it raises dollar-denominated commodity prices for buyers using other currencies.

China posted unexpectedly strong annual growth of 11.9 percent in the first quarter, but the surging growth could prompt a revaluation of the yuan, which may boost oil demand by increasing China's buying power.

An unexpected 24,000 jump in the number of U.S. workers filing new jobless benefit claims tempered sentiment, but an expansion in New York state manufacturing to a six-month high kept optimism about the economy bolstered.

Oil traders have been watching for signs of a turnaround in the U.S. economy that could bolster oil demand, which was hard hit by the recession.

SURPRISE DROP

Oil prices rose 2 percent on Wednesday, ending a five-day losing streak after U.S. government data showed a surprise 2.2 million-barrel drop in U.S. crude stocks. But the report also showed a larger-than-expected 1.1 million barrel rise in distillate stocks, raising questions about the pace of the U.S. exit from recession.

On a technical basis, prices may be due for a small correction on Thursday but upward momentum is expected to stay intact.

OPEC has noted oil's jump to 18-month highs. Kuwait's oil minister said Thursday that OPEC would make a decision on an output boost if prices moved above $100.

On Tuesday, OPEC delegates said a price above $90-$95 would prompt the group to consider raising output.

But Venezuela's oil minister said on Thursday that OPEC will not increase output to bring down prices, as stocks are high because demand is low and additional output would only end up in storage.

Gold near final bull stage; gains possible: GFMS

Gold is near the final phase of its 10-year bull run, but prices could still climb as high as $1,300 an ounce in 2010 driven by higher investment demand, said Philip Klapwijk, chairman of metals consultancy GFMS Ltd.

The rise of gold prices is not sustainable because jewelry demand has dropped to less than half of total demand, and record investment buying at some point will fall off, Klapwijk told Reuters in an interview before the release of Gold Survey 2010.

"There are pointers to the fact that we are entering the final stages of a bull market," Klapwijk said.

Bullion has more than quadrupled since 2000 when it was trading at about $250 an ounce. Year to date, it has gained about 5 percent and spot gold is currently fetching about $1,150 an ounce.

"But that doesn't rule out the potential for some fairly fancy price gains before it reaches a peak in prices. We are actually pretty bullish still in at least the next 6-12 months."

Klapwijk said the last phase of gold's bull cycle could last as long as two to three years.

"By the end of this year, we believe prices will be near the $1,300 mark," he said.

Klapwijk said gold will eventually face strong headwinds, such as the end of governments' emergency economic stimulus packages. "Investment demand at some point has to falter," he added.

The worst economic crisis since the Great Depression has led to both a sharp drop in jewelry buying and soaring gold investment demand for wealth protection.

Klapwijk said that gold supply and demand are not currently in a long-term equilibrium and prices at higher levels are not sustainable.

"This is not an healthy underlying market when the traditional mainstay of the gold market on the demand side, jewelry, is reduced to just 40 percent of demand."

GFMS' gold survey showed that jewelry demand fell 20 percent to 1,759 tonnes due to weak consumption during a recession.

Jewelry demand, excluding scrap gold, was even weaker, down 25 percent at 1,111 tonnes.

Jewelry consumption is usually the biggest underpinning factor, representing about 70 percent of total gold demand.

"At some point, there will be a resumption of normalcy, and gold is going to look very pricey. You could see some massive volatility and significant swings in prices," Klapwijk said.

Gold rises as weaker dollar adds to momentum

Gold rose on Wednesday as the dollar dipped after Singapore effectively revalued its currency, and as upbeat U.S. corporate earnings boosted appetite for currencies seen as higher risk.

The Singapore move was viewed as a mark of confidence in the economic recovery.

Other precious metals also rose, with palladium hitting a new two-year high at $548.50 an ounce as investors bet supply would fail to keep pace with a demand recovery this year.

Spot gold was bid at $1,153.15 an ounce at 1425 GMT, against $1,150.15 late in New York on Tuesday. U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose 20 cents to $1,153.60 an ounce.

The dollar's fall boosted interest in gold as an alternative asset, and made it cheaper for other currency holders. The unit fell after Singapore tightened monetary policy, and on positive corporate earnings, including those of JPMorgan Chase (JPM.N), which increased investor appetite for riskier assets.

The currency extended losses after data showed sales at U.S. retailers rose more strongly than expected in March, while CPI numbers showed inflation pressures remain muted.

"Gold has been heavily driven by the currencies," said Daniel Major, an analyst at RBS Global Banking & Markets.

He said the benign inflation reading was also reassuring investors that U.S. interest rates may stay at their current record lows for an extended period.

"The CPI number out of the United States today was pretty much in line with consensus," he said. "That is probably going to instill more confidence in the lower-for-longer (view)."

Low interest rates reduce the opportunity cost of holding non-interest bearing gold.

The metal's rise to four-month highs at the beginning of the week on the back of the euro's recovery against the dollar has also shored up the technical picture for gold, analysts said.

"Gold has achieved the level it has achieved based on fundamentals, and now the technical picture is looking good," said Peter Hillyard, head of metals sales at ANZ Bank. "The $1,140-1,145 level is clearly showing itself as good support."

BULL RUN 'NEAR PEAK'

In an interview ahead of the launch of the metals consultancy's annual report, GFMS chairman Philip Klapwijk said gold is near the final phase of its 10-year bull run, but prices could still reach $1,300 an ounce in 2010.

Gold investment demand in 2009 surpassed jewelry buying for the first time since 1980 as investors flocked to the metal as a safe store of value as the global recession bit, GFMS said.

Indicators of physical gold demand were positive, with the president of the Bombay Bullion Association saying March imports to major bullion consumer India jumped to 27.7 tons from 4.8 tons a year before.

Holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, were unchanged at record highs on Tuesday.

Among other precious metals, palladium hit another two-year high on Wednesday.

"(The) improving economic outlook and strong growth in auto sales in Asian markets support demand for palladium," said Fairfax investment bank in a note. "Around 54 percent of metal production is used in autocatalyst production."

Palladium was at $538.50 an ounce against $526, while platinum was at $1,720.50 an ounce against $1,714. Silver was bid at $18.33 an ounce against $18.18.

Prices of minor precious metals also rose on Wednesday, with rhodium hitting its highest since October 2008 at $2,875 an ounce, ruthenium its highest since December 2008 at $190 an ounce, and iridium a 12-year high at $520 an ounce.

Greece debt plan may work if growth returns

Aid from European governments will give Greece a good chance of success in its struggle to curb its national debt, but only if it can emerge from recession in no more than two years, Reuters calculations suggest.

A simple spreadsheet model of Greece's economy and debt, prepared to test different scenarios for growth, borrowing costs and fiscal austerity measures, indicates the emergency aid plan announced by European governments this week could tip the balance in Greece's favor.

Under the European aid package, euro zone governments would provide up to 30 billion euros of three-year loans in the first year at a rate of roughly 5 percent. The International Monetary Fund would chip in an additional 10 billion euros or more.

Greece has not said if it will request such aid, which would come with tough fiscal conditions. It is unclear how quickly and willingly governments such as Germany, where public opinion opposes helping Greece, would approve disbursement of the money.

But the Reuters calculations suggest the aid package, if obtained, could bring Greece's borrowing costs down far enough to help it come very close to meeting public debt targets in the economic plan which it has agreed with the European Union.

The plan sees the ratio of debt to gross domestic product, which was 113.4 percent last year, surging to 120.4 percent this year but rising only marginally to 120.6 percent next year, and then falling to 117.7 percent in 2012 and 113.4 percent in 2013.

BORROWING COSTS

Before the aid package was announced, soaring borrowing costs were a major threat to Greece -- its three-year government bond yield hit 7.6 percent last week, far above debt service interest rates of below 5 percent assumed by the Greek plan for the next four years.

But if Greece can borrow at 5.0 percent from the aid package, its outlook improves greatly.

Plugging that number into the model, and using growth, inflation and budget assumptions in the Greek plan, produces debt-to-GDP ratios of 120.7 percent this year, 121.1 percent next year, 118.7 percent in 2012, and 114.7 percent in 2013.

That result would only be slightly worse than the debt reduction course envisaged by Greece's plan, and would not change the year in which the debt ratio began to fall: 2012.

Greece, which has said it will need to borrow a total of about 53 billion euros this year, could probably not expect to obtain all its funding over several years from the aid package; it would likely have to borrow some money from the markets at a higher rate.

But even assuming an effective debt service interest rate of 6.0 percent, the debt ratio would still begin dropping in 2012. It would come in at 121.5 percent this year, 123.0 percent in 2011, 121.5 percent in 2012 and 118.5 percent in 2013.

BUDGET BALANCE

One big source of risk for Greece, however, is the chance of a political backlash against the government's austerity measures which could eventually block spending and revenue reforms needed to meet the plan's targets for annual budget deficits.

Analysts think the government has probably done enough to succeed in moving its primary budget balance, essentially the gap between current government spending and revenue, to minus 3.5 percent this year from minus 7.7 percent last year.

It aims for minus 0.2 percent next year, plus 2.6 percent in 2012 and plus 3.2 percent in 2013. Fresh austerity steps will be needed to reach those targets, and the model shows the debt situation deteriorates considerably if they are missed.

For example, if the primary budget balance only improves to minus 1.5 percent next year and stays at that level for the following two years, the debt-to-GDP ratio continues rising through 2013, hitting 123.6 percent in that year.

GROWTH

And the model's debt numbers start to look much worse if the austerity measures cause a deeper recession than the government is assuming.

The central bank is already predicting a 2 percent drop in real GDP this year, compared to the government's forecast of a fall of only 0.3 percent.

Former IMF chief economist Simon Johnson says it is not unreasonable to speculate that Greece's real GDP might shrink 3 percent this year, followed by falls of 7 percent in 2011 and 1 percent in 2012, before it rebounds 3 percent in 2013.

Plugging those numbers into the model, and assuming an effective debt service interest rate of 6.0 percent, Greece's debt ratio would rise much higher -- to 135.4 percent in 2012 -- and start falling one year later than planned, in 2013.

It is unclear whether the financial markets would be willing to wait that additional year for Greece's debt mountain to start shrinking -- or whether they would again panic and push up its borrowing costs, making fiscal consolidation even harder.

European governments extending emergency loans to Greece might also lose patience.

The simple model does not capture other risks for Greece. It does not show how different inputs into the debt calculation might affect each other; for example, a deep recession could hurt tax revenues more than the government assumes, preventing Athens from hitting targets for its primary budget balance.

And while Greece would pay an interest rate of about 5 percent on emergency loans in the first year of the aid package, eventual monetary tightening by the European Central Bank could make any later loans more expensive.

In the 1980s and 1990s, Sweden managed fiscal consolidations of a similar scale to the one now required for Greece, and Greece itself managed one in the 1990s before it was locked into a common currency, notes Organization for Economic Co-operation and Development economist Philip Bagnoli.

U.S. Stock Futures Climb on Intel Forecast, JPMorgan Earnings

U.S. stock-index futures advanced after Intel Corp.’s sales forecast topped analysts’ forecasts and JPMorgan Chase & Co. reported better-than-estimated first- quarter earnings.

Intel climbed 4.7 percent in Germany after the world’s largest chipmaker forecast rising sales this quarter and record profit margins for the year, fueling optimism that a rebound in technology spending is gathering steam,. Texas Instruments Inc. also advanced. JPMorgan, the second-biggest U.S. bank by assets, rose 2 percent in pre-market trading in New York.

Futures on the Standard & Poor’s 500 Index expiring in June gained 0.3 percent to 1,196.6 at 7:12 a.m. in London before a report forecast to show retail sales climbed for a third month. Dow Jones Industrial Average futures increased 0.3 percent to 10,995 and Nasdaq-100 Index futures rose 0.5 percent to 2,011.25. Stocks in Europe and Asia also advanced.

“All eyes are on earnings and outlooks of the big companies,” said Urs Eilinger, Zurich-based chief investment officer at Infidar Investment Advisory Ltd., which manages about $3.2 billion. “From cyclicals and information technology we should see surprisingly good numbers. I’m confident that the market can hold up at this level.”

Earnings Optimism

U.S. stocks rose for a fourth day yesterday as earnings optimism boosted technology, industrial and consumer shares, overcoming an early drop after Alcoa Inc.’s results called into question the strength of the economic recovery. The S&P 500 has surged 77 percent from last year’s low in March to the highest level since September 2008.

Combined profit for S&P 500 companies will increase 30 percent in the first quarter from a year earlier, according to analyst estimates compiled by Bloomberg. AMR Corp. and Yum! Brands Inc. are also due to report results today.

Credit Suisse Group AG raised its year-end estimate for the S&P 500 by 13 percent to 1,270 today, saying “equities still offer value relative to other asset classes.”

We “now believe that the renewed bear market in the S&P 500 that we had penciled in for the end of this year is likely to be a 2011 event,” London-based strategist Andrew Garthwaite wrote in a report.

The MSCI Asia Pacific Index climbed 0.7 percent today as Moody’s Investors Service boosted South Korea’s credit rating and Singapore raised its economic growth forecast. The Stoxx Europe 600 Index rose 0.3 percent as ASML Holding NV, Europe’s largest maker of semiconductor equipment, posted net income that beat analysts’ forecasts.

Intel Surges

Intel jumped 4.7 percent to $23.83 in German trading. Second-quarter revenue will climb as high as $10.6 billion, exceeding analysts’ predictions, and 2010 gross margins will widen to a record, the chipmaker said late yesterday. Net income surged almost fourfold in the three months through March.

Texas Instruments, the second-biggest U.S. chipmaker, rose 2.2 percent to $26.43.

JPMorgan advanced 2 percent to $46.80 in New York. The bank posted first-quarter earnings of 74 cents a share. Analysts surveyed by Bloomberg had estimated profit of 64 cents on average.

Morgan Stanley, the sixth-biggest U.S. bank by assets, dropped 0.5 percent to $30.34 as the bank was said to expect its global real-estate fund to lose $5.4 billion.

The firm sent a fourth-quarter update to investors in recent weeks showing the real-estate fund was likely to recover $3.4 billion of the $8.8 billion invested in 2007, said a person familiar with the situation, who declined to be identified because the information wasn’t public. A spokesman for Morgan Stanley declined to comment.

Time Warner Downgrade

Time Warner Inc. fell 1.4 percent to $32.30. The owner of the Warner Bros. movie studio was cut to “equal weight” from “overweight” at Morgan Stanley.

Retail sales in the U.S. probably climbed in March for a third straight month, a sign the economic recovery is broadening, analysts said before a Commerce Department report due at 8:30 a.m. in Washington.

Purchases increased 1.2 percent, the biggest gain in four months, after a 0.3 percent February increase, according to the median estimate of 79 economists surveyed by Bloomberg News.

A report from the Labor Department due at the same time may show the cost of living increased 0.1 percent in March after no change the previous month, according to the survey median. At 10 a.m., a second report from the Commerce Department may show stockpiles rose 0.4 percent in February as companies tried to have enough goods on hand to meet improving demand.

The Federal Reserve at 2 p.m. will issue its report on regional economic activity, known as the Beige Book, which policy makers use to help formulate monetary policy.

Singapore Stocks Rally on Growth; Index at Highest Since 2008

Singapore stocks advanced, sending the benchmark Straits Times Index to above the 3,000 level for the first time since 2008, after the government raised its economic-growth forecast for the second time this year.

DBS Group Holdings Ltd., Southeast Asia’s biggest lender, climbed 4.6 percent. City Developments Ltd., the second-biggest homebuilder in the city-state, gained 2.5 percent. Singapore Press Holdings Ltd., the biggest newspaper publisher, rose 1 percent after saying second-quarter profit increased.

“The government’s very bullish forecast suggests the rebound is quite strong,” said Chua Hak Bin, head of research at Citigroup Inc. in Singapore. “It’s encouraging that the recovery is fairly broad-based. This will translate to a strong earnings recovery, especially for banks.”

Singapore’s Straits Times Index increased 1.6 percent to 3,019.74 at the close, its highest close since June 18, 2008. Gross domestic product will grow by as much as 9 percent in 2010, the trade ministry said in a statement today, compared with a previous estimate of as much as 6.5 percent.

The city-state’s $182 billion economy expanded an annualized 32.1 percent in the first quarter from the previous three months, when it shrank 2.8 percent, the government agency said. That was better than the median estimate for 18.4 percent growth in a Bloomberg News survey of 11 economists.

The Singapore dollar rose the most in a year after the central bank said today it will undertake a one-time revaluation and seek a gradual and modest appreciation of the currency.

‘Very Important’

DBS Group gained 4.6 percent to S$15.50, the biggest contributor to the benchmark index’s advance. United Overseas Bank Ltd., Singapore’s second-largest lender by market value, rose 4.7 percent to S$20.88. Oversea-Chinese Banking Corp., owner of Singapore’s biggest life insurer, gained 2.4 percent to S$9.16.

“We’ve just seen the realization that Singapore is a great place to do business. With the recovery around the world, Singapore is a very important part of people’s investment,” Donald Gimbel, senior managing director at Carret Asset Management LLC said in an interview on Bloomberg TV. “We will gradually be adding to our position,” in Singaporean stocks.

Among property developers, City Developments, the second- biggest homebuilder in the city-state, climbed 2.5 percent to S$11.50. CapitaLand Ltd., Southeast Asia’s biggest developer, gained 2 percent to S$4.18. Singapore’s private home prices rose 5.1 percent in the first quarter from the previous three months, a government report showed on April 1.

Neptune Orient

Fraser & Neave Ltd., the property developer and Singapore’s largest beverage maker, advanced 2.7 percent to S$4.94. Deutsche Bank AG rated the stock a new “buy” with a 12-month share- price forecast of S$6.

Singapore Press Holdings gained 1 percent to S$3.97. The company said yesterday it had a profit of S$113.3 million ($82.1 million) in the second quarter, up from S$87 million a year earlier.

Neptune Orient Lines Ltd., the container carrier that gets about 64 percent of revenue from the Americas, advanced 8 percent to S$2.30, its highest close since Aug. 18, 2008. The trade deficit in the U.S. widened in February more than anticipated as Americans snapped up foreign-made televisions and computers, government data released yesterday showed.

“NOL has a higher exposure in the trans-Pacific route. It stands to benefit more than other lines from improving U.S. trade,” Suvro Sarkar, an analyst at DBS Group Holdings Ltd., said.

European Stocks, U.S. Futures Rise on Intel, JPMorgan Results

European shares advanced after results from Intel Corp. and JPMorgan Chase & Co. spurred optimism about the economic recovery. Asian shares and U.S. stock-index futures rose.

Infineon Technologies AG and STMicroelectronics NV paced a rally among European chipmakers after Intel forecast sales that topped analysts’ estimates. Allied Irish Banks Plc climbed 6.6 percent as Goldman Sachs Group Inc. recommended buying the shares. Ericsson AB rallied the most in five months after Credit Suisse Group AG boosted its rating on the stock. Shares in Greece declined as billionaire investor George Soros said the cost of borrowing in the nation’s rescue package is too high.

The Stoxx Europe 600 Index gained 0.6 percent to 270.23 as of 12:01 p.m. in London. The benchmark gauge for European equities has climbed 6.3 percent in 2010 as the European Union agreed a $61 billion aid proposal to help Greece tackle the region’s biggest budget deficit and the U.S. Federal Reserve pledged to maintain record-low interest rates for an extended period to secure the economic recovery.

“We’ll see coming up in these quarterly results some revenue numbers that reassure people that if last year was all about cutting costs then this year is about rebuilding sales with a lower cost base,” said Jeremy Podger, London-based head of global equities at Threadneedle Asset Management Ltd., which has about $93 billion in client assets. “This will give people confidence to go back into equities. It’s a positive story.”

Earnings Season

The first-quarter earnings season began in the U.S. this week, with analysts predicting combined profit for S&P 500 companies increased 30 percent from a year earlier, according to estimates compiled by Bloomberg. The Stoxx 600 has surged 71 percent and the S&P 500 has jumped 77 percent from lows in March 2009 as the economy returned to growth.

Intel climbed 4.2 percent to $23.73 in early New York trading after the world’s biggest chipmaker yesterday forecast rising sales this quarter and record profit margins for the year.

Second-quarter revenue will climb as high as $10.6 billion, exceeding analysts’ predictions, and 2010 gross margins will widen to a record, Intel said. Net income surged almost fourfold in the three months through March.

Futures on the Standard & Poor’s 500 Index expiring in June rose 0.3 percent while the MSCI Asia Pacific Index climbed 0.7 percent.

Singapore Growth

Samsung Electronics Co., the world’s biggest chipmaker after Intel, gained 2.2 percent in Seoul. Tokyo Electron Ltd. advanced 3.6 percent in Tokyo after the company said orders for machines that make semiconductors and flat-panel displays rose.

Singapore unexpectedly revalued its currency, triggering the biggest gain in a year, after the government raised forecasts for economic growth and inflation.

Infineon Technologies, Europe’s second-largest chipmaker, climbed 2.6 percent to 5.2 euros. STMicroelectronics gained 3.4 percent to 7.78 euros. ARM Holdings Plc, the U.K. designer of semiconductors used in Apple Inc.’s iPhone, advanced 1.1 percent to 235.8 pence. Cap Gemini SA, Europe’s largest computer services company, rallied 5.6 percent to 38.77 euros.

ASML Holding NV gained 0.5 percent to 26.29 euros as Europe’s largest maker of semiconductor equipment reported net income for the first quarter of 107 million euros ($146 million), beating the 101 million-euro average forecast of analysts surveyed by Bloomberg. The semiconductor equipment maker said second-quarter sales will be 50 million euros higher than previous forecasts.

Ericsson, Allied Irish

JPMorgan climbed 1.8 percent to $46.70 in pre-market trading in New York. The second-biggest U.S. bank by assets beat analysts’ estimates as first-quarter earnings rose 55 percent on higher trading revenue.

Ericsson AB rallied 3.9 percent to 77.20 kronor, the biggest gain since Oct. 30. Credit Suisse raised its recommendation on the shares to “outperform” from “neutral,” saying the outlook for sales is improving.

Allied Irish Banks surged 7.2 percent to 1.54 euros as Goldman Sachs upgraded the shares to “buy” from “neutral.”

UBS AG gained 1.9 percent to 18.4 Swiss francs. Chief Executive Officer Oswald Gruebel said he’s upbeat about the prospects for Switzerland’s biggest bank after a return to profit, even as he predicted further withdrawals at the private bank.

Postbank Integration

Deutsche Postbank AG climbed 5.5 percent to 25.24 euros. Deutsche Bank AG’s preparations for the integration of Deutsche Postbank are more advanced than expected as the company pushes ahead with a shared information technology platform, Handelsblatt reported, without saying where it got the information.

Yell Group Plc, the publisher of the U.K.’s yellow pages directory, rose 3.6 percent to 52.3 pence after UBS AG added the shares to its “most preferred” list.

Greece’s ASE Index fell 2.2 percent, led by banks. National Bank of Greece SA, the country’s biggest lender, dropped 4.4 percent to 13.19 euros. EFG Eurobank Ergasias SA, the second largest, declined 5.3 percent to 6.25 euros, the biggest decline on the Stoxx 600 today. Goldman Sachs analysts lowered price estimates for both banks, according to a report today.

Greece faces the danger of a “death spiral” because the cost of borrowing in the euro region’s rescue package is too expensive, billionaire investor George Soros said at an event late yesterday in London.

Oil above $84 as equities, dollar offset stockpiles

Oil rose to trade above $84 a barrel on Wednesday, ending a five-day losing streak, as rising stock markets and a weaker dollar outweighed an industry report showing gains in U.S. inventories.

European stocks made a positive start while the dollar .DXY was down 0.18 percent, making dollar-denominated commodities cheaper to other currency holders. U.S. stocks also closed slightly higher on Tuesday.

Gasoline stockpiles in the United States, the world's top user, unexpectedly rose last week, the American Petroleum Institute (API) said on Tuesday, while crude supplies posted their 11th consecutive increase.

"The builds were more or less anticipated except for gasoline," said Christopher Bellew, a broker at Bache Commodities. "We've moved into a higher range with support at around $83," he said, referring to Brent crude.

U.S. crude gained 53 cents to $84.58 a barrel by 4:21 a.m. ET, less than $3 from an 18-month high above $87 reached last week. Brent rose 36 cents to $85.08, trading at a premium to the U.S. benchmark for a third straight day.

"Inventories are showing a bearish fundamental picture, but as long as the U.S. equity market is steady and economic indicators are showing good numbers, I don't think prices will fall much," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd, who sees oil between $83-$88 in coming weeks.

U.S. crude stocks rose in line with expectations by 1.4 million barrels in the week to April 9, the API said, while gasoline stocks increased 1.6 million barrels.

The U.S. government's Energy Information Administration issues its own snapshot of supplies at 1430 GMT.

While rising crude stocks in the United States are an indicator of tepid fuel demand, the International Energy Agency said on Tuesday global demand will rebound sharply this year to record levels.

Support for oil prices could come from China's GDP data to be published on Thursday, Emori said, while a potential appreciation of the yuan would also boost values because it would increase the country's purchasing power of dollar-denominated commodities.

The Chinese economy probably grew 11.5 percent in the first quarter, a Reuters survey showed. That would be the fastest year-on-year rate of growth since the third quarter of 2007.

U.S. dollar slips after Singapore revalues, Intel

The U.S. dollar eased across the board on Wednesday after Singapore effectively revalued its currency and as upbeat earnings from technology bellwether Intel Corp (INTC.O) boosted appetite for riskier currencies.

The revaluation was viewed as a mark of confidence in economic recovery and boosted higher-yielding currencies seen most likely to benefit from faster global growth.

Commodity currencies such as the Australian and Canadian dollars gained against the U.S. unit, while the low-yielding yen also softened.

The euro edged up against the dollar, still benefiting from a financial aid mechanism for Greece announced at the weekend, but its gains were capped by longer-term concerns about the debt-stricken country and details of the plan's implementation.

German/Greek government bond yield spreads widened to their highest since the euro zone agreement.

"The aid plan put default risks off the table for now, but the euro's upside is limited as the package may just be delaying a resolution to Greece's problems," said Lutz Karpowitz, senior currency strategist at Commerzbank.

By 6:20 a.m. ET, the euro was up 0.2 percent to $1.3643, but could not rise beyond Monday's high of $1.3692.

Options with strike prices of $1.3640 and $1.3600 were set to expire later on Wednesday, traders said, limiting the euro's rise.

A German economist plans to launch a legal challenge at the Constitutional Court against the euro zone aid package for Greece agreed by finance ministers at the weekend, a German newspaper reported.

The dollar fell 0.2 percent on the index measuring its performance against six other major currencies .DXY to 80.31. It breached its 55-day moving average at 80.49 and was nearing a one-month low set on Monday.

SINGAPORE TIGHTENING

Singapore's central bank re-centered its trade-weighted band to the prevailing exchange rate level, which was in the upper half of the previous band.

Markets took the move as a signal of the central bank's confidence in the economic outlook, as it also shifted policy to modest and gradual currency appreciation. The move also revived speculation about when China might revalue the yuan.

"It reaffirms a move of Asian central banks shifting to monetary tightening while the major economies stand pat," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.

"It also instills market confidence over global recovery prospects."

Improved risk sentiment boosted the Australian dollar through a psychological barrier at $0.9300, but failed to top a five-month peak just below $0.9400 set on Monday.

The Canadian dollar rose back above parity against the U.S. dollar, nearing its highest since July 2008.

The yen also softened. The dollar was up 0.2 percent at 93.41 yen, while the euro rose 0.5 percent to 127.60 yen above its 100-day moving average at 127.03 yen. Resistance was seen at a previous high of 128.00 yen.

The market awaited U.S. Federal Reserve Chairman Ben Bernanke's congressional testimony on the economic outlook at 10 a.m. ET.

Most market players expected he would not deviate from language stating interest rates would remain low for an extended period, especially if U.S. consumer price inflation due out at 8:30 a.m. ET comes in at a meager 0.1 percent increase, as expected.

Several Fed officials are also due to speak and the market will also be watching for retail sales data due at 8 a.m. ET.

OPEC sees oil around $70-$80 in coming months

Oil prices are likely to trade around $70 to $80 a barrel in coming months, supported by improving economic and oil market conditions, OPEC said on Wednesday.

The monthly report from OPEC said world oil demand would rise by 900,000 barrels per day (bpd) in 2010, 20,000 bpd higher than previously forecast, but the need for crude from its members would fall from the previous year.

"Current conditions in the world economy and the very comfortable outlook for oil market fundamentals are likely to remain supportive for prices to continue to move within this range ($70-$80) over the coming months."

OPEC's report comes after positive comments from the International Energy Agency (IEA), adviser to industrialized economies, which said on Tuesday that world oil demand would hit a record high this year.

But OPEC trimmed the forecast for 2010 demand for its own crude by 130,000 bpd, reflecting higher non-OPEC supply.

Supply from countries outside OPEC in 2010 will rise by 500,000 bpd from the previous year, Wednesday's report said, an increase of around 90,000 bpd from its previous forecast.

OPEC's compliance with output targets fell to 53 percent in March, compared with 55 percent in February, according to Reuters calculations based on data from Wednesday's report.

The group announced in December 2008 it would cut production as prices slumped to below $33 in the global economic crisis. But with oil now above $80 there is less incentive for members to comply with quotas.

China Raises Diesel, Gasoline Prices 4.6% as Crude Oil Gains

China, the world’s second-largest energy user, will increase gasoline and diesel prices by as much as 4.6 percent from today after global crude costs climbed.

The average retail gasoline and diesel price will rise by 320 yuan ($47) a metric ton, the National Development and Reform Commission said on its Web site yesterday. The NDRC said the fuel price gain will add 7 basis points to the April consumer price index month-on-month.

The increase will boost costs for manufacturers and farmers and may add to inflationary risk as the Chinese economy, the world’s third biggest, expanded at the fastest pace since 2007 in the fourth quarter. China Petroleum & Chemical Corp., the nation’s biggest refiner, will benefit from the adjustment after crude oil costs climbed almost 6 percent since November, when the government last raised prices.

Refiners need an increase of between 400 and 500 yuan per ton to cover gains in crude oil costs, Brynjar Eirik Bustnes, an analyst at JPMorgan Chase & Co, said by telephone in Hong Kong. A revision lower than 400 yuan wouldn’t have a “meaningful impact” on inflation, he said.

Diesel prices in western Xinjiang province will be set at a maximum of 7,330 yuan a ton, a 4.6 percent increase. The price of 90-octane gasoline in Beijing, was fixed at 8,620 yuan a ton (93 cents a liter) and diesel at 7,950 yuan a ton. Pump prices for regular gasoline in the U.S. are about 75 cents a liter, according to data from the Energy Information Administration.

Yuan Speculation

The fuel price change comes amid speculation that China will allow the yuan to appreciate by June 30 to help curb inflation. China’s consumer prices rose 2.7 percent in February from a year earlier, the biggest gain in 16 months. Crude oil futures in New York have risen about 68 percent in the last 12 months and were at $83.86 a barrel at 7:27 a.m. in Singapore.

China Petroleum, also known as Sinopec, said last month the profit from turning crude oil into fuels was “very low” in the fourth quarter and may have fallen further between January and March. The refiner imports about 80 percent of its crude oil requirements.

China has now adjusted prices nine times since introducing a mechanism in December 2008 that allows the government to revise prices when crude-oil costs change more than 4 percent over 22 working days.

The government controls fuel prices to keep inflation in check. Prices were adjusted twice in 2008 before the pricing mechanism came into effect.

Crude Oil Extends Declines as Report Shows Inventories Rise

Oil declined for a sixth day as an industry-funded report showed U.S. crude inventories rose last week and the International Energy Agency boosted its forecast for non-OPEC supplies.

Oil fell 0.3 percent yesterday after the IEA predicted that output will expand in countries such as Canada, the U.K. and Russia. Crude stockpiles gained 1.41 million barrels, according to the American Petroleum Institute. The U.S. Energy Department will probably say today inventories grew by 1.3 million barrels, based on analyst estimates in a Bloomberg News survey.

“Inventory levels are high,” Peter McGuire, managing director at CWA Global Markets Pty, said by phone from Sydney. Oil is “having a breather after a strong run-up in the last couple of weeks.”

Crude oil for May delivery dropped as much as 34 cents, or 0.4 percent, to $83.71 a barrel and was at $83.86 in electronic trading on the New York Mercantile Exchange at 9:57 a.m. Sydney time. Yesterday, the contract lost 29 cents to settle at $84.05.

Countries outside the Organization of Petroleum Exporting Countries will raise output by 600,000 barrels a day this year to average 52 million barrels a day, the IEA said in its monthly market report yesterday. That’s 220,000 barrels a day more than estimated last month. The agency’s global oil-demand forecast was 30,000 barrels a day higher than in last month’s report.

Non-OPEC producers pump about 60 percent of the world’s oil.

Fuel Supplies

Gasoline inventories climbed by 1.61 million barrels to 221.8 million, according to the API report. Stockpiles of distillate fuel, a category that includes heating oil and diesel, rose 1.71 million barrels, the API said.

Oil-supply totals from the API and DOE moved in the same direction 75 percent of the time over the past four years, according to data compiled by Bloomberg.

API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Brent crude for May settlement lost 5 cents, or 0.1 percent, to $84.72 a barrel on the London-based ICE Futures Europe exchange yesterday.

Japanese, Australian Stock Futures Rise on U.S. Earnings, Intel

Japanese and Australian stock futures rose as higher-than-expected earnings or forecasts at U.S. companies including Intel Corp. bolstered confidence in the strength of the global economic recovery.

Advantest Corp.’s American depositary receipts traded 0.3 percent higher from the closing share price in Tokyo yesterday as Intel, the world’s biggest chipmaker, forecast sales that beat analyst estimates. Those of Canon Inc. climbed 0.5 percent as the yen weakened. Telstra Corp. rose 2.7 percent in Wellington on speculation the company had reached an agreement to sell its fixed-line assets to the Australian government’s national broadband network.

“The global economy is steadily recovering,” said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. “Investors will promptly buy shares when markets fall, on the backdrop of a rising trend overall.”

Yen-denominated futures on Japan’s Nikkei 225 Stock Average expiring in June closed at 11,190 yesterday in Chicago, compared with 11,165 in Singapore. They were bid in the pre-market at 11,210 as of 8:05 a.m. in Osaka.

Futures on Australia’s S&P/ASX 200 Index rose 0.4 percent today. New Zealand’s NZX 50 Index climbed 0.3 percent in Wellington even as the statistics office reported an unexpected decline in February retail sales.

The MSCI Asia Pacific Index has climbed 12 percent from this year’s low on Feb. 8 as improving U.S. economic data and positive company earnings boosted the outlook for the global economy. Stocks in the gauge trade at 16.3 times estimated earnings, compared with 14.9 times for the MSCI World Index of 23 developed nations.

Intel Sales

Futures on the Standard & Poor’s 500 Index increased 0.1 percent. The gauge rose 0.1 percent yesterday to the highest close since September 2008, as Fastenal Co.’s profit topped analysts’ estimates. Intel said second-quarter sales will be about $10.2 billion after the market closed. Analysts in a Bloomberg survey had estimated $9.72 billion on average.

The yen weakened to as much as 126.99 against the euro from 126.12 at the 3 p.m. close of stock trading in Tokyo yesterday. Against the dollar, the yen depreciated to 93.35 from 92.82.

Telstra, Australia’s largest phone company, climbed 2.7 percent to NZ$4.15. The company may have been offered A$9.75 billion ($9.05 billion) as part of a deal with the National Broadband Network Co., the Australian newspaper said, citing market speculation.

Toyota Sales Halt

In Tokyo, Toyota Motor Corp. may move. The world’s largest carmaker has temporarily halted sales of its Lexus GX 460 SUVs, Lexus General Manager Mark Templin said in an e-mailed statement.

Tokyo Electron Ltd. may be active today after the world’s second-largest maker of semiconductor equipment said orders for machines that make semiconductors and flat-panel displays rose last quarter to the highest level in two years.

China Southern Airlines Co. may move after the nation’s largest carrier said it expects sales and passenger traffic to grow by more than 10 percent this year.

Posco, Asia’s third-largest steelmaker, may be active in Seoul. The company’s first-quarter profit jumped more than fourfold, after it increased output to meet rising demand from makers of cars and home appliances.

S&P 500 Backed by Most Momentum Since 1986: Technical Analysis

U.S. stocks almost have the most momentum since 1986.

The 14-day relative strength index for the Standard & Poor’s 500 Index has exceeded 65 since March 5, the longest stretch since 1995, according to data compiled by Bloomberg. Today would mark the 27th consecutive day, the most in 24 years.

RSI identifies possible turning points by measuring the degree that gains and losses outpace each other. While readings of 70 or more are considered evidence that an index may decline, the current streak suggests investors are reluctant to sell, making a collapse unlikely, said Joseph Keating.

“A lot of investors missed out on the run-up and are scrambling to get in the market,” said Keating, chief investment officer of Raleigh, North Carolina-based RBC Bank, which oversees $3 billion. The RSI “may portend that the market is going to have to move sideways and consolidate a bit.”

The S&P 500 has surged 77 percent since March 9, 2009, in the biggest advance since the 1930s as the economy recovered and more companies beat profit estimates than at any time since at least 1993. Alcoa Inc., the biggest U.S. aluminum producer, yesterday posted first-quarter earnings excluding some items that topped the average analyst estimate by 8.7 percent.

Still, many investors missed the equity rally. Money added to U.S. bond funds has exceeded the amount stashed in stock funds by about 16-to-1, according to data compiled by the Washington-based Investment Company Institute.

No Correction

Robert Sluymer, a New York-based analyst at RBC Capital Markets Corp., said he doesn’t see an imminent correction, or decline of at least 10 percent, because indicators such as the ratio of rising to falling stocks show no sign of deterioration.

The cumulative advance-decline line for securities listed on the New York Stock Exchange increased 0.5 percent yesterday. The index represents the number of daily gains for individual securities minus the number of declines since its August 1996 inception.

“This type of overbought condition can persist for many weeks and for many months,” Sluymer said. “There is very little evidence of technical decay.”

When the RSI using 14 days of trading stayed above 65 this long in 1995, the S&P 500 went on to post an annual advance of 34 percent. It then rose at least 19 percent a year from 1996 to 1999.

Wine Beats Russell Stocks as Liquid Investment in Swiss Study

For the ultimate in liquid investments, try top-quality wine, which has outperformed one benchmark U.S. stock index for 13 years and withstood two recessions.

That’s the conclusion of Philippe Masset and Jean-Philippe Weisskopf, two Switzerland-based economists who compared wine prices with the Russell 3000 Index between January 1996 and January 2009. The researchers studied more than 400,000 prices on regularly traded wines from the 13-year period, which covers two bull markets and two bear markets for stocks, to construct a general wine index and a gauge of top vintages.

“My wine cellars have probably appreciated better than any other investment I have made personally,” said Drew Nieporent, owner of Corton, Nobu and Tribeca Grill in New York. The third restaurant holds a 2009 Grand Award from Wine Spectator magazine. “Great wines are scarce,” he said. “You can’t get them everywhere.”

Demand for alternative investments such as wine and artwork has grown in recent decades as investors seek refuge from inflation, and look for asset classes in which to store wealth beyond traditional methods such as stocks, bonds and gold, according to Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York

“It’s the demand for hard assets, and it’s the same reason why gold and oil are rallying,” Boockvar said. Gold futures are advancing for a 10th straight year, and crude trades for about $84 a barrel in New York, a level never exceeded before 2007.

Boosting Returns

Masset and Weisskopf took prices from 144 auctions with a combined value of $237 million to construct the index. They used vintages from 1981 to 2005.

“Our findings show that the inclusion of wine in a portfolio and, especially, more prestigious wines, increases the portfolio’s returns while reducing its risk, particularly during the financial crisis,” wrote Masset, a professor at the Lausanne Hotel School, and Weisskopf, a researcher at the University of Fribourg, in their study, “Raise Your Glass: Wine Investment and the Financial Crisis.”

The general wine index beat the Russell 3000 over the period, largely because it held value over the most recent market downturn -- and did so with lower volatility than equities. Since mid-2008, the wine measure fell 17 percent, while the stocks gauge declined 47 percent.

The index of highest-quality wines, “first growth wines of top vintages only,” in particular from 2005 onward, “hugely outperforms” the other two indexes, the authors said. The elite gauge has a more than fivefold return, while the regular wine index has more than doubled. The Russell 3000 gained about 50 percent.

Drinking More

The increase in prices coincided with an increase in consumption of the beverage. Americans drank a record 304 million cases in 2009 following a 3.2 percent average annual rise since 1996, according to the last year’s edition of “The Global Drinks Market: Impact Databank Review & Forecast. (There are nine liters of wine in a case.) Global consumption has grown 0.6 percent a year on average to 2.65 billion cases during the same period.

The monthly Liv-ex 100 Fine Wine Index tracks the price movements of 100 of the most sought-after wines offered in the resale market. The index rose 11.7 percent during the first three months of 2010 and jumped 27.6 percent from a year earlier as of March 31, according to data compiled by Liv-ex.com.

Proper Storage

Wine isn’t an investment for the unprepared, said Peter Meltzer, auction correspondent for Wine Spectator magazine. The market is thinly traded compared with stocks. Bottles need to be handled carefully and stored properly to avoid breakage or spoiling. Collectors who aren’t familiar with vintages, varietals and appellations could find themselves saddled with a product that’s much less desirable than they’d expected.

Because wine doesn’t generate dividends or interest like stocks or bonds often do, the only way to calculate its value is to guess how much people will be willing to pay for it in the future, making it a speculative instrument, said Glenn Tongue, a partner at T2 Partners LLC in New York.

‘‘We get no cash from wine and we have no idea what we can sell it for down the road, so we’re not going to invest in it,” said Tongue, whose Tilson Focus Fund has almost doubled investors’ money in the past year, beating 99 percent of peers. “It’s speculation when you’re buying wine or art. It’s not an investment.”

More Than $400

Top wine vintages have been the best performers since 1996 with wines costing more than $200 a bottle -- and particularly collectible bottles above $400 -- as much as quadrupling their value. That compares with a 170 percent increase in the price of wines selling below $100 and a 120 percent return for those between $100 and $199.

The Internet has made the market for collector’s items more organized and transparent because it improves the distribution of information and lowers transaction costs, according to Jim Halperin, co-founder of Heritage Auction Galleries, the third- largest art and memorabilia auctioneer after New York-based Sotheby’s and Christie’s International Plc in London.

While wine has done better than assets such as stocks, real estate and gold, modern art was the most attractive investment, outperforming credit, equity and commodities between 1994 and 2008, according to data compiled by Birinyi Associates Inc., an investment research firm in Westport, Connecticut.

Not All Equal

Not all wines appreciate equally and while lesser-quality wines may increase in value, they will rarely show the same performance as choice Bordeaux like Châteaux Pétrus, Ausone, and Cheval Blanc, or Burgundies from Domaine de la Romanée-Conti and Henri Jayer, said Meltzer of Wine Spectator.

“Collectibles have become a viable and serious tool for investment diversification,” said Dallas-based Halperin. “I’m investing my own money in art and collectibles, right alongside public stocks, private equity, business loans and real estate.”

Low interest rates and government stimulus measures have helped boost demand for wine, said Miller Tabak’s Boockvar. The Federal Reserve cut its interest-rate benchmark to a record low near zero in December 2008 and has said it will keep it there for an “extended period.” The U.S. government spent, lent or guaranteed more than $8 trillion to end the worst contraction since the Great Depression.

“In a world where interest rates are zero and money is being printed around the world, there’s a demand for hard assets -- whether it is wine, comic books or baseball cards -- because they can protect the investor from that environment,” Boockvar said.

U.S. Stocks Gain as Industrial, Consumer Shares Advance

U.S. stocks advanced as gains in industrial, technology and consumer shares helped the market overcome an early slump triggered by results at Alcoa Inc. that called into question the strength of the economic recovery.

Fastenal Co., the largest U.S. retailer of nuts, bolts and other fasteners, jumped 1.9 percent to lead industrial shares higher after profit topped analyst estimates. Home Depot Inc. rallied 3.1 percent. Intel Corp. climbed 0.9 percent before reporting earnings after financial markets close. Alcoa slid 2.2 percent after sales trailed estimates.

The Standard & Poor’s 500 Index rose 0.2 percent to 1,198.47 at 3:32 p.m. in New York. The Dow Jones Industrial Average gained 25.69 points, or 0.2 percent, to 11,031.66. The Russell 2000 Index of smaller U.S. companies increased 0.3 percent.

“Maybe investors’ reaction to Alcoa’s earnings report was too harsh,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, who oversees $55 billion. “We’re going to see very good first-quarter results. Historically analysts have underestimated the ability of companies to deliver profits.”

As earnings season begins, U.S. stocks are about to have the most momentum since 1986. The 14-day relative strength index for the S&P 500 has exceeded 65 since March 5, the longest stretch since 1995, according to data compiled by Bloomberg. Today would mark the 27th consecutive day, the most in 24 years.

Earnings Estimates

Combined profit for S&P 500 companies increased 30 percent in the first quarter from a year earlier, according to analyst estimates compiled by Bloomberg. The S&P 500 has jumped 77 percent from a 12-year low in March 2009 as the economy returned to growth and the Federal Reserve kept its benchmark interest rate near zero to safeguard the recovery.

Alcoa dropped 2.2 percent, the most in the Dow, to $14.25. The metal producer reported quarterly sales of $4.89 billion, missing the $5.23 billion average estimate of eight analysts surveyed by Bloomberg. UBS downgraded the stock to “neutral” from “buy.”

The S&P 500 Regional Banks Index slumped 1.9 percent and earlier dropped as much as 2.7 percent for the biggest intraday drop since Feb. 25. UBS said valuations are unsustainable and earnings are likely to fall short of expectations. The shares may be poised for a “meaningful pullback” in the second half of 2010 as the pace of earnings recovery disappoints investors, according to UBS.

Banks Drop

Huntington Bancshares fell 5.8 percent to $5.68 and KeyCorp retreated 1.9 percent to $8.18.

The S&P 500 Banks Index fell the most out of 24 industry groups, losing 1.1 percent. It still has the best one-month performance, rising 8.5 percent, bolstered by last week’s rally after Credit Suisse Group AG said SunTrust Banks Inc. could be a takeover target and Wells Fargo & Co. raised U.S. large-cap bank shares to “market weight” from “underweight.”

Avon Products Inc., the world’s largest door-to-door cosmetics seller, tumbled 7.8 percent to $32.04 for the biggest loss in the S&P 500. The company said in October 2008 that it started an investigation into compliance with the Foreign Corrupt Practices Act, which outlaws bribing foreign officials, at its China division. Avon generated 3.2 percent of its sales in China during the quarter that ended Dec. 31.

Home Depot, Fastenal

Home Depot, the largest home-improvement retailer, rallied 3.1 percent to $34.53 for the Dow’s biggest advance. Fastenal reported first-quarter profit excluding some items of 38 cents a share, topping the average analyst estimate of 33 cents. Its shares jumped 1.9 percent.

The U.S. trade deficit widened 7.4 percent in February, more than expected, to $39.7 billion from a revised $37 billion the prior month, the Commerce Department said in Washington.

The Dow’s close over 11,000 yesterday was its first above that level since September 2008. The S&P 500 is hovering just under a milestone of its own -- 1,200. Resistance can be expected at both levels, said Ryan Detrick, senior technical analyst at Schaeffer’s Investment Research in Cincinnati.

“You’ve got 1,200 and 11,000 -- two big, round numbers,” Detrick said. “That’s an area people look at” when watching for resistance or a possible pullback.

DeVry Inc. gained 10 percent, the most in the S&P 500, to $71.87 after the for-profit education company was raised to “outperform” from “neutral” at credit Suisse.

Goodyear Tire & Rubber Co. advanced 7.8 percent to $13.97 today, the day of the tiremaker’s annual meeting. Richard J. Cramer became president and chief executive officer, succeeding Robert J. Keegan, who remains executive chairman.