U.S. Stocks Rise Most in Almost 2 Months, Led by Energy, Retail

U.S. stocks rose the most in almost two months, led by energy companies and retailers, on a $5-a- barrel jump in the price of oil and sales at Wal-Mart Stores Inc. and Costco Wholesale Corp. that topped analysts' estimates.

The gains sent the Dow Jones Industrial Average up 214 points and pushed the Nasdaq Composite Index to its highest close since Jan. 3. Exxon Mobil Corp. led energy shares to their biggest advance since March as a drop in the dollar boosted oil. Wal-Mart climbed to a four-year high, while Costco had its best gain in 11 weeks. Verizon Communications Inc. rallied the most in five years after its wireless unit agreed to buy Alltel Corp. for $28.1 billion to become the biggest U.S. mobile-phone company.

The Standard & Poor's 500 Index added 26.85, or 2 percent, to 1,404.5. The Dow increased 1.7 percent to 12,604.45, snapping a four-day losing streak. The Nasdaq climbed 46.8, or 1.9 percent, to 2,549.94. Seven stocks rose for each that fell on the New York Stock Exchange.

``While the economy is weak, it's not deathly weak,'' Alan Gayle, the Richmond, Virginia-based senior investment strategist at Ridgeworth Capital Management, which oversees about $74 billion, said in interview on Bloomberg Television. ``The markets may very well be breathing a sigh of relief.''

All 24 industry groups in the S&P 500 climbed as an unexpected decrease in jobless claims fueled gains. Financial shares rallied 2 percent as a group, their first advance in five days, after Deutsche Bank AG told clients to buy shares of Lehman Brothers Holdings Inc., the Wall Street firm that had lost a third of its market value in the past month.

Cyclicals Gain

The Morgan Stanley Cyclical Index, a gauge of companies that rely the most on economic expansion to boost profits, advanced 1.8 percent as 25 of 30 shares in the index rose. U.S. Steel Corp. led the group higher after rival Nucor Corp. said it will earn more in the second quarter than it previously forecast.

Oil companies advanced, helping the S&P 500 Energy Index rally 4.4 percent and snap a two-day slide, as crude futures rose $5.49 to $127.79 a barrel on a decline in the U.S. currency. Exxon, the biggest U.S. oil producer, climbed $3.56 to $89.31. Chevron Corp., the second-largest, increased $3.95 to $99.99.

The dollar slid the most since March against the euro after Jean-Claude Trichet, president of the European Central Bank, said policy makers may raise interest rates as soon as July after increasing the inflation forecast for this year and next. His remarks caused European shares to erase gains, sending the Dow Jones Stoxx 600 Index to a 0.2 percent drop.

Wal-Mart, Costco

Wal-Mart added $2.12, or 3.7 percent, to $59.80, the highest level since March 2004. Grocery and medicine discounts helped the company post a 3.9 percent gain in May sales. Wal-Mart had forecast sales at stores open more than a year would rise as much as 2 percent in the month. U.S. comparable-store sales may increase 2 percent to 4 percent in June, helped by tax rebates, the Bentonville, Arkansas-based retailer said today.

Costco said same-store sales advanced 7 percent in the U.S. and 15 percent at international locations. The 9 percent gain for the whole company beat the 7 percent average estimate of 16 analysts, based on figures provided by Retail Metrics LLC. The shares rose $2.69, or 3.8 percent, to $73.50.

The S&P 500 Consumer Discretionary Index advanced 1.2 percent today. The group has climbed 10 percent from its lowest level in more than three years on March 17 as companies in the index posted first-quarter profits that topped analysts' estimates by the widest margin among 10 industries in the S&P 500, according to data compiled by Bloomberg.

Initial jobless claims decreased by 18,000 to 357,000 in the week that ended May 31, the lowest level in more than a month, the Labor Department said today.

Awaiting Jobs Data

The government's May payroll report, due at 8:30 a.m. New York time tomorrow, will give investors more clues on the outlook for the economy and profits at companies dependent on Americans' spending. Economists surveyed by Bloomberg News expect payrolls to drop by 60,000 workers and the unemployment rate to climb to 5.1 percent from 5 percent the previous month. Consumer purchases account for about two-thirds of the economy.

The jobless claims were ``the key, the linchpin to today's at least initial rally,'' James Lowell, who helps oversee more than $1 billion as chief investment strategist at Adviser Investment Management Inc. in Watertown, Massachusetts, said in an interview on Bloomberg Radio. ``If tomorrow's jobs report actually surprises even just marginally to the upside, then that's going to continue to sustain this concept that maybe this economy is in a stabilizing as opposed to decelerating trend.''

Verizon Communications added $1.98, or 5.4 percent, to $38.96 for the top gain in the Dow average. Verizon Wireless said it agreed to acquire Alltel from TPG Inc. and Goldman Sachs Group Inc. for $28.1 billion in cash and debt. The deal is worth 2.1 percent more than the $27.5 billion TPG and Goldman paid last year to take Alltel private. The acquisition includes about $5.9 billion in cash and $22.2 billion in debt.

Lehman Rallies

Lehman rallied $2.45 to $33.85. The stock is poised to rise as it already reflects ``worst-case scenarios'' for the fourth- biggest U.S. securities firm, said Deutsche Bank analyst Mike Mayo. Lehman shares tumbled during the past month on speculation the company will seek outside funding as credit losses increase. Mayo has had a ``buy'' recommendation on Lehman since at least April 2007, when the shares were trading for more than $70, according to Bloomberg data.

Sanford C. Bernstein & Co.'s Brad Hintz reiterated his ``market perform'' rating today on Lehman. While the company won't face ``a life-threatening funding run,'' investors should ``remain on the sidelines until the firm demonstrates a reduction in leverage and lowers its exposures to troubled asset classes,'' he wrote in a report.

Financials Rebound

The S&P 500 Financials Index has gained 4.9 percent from a five-year low in March after the Federal Reserve backed JPMorgan Chase & Co.'s rescue of Bear Stearns Cos., policy makers slashed their benchmark lending rate to 2 percent and introduced new lending programs for securities firms.

Nucor spurred a rally in steel producers after the Charlotte, North Carolina-based company boosted its second-quarter profit forecast because of rising global demand.

Nucor, the largest U.S.-based steelmaker by market value, added $6.40 to $80.54. U.S. Steel increased $9.93 to $183.15. Olympic Steel Inc. rose $3.79 to $67.38, the highest since its 1994 initial public offering.

UAL Corp. and Northwest Airlines Corp. led airlines higher after Lehman boosted its recommendation on the industry to ``positive'' from ``neutral.'' Analyst Gary Chase wrote ``it is time for investors to revisit the airline space'' in part because capacity reductions will increase profits.

UAL, owner of United Airlines, gained 97 cents to $10.11. Northwest added $1.05 to $8.06. Chase upgraded both stocks to ``overweight.''

Continental Airlines Inc. climbed 70 cents to $15.20. The carrier said it will cut 3,000 jobs and shrink its fleet by 18 percent because of record fuel expenses.

Insurers Downgrade

Benchmark indexes briefly pared some of their gains after S&P cut its AAA insurance financial strength ratings on MBIA Inc. and Ambac Financial Group Inc., the biggest bond guarantors.

MBIA, the largest bond insurer, rose 41 cents to $6.04 after earlier climbing as much as 67 cents. Ambac, the second-biggest, added 13 cents to $2.62. The ratings were cut two levels to AA, New York-based S&P said in a statement today.

``Everyone knew'' MBIA and Ambac would be downgraded, Michael Binger, a fund manager at Thrivent Financial for Lutherans, which oversees about $73 billion, said in an interview on Bloomberg Television in New York.

Homebuilders declined on a Mortgage Bankers Association report showing the number of Americans in danger of losing their homes to foreclosure rose to the highest in almost three decades during the first quarter as borrowers who fell behind on payments were unable to sell their homes.

Toll Brothers Inc., the second-largest builder by market value, decreased 59 cents to $20.43. Hovnanian Enterprises Inc., the biggest in New Jersey, slid 19 cents to $7.31.