By Craig Trudell March 13 (Bloomberg) — U.S. stocks rose, pushing the Standard & Poor’s 500 Index to a 17-month high, as Citigroup Inc. led a rally among banks and data boosted confidence that the economic recovery is sustainable. Citigroup rallied 13 percent on speculation the U.S. government may sell its stake and after Chief Executive Officer Vikram Pandit said the bank will be consistently profitable. American International Group Inc., the bailed-out insurer, surged 22 percent after selling a division to MetLife Inc. for $15.5 billion. Home Depot Inc. and McDonald’s Corp. each rose at least 2.8 percent after U.S. retail sales unexpectedly increased in February. The S&P 500 climbed 1 percent to 1,149.99 this week. It closed at 1,150.24 on March 11, the highest level since October 2008, and has now surged 70 percent since its bear-market low on March 9, 2009. The Dow Jones Industrial Average gained 58.49 points, or 0.6 percent, to 10,624.69. “The market forecast an apocalyptic, utopian scenario one year ago, and that proved to be inaccurate,” said Stephen Wood , who helps manage $176 billion as chief market strategist for Russell Investments. “A big percentage of what we’ve seen over the last year is the market correcting this incorrect forecast. We were wrong, and we need to get back to a more accurate pricing of the current environment.” Jobs, Takeovers The S&P 500 has risen 9 of the past 11 days after reports showed the labor market and consumer confidence are improving and takeovers bolstered optimism that the economy is gaining strength. The stock index had fallen 8.1 percent between Jan. 19 and Feb. 8 on concern Greece’s budget crisis would throttle the recovery. Stocks rose this week even after inflation in China accelerated more than economists estimated, spurring speculation that the government will boost interest rates to slow the world’s fastest-growing major economy. Central banks including the Federal Reserve have kept rates low to stimulate the economy out of the worst contraction since the Great Depression. The Fed has pledged to keep its target rate for overnight loans between banks low for an “extended period.” “The endpoint of the ‘extended period’ is certainly a lot closer than it was six months ago,” Russell’s Wood said. The Fed’s next rate decision is scheduled for March 16. The central bank won’t raise rates until November, according to forecasts by economists surveyed by Bloomberg. Government Sale Citigroup advanced 13 percent to $3.97 and closed at $4.18 on March 11, the highest price since Nov. 24. Pandit said he “wouldn’t be surprised” if the government were considering a sale of its 27 percent stake. AIG soared 22 percent, the most in the S&P 500, to $34.23 after the insurer sold American Life Insurance Co. to MetLife, the bailed-out company’s second divestiture of a non-U.S. life insurance unit this month. Retailers advanced after Americans braved blizzards and overcame job concerns to propel sales in February, pointing to a broadening in growth that will help sustain the expansion. Purchases at stores unexpectedly climbed 0.3 percent, the fourth gain in five months, Commerce Department figures showed. Home Depot, the world’s largest home-improvement retailer, rose 2.8 percent to $32.45. McDonald’s, the biggest fast-food chain, climbed 2.9 percent to $65.53. McDonald’s said global sales rose 4.8 percent in February, topping some analysts’ estimates. Forecasting Gains Barton Biggs , the hedge-fund manager who recommended buying U.S. stocks in March of last year when the S&P 500 sank to a 12- year low, said American equities may rise another 10 percent to 15 percent over the next couple of months. “I’m very struck by the level of bearishness everywhere I go,” said Biggs, who runs New York-based hedge fund Traxis Partners LP. “I’m not obsessed with history. I’m bullish because I think the global economic recovery is on track and is going to be surprisingly strong. The world was falling apart in 2009. There’s been a tremendous change.” Boeing Co. climbed 2.8 percent to $69.83. The second- largest commercial planemaker said it plans to ramp up production of its 787 Dreamliner to 2 1/2 a month by August as it works toward building 10 of the composite-plastic jets each month by 2013 and reclaiming the top delivery spot next year from Airbus SAS. Cisco Systems Inc. jumped 2.7 percent to $25.88. The biggest maker of networking gear introduced an Internet router starting at $90,000 that will let Web users download movies, songs and data faster to computers and mobile devices. Sprint Nextel Co. led telephone companies to the biggest gain among 10 industries in the S&P 500. The third-largest U.S. wireless company said it will pay off debt and control expenses . To contact the reporter on this story: Craig Trudell at ctrudell1@bloomberg.net .
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U.S. Stocks Advance to 17-Month High on Economic Confidence, Paced by AIG
