U.S. stocks climbed, sending the Standard & Poor’s 500 Index to a two-month high, amid signs that manufacturing output is increasing from China to Australia and America.
Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) added more than 4.7 percent as financial shares had the biggest gain among S&P 500 industries. Caterpillar Inc. (CAT) advanced 3.7 percent, pacing increases among the largest U.S. companies. Chevron Corp. (CVX) and ConocoPhillips (COP) climbed at least 2 percent as the price of oil rose. Cisco Systems Inc. surged 3.3 percent after JPMorgan recommended investors buy the shares.
The S&P 500 rose 1.6 percent to 1,277.87 as of 1:49 p.m. New York time, after gaining as much as 2.2 percent earlier. The Dow Jones Industrial Average jumped 195.04 points, or 1.6 percent, to 12,412.60.
“The U.S. market has been cheering because of the fact the U.S. economy has been performing better,” Kevin Shacknofsky, who helps manage about $5 billion for Alpine Mutual Funds in New York, said in a telephone interview. “In line with everything else today, the manufacturing data is better than expected.”
The S&P 500 (SPX) rallied (SPX) 14 percent from last year’s lowest level on Oct. 3 through Dec. 30 as better-than-estimated economic data fueled optimism the world’s largest economy can shrug off concern over Europe’s sovereign-debt crisis. The S&P 500 had the 10th best performance among the world’s stock markets in 2011. The gauge still recorded its first annual decline since 2008, posting a loss of 4/100ths of a point.


Manufacturing Grows


Manufacturing across the globe showed improvement in December, suggesting production is weathering strains from Europe’s debt crisis. In the U.S., a report today showed factory output grew at the fastest pace in six months. Australian manufacturing expanded for the first time in six months, while similar Chinese and German (PMITMGE) data beat economist estimates in the past two days.
Another report showed construction spending in the U.S. rose in November for a third time in four months. Housing shares surged today, with an S&P index (S15HOME) of homebuilders gaining 2.7 percent. PulteGroup Inc. jumped 3.5 percent to $6.53, while D.R. Horton Inc. climbed 3.3 percent to $13.03.
“You’re starting to see people want to take more risks,” Frank Ingarra, who helps manage the Can Slim Select Growth Fund at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a telephone interview. His firm oversees $1.4 billion. “Nobody was really around the last week or two, and now they’re getting positioned to start the year off with a positive step.”


Financials, Industrials


Financial companies, industrials and commodity producers had the biggest gains among 10 groups in the S&P 500, advancing at least 2.3 percent. The Morgan Stanley Cyclical (CYC) Index added 3 percent amid optimism about economic growth.
The KBW Bank Index rose 3.3 percent. Bank of America climbed 4.8 percent, the most in the Dow, to $5.83. JPMorgan increased 4.7 percent to $34.82.
Caterpillar, the world’s largest construction and mining- equipment maker, gained 3.7 percent to $93.92.
ConocoPhillips rose 2 percent to $74.30, while Chevron added 3.5 percent to $110.09. Peabody Energy Corp. (BTU) increased 8.5 percent to $35.92, for the biggest gain in the S&P 500. Alpha Natural Resources Inc. (ANR) advanced 7 percent to $21.86.
Base metal producers surged as copper, aluminum, zinc and tin rose on speculation stronger gauges of manufacturing may signal increased demand for industrial metals.
U.S. Steel, Alcoa
U.S. Steel Corp. climbed 5.4 percent to $27.88. Alcoa Inc. (AA) gained 4.7 percent to $9.06. Freeport-McMoRan Copper & Gold Inc. (FCX) rose 6.4 percent to $39.13.
Boeing Co. (BA) advanced 1.7 percent to $74.62. The planemaker beat Lockheed Martin Corp. to keep a $3.48 billion, seven-year contract for the primary U.S. shield against intercontinental ballistic missiles.
Cisco (CSCO) jumped 3.3 percent to $18.61. The world’s biggest maker of networking equipment was raised to “overweight” from “neutral” at JPMorgan.
Mead Johnson Nutrition Co. (MJN) increased 4.7 percent to $71.95. U.S. regulators said they haven’t found evidence of any connections between the company’s baby formula and illnesses in four infants, which led some stores to pull the formula from shelves.
Tenet Healthcare Corp. (THC) retreated 3.1 percent to $4.97 after Citigroup cut the Dallas-based hospital operator to “sell” from “neutral,” saying the company is “poorly positioned” and faces “much competition.”


Conservative Forecast


Forecasters at securities firms are more conservative on U.S. stocks than any time in seven years, predicting the S&P 500 will rise 6.4 percent in 2012 as budget deficits around the world limit gains.
The benchmark gauge will climb to 1,338 after it was virtually unchanged in 2011 and the U.S. beat every equity market in the developed world except Ireland, according to the average forecast of 13 strategists tracked by Bloomberg. That’s the smallest predicted return since 2005. Adam Parker of Morgan Stanley, whose estimate for 2011 proved the most accurate among current analysts, forecast a loss of 7.2 percent as Europe’s debt crisis will keep volatility above historical levels.
Blackstone Group LP’s Byron Wien, whose prediction for the U.S. economy and stock market in 2011 proved too optimistic, said oil will slip to $85 a barrel this year and the S&P 500 will exceed 1,400.
U.S. economic growth will top 3 percent while the nation’s unemployment rate will drop below 8 percent, Wien, chairman of Blackstone’s advisory services unit, said in his annual “10 Surprises” list published since 1986. His forecast for crude oil implies a 14 percent slump from last year’s closing level, while the S&P 500 forecast would require an 11 percent gain.
“The drop in the price of oil and the rise in the stock market improve both consumer confidence and spending patterns,” Wien wrote in an e-mailed statement today. “Recession fears and even ‘the new normal’ view of prolonged slow growth are called into question.”