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

By Eric Martin

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

Home Depot Inc., Boeing Co. and Bank of America Corp. gained more than 4.6 percent after the government said the economy shrunk 0.3 percent last quarter. Colgate-Palmolive Co. climbed 6 percent on better-than-estimated earnings. The advance added to a global rally after Hong Kong joined the U.S. in lowering borrowing costs and the Federal Reserve provided $120 billion to spur lending in emerging markets.

The Standard & Poor's 500 Index jumped 24.16, or 2.6 percent, to 954.25 at 9:34 a.m. in New York, extending its weekly advance to 5.3 percent. The Dow Jones Industrial Average advanced 187.73, or 2.1 percent, to 9,178.69. The Nasdaq Composite Index increased 38.05, or 2.3 percent, to 1,695.26.

The GDP data ``may create a sense that the Fed is going to continue to try to fix things,'' said Dean Gulis, part of a group that manages about $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. `` It's a positive that most central bankers appear to be on the same page.''

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

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

Global Rally

The MSCI Asia Pacific Index surged 9 percent and Europe's Dow Jones Stoxx 600 Index advanced 2.6 percent today after central banks from Hong Kong to Washington eased borrowing costs and the Fed provided $120 billion to South Korea, Singapore, Brazil and Mexico.

Fed Chairman Ben S. Bernanke signaled he's ready to keep cutting rates should yesterday's half-point reduction in the main rate to 1 percent fail to stem the economic slump.

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.