U.S. stocks rose, completing the steepest two-week rally for the Dow Jones Industrial Average since 2000, as companies beat profit estimates and an increase in home resales signaled an economic recovery may be underway.

Caterpillar Inc. soared 24 percent after reporting earnings that tripled analysts’ projections, and EBay Inc. rallied on results that signaled consumers’ appetite for online commerce is rebounding. Homebuilders in the Standard & Poor’s 500 Index climbed 11 percent as sales increased for a third month. All 40 energy companies in the S&P 500 rallied.
The S&P 500 added 4.1 percent to 979.26. The Dow average jumped 349.30 points, or 4 percent, to 9,093.24, topping 9,000 for the first time since January and extending its rally since July 10 to 12 percent. The Nasdaq Composite Index gained 4.2 percent to 1,965.96. Its 12-day winning streak, the longest since 1992, ended as Microsoft Corp. dropped.
“The rally’s been a surprise to everyone, including the bulls,” said Philip Dow, the Minneapolis-based director of equity strategy at RBC Wealth Management, which oversees $112 billion. “What’s driving the market is positive earnings surprises, and the economic tea leaves are telling us the recovery is at hand.”
Companies from American Express Co. to 3M Co. reported second-quarter results that topped estimates, suggesting the worst recession in a half century is abating. Seventy-five percent of the companies in the S&P 500 that have released results surpassed predictions, according to data compiled by Bloomberg. That would be the highest rate ever for a full quarter, Bloomberg data going back to 1993 show.
Walt Disney Co., Exxon Mobil Corp. and Chevron Corp. are among 150 companies in the S&P 500 scheduled to report next week.
The S&P 500 has erased more than half its loss since the Sept. 15 collapse of Lehman Brothers Holdings Inc. The benchmark index for U.S. equities has climbed 45 percent from a 12-year low on March 9 after the nation’s largest banks were profitable to start the year and the U.S. government and Federal Reserve pledged $12.8 trillion to revive growth.
Investors are pouring money into shares on speculation the fastest rally since the Great Depression will reverse losses from last year, when the S&P 500 fell 38 percent. U.S. mutual funds received $1.5 billion of net inflows this week, the second-highest amount since February 2008, according to AMG Data Services in Arcata, California.
All 10 industries rose this week, led by raw-materials producers, as existing-home sales rose in June for a third straight month, climbing to the highest level since October.
“This isn’t a bear market rally,” Hugh Johnson, who manages more than $1.5 billion as chairman of Albany, New York-based Johnson Illington, said in a Bloomberg Radio interview. “It’s often confirmed by things such as the index of leading economic indicators, which has been up three months in a row and telling us that we’re headed towards a recovery.”
Caterpillar gained 24 percent to $42, the best weekly rally since April 1999. The world’s largest maker of construction equipment raised its full-year forecast after reporting second-quarter profit that beat estimates, saying stimulus programs are beginning to support worldwide demand.
Data next week will probably show the economic downturn eased last quarter as trade and government stimulus mitigated damage from declines in housing, inventories and consumer and business spending, according to the average forecast of economists in a Bloomberg survey. Other reports may show sales of new houses rose, while orders for long-lasting goods fell.
(Source: Bloomberg)