(Bloomberg) — U.S. stocks rose, with the Standard & Poor’s 500 Index posting its first three-day rally since April, as a drop in jobless claims and higher-than-forecast sales at some retailers bolstered confidence in the economy.
DuPont Co. and Boeing Co. climbed at least 1.6 percent to lead the Dow Jones Industrial Average higher. J.C. Penney Co. and Abercrombie & Fitch Co. surged more than 6.7 percent after reporting June sales that beat estimates. Stocks pared gains after analyst Meredith Whitney cut earnings estimates for Goldman Sachs Group Inc. and Morgan Stanley.
The S&P 500 climbed 0.2 percent to 1,062.69 as of 12:25 p.m. in New York after rising as much as 1 percent and falling as much as 0.1 percent earlier today. The Dow rose 40.11 points, or 0.4 percent, to 10,058.39.
“It’s a relief rally,” Russ Koesterich, the San Francisco-based head of investment strategy for scientific active equities at BlackRock Inc., which manages $3.36 trillion in assets as the world’s largest asset manager. “There’s evidence that the global economy continues to recover. In the U.S., some retailers are doing well. Valuations are reasonable. The stock market may have found a short-term bottom.”
U.S. stocks rallied yesterday, sending the S&P 500 up 3.1 percent for its biggest gain in six weeks, as banks advanced and retail-sales growth bolstered optimism that consumer spending is weathering a drop in confidence. Still, the S&P 500 remains 13 percent below its April 23 high after a sovereign debt-crisis in Europe rattled markets and economic reports from the U.S. and China suggested that the recovery is stalling.
Jobless Claims
Economists had forecast jobless-benefit applications would fall to 460,000 from an initially reported 472,000 for the prior week, according to the median of 36 projections in a Bloomberg survey. The number of people receiving unemployment insurance dropped to the lowest point since 2008, while those getting emergency benefits also declined after Congress failed to pass legislation extending the assistance.
U.S. stocks also rose after the International Monetary Fund raised its forecast for global growth this year reflects a stronger-than-expected first half. The world economy will expand 4.6 percent in 2010, the biggest gain since 2007, compared with an April projection of 4.2 percent. Growth next year is projected to be 4.3 percent.
“It’s very encouraging,” said Stanley Nabi, New York- based vice chairman of Silvercrest Asset Management Group, which manages $9 billion. “The combination of better-than-expected jobless claims and good numbers from some of the largest retailers removed some of the gloom from the market. It was also positive to see the IMF raising its estimates.”
J.C. Penney
J.C. Penney gained 6.8 percent to $23.25. The third-biggest U.S. department-store chain said June comparable store sales rose 4.5 percent, beating Retail Metrics’ estimate of a 3.7 percent increase.
Abercrombie & Fitch rose 9.4 percent to $35.98 after it reported that same-store sales in June rose 9 percent, beating analyst estimates.
Gap Inc. shares retreated 7.3 percent to $18.28 after the retailer said same-store sales in June were unchanged. Analysts had estimated sales for the company, whose brands include Old Navy and Banana Republic, would rise 3.7 percent.
‘A Little Careful’
“I want to be a little careful here,” said Mike Ryan, New York-based head of wealth management research for the Americas at UBS Financial Services Inc., which oversees about $663 billion. “The rate of expansion has moderated. Jobless claims came in better, but private payroll growth remains weak. As for retailers, we’ve seen evidence of some good numbers which are not necessarily translated into strong retail growth.”
A gauge of S&P 500 banks fell as much as 1.1 percent after Goldman Sachs had its profit estimates for 2010 reduced by Meredith Whitney Advisory Group LLC. Goldman Sachs will earn $1.70, $3.77 and $4.64 a share in the second through fourth quarters of 2010, respectively, down from prior forecasts of $4.75, $4.24 and $5.42, according to a report from Meredith Whitney Advisory. Morgan Stanley’s second-quarter estimate was also reduced by Meredith Whitney, to 40 cents from 68 cents.
Goldman Sachs fell 1.1 percent to $134.31, while Morgan Stanley rose 0.5 percent to $24.06.
The IMF said the U.S. economy faces the risk of a “double- dip” in housing and urged the Obama administration to fix the nation’s mortgage finance system by overhauling Fannie Mae and Freddie Mac.
“The backlog of foreclosures and high levels of negative equity, combined with elevated unemployment, pose risks of a double dip in housing,” the Washington-based IMF said in a statement dated June 21 after an annual review of the country’s policies and economy. The fund sees unemployment staying above 9 percent this year and in 2011.
–With assistance from Joshua Fineman and Elizabeth Stanton in New York. Editors: Michael P. Regan, Joanna Ossinger
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.

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