May 2 (Bloomberg) -- U.S. stocks gained, bringing the market to its first three-week advance since October, as a better-than-forecast jobs report boosted optimism that the economy won't get much worse.
Eight of 10 industry groups in the Standard & Poor's 500 Index climbed after the government said payrolls shrank by 20,000 workers in April, almost three-quarters less than economists had projected. Citigroup Inc. led financial shares to their highest level since February as the Federal Reserve increased a cash-loan program. Sun Microsystems Inc. tumbled the most since 2002, dragging technology shares lower, after posting a surprise loss.
The S&P 500 added 7.09, or 0.5 percent, to 1,416.43 at 11:25 a.m. in New York. The Dow Jones Industrial Average rose 56.51, or 0.4 percent, to 13,066.51. The Nasdaq decreased 2.81 to 2,477.9. Asian and European shares rose, sending the MSCI World Index to an almost four-month high.
``This is good news because consumer spending depends on job security,'' said Edgar Peters, chief investment officer at PanAgora Asset Management in Boston, who has been buying more equities in the last six weeks on speculation a U.S. contraction would be ``mild.'' PanAgora oversees $25 billion. ``All the talk of recession had people being as crazy as saying `This will be like the Great Depression.' If the job losses are limited to Wall Street, it's not going to bother Main Street.''
The S&P 500's 2.2 percent climb over the past two days pushed the index up 11.2 percent from its 19-month low March 10 and pared its 2008 loss to 3.5 percent. The Dow average has reduced its year-to-date decline to 1.5 percent.
Bullish Chart
The jump in the S&P 500 above 1,400 yesterday for the first time since January indicates U.S. stocks may extend their rally, say analysts who make predictions based on trading patterns. The gains sent the benchmark index for American equities closer to its 200-day moving average than at anytime this year.
More than three stocks gained for every two that fell today on the New York Stock Exchange. The Morgan Stanley Cyclical Index, designed to measure the performance of stocks closely tied to the health of the economy, rose 0.6 percent.
Citigroup increased 75 cents, or 2.9 percent, to $26.74. Bank of America Corp., the second-biggest U.S. bank, rose 61 cents to $40. The S&P 500 Financials Index climbed 1.1 percent to the highest level since Feb. 4.
The Fed, which has reduced its benchmark interest rate by 3.25 percentage points since September, today expanded its cash- loan auctions for banks by 50 percent to $75 billion each after higher borrowing costs blunted the impact of the four-month-old program. Fed Chairman Ben S. Bernanke created the Term Auction Facility and two other programs to reverse a decline in liquidity stemming from the subprime mortgage-market's collapse. Today's move may reduce loan payments for some companies and homeowners with variable-rate mortgages.
`Interesting Activity'
``I just got to the conclusion that this is the time to actually start increasing our weight in financials because the system is trying to be fixed, and in fact, is being fixed right now,'' Kevin Rendino, a senior fund manager at BlackRock Inc. in Plainsboro, New Jersey, said in an interview on Bloomberg Television. Rendino helps oversee about $15 billion. ``You cannot ignore what the Fed has done. All of the interesting activity they have done speaks to a better environment for the financials.''
Yahoo! Inc. gained $1.01 to $27.82 on speculation Microsoft Corp. may boost its bid for the operator of the second-most popular search engine. Microsoft is leaning toward a hostile bid and may make an announcement as early as today, the Wall Street Journal reported, citing people familiar with the matter. Microsoft declined to comment on its plans to the Journal. Microsoft lost 4 cents to $29.36.
Energy Rebound
Energy shares gained as crude oil rose for the first time in four days, gaining $1.25 to $113.77 a barrel as Turkey renewed its offensive against Kurdish rebels in Iraq, holder of the world's third-biggest oil reserves.
Exxon Mobil Corp., the biggest U.S. energy company, added 23 cents to $89.93. Schlumberger Ltd., the largest oilfield services company, climbed $1.54 to $99.89.
Chevron Corp. added 30 cents to $95.24. The second-largest U.S. oil company said first-quarter profit rose 9.5 percent amid record global demand for oil. Per-share profit was 8 cents higher than the average of 18 analyst estimates compiled by Bloomberg.
U.S. oil futures averaged $97.82 a barrel in the quarter, up almost $30, on their way to touching a record at $119.93 this week. Each $5 increase in crude prices boosts Chevron's earnings per share by more than 6 percent, according to Erik Mielke, an analyst at Merrill Lynch & Co. in New York.
Sun Microsystems Inc., the fourth-largest maker of server computers, dropped the most since July 2002 after a surprise loss, stagnant sales and another round of job cuts raised concern that Chief Executive Officer Jonathan Schwartz's growth plan isn't working. Sun slid $3.25, or 20 percent, to $13.08 for the steepest retreat in the S&P 500.
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