Citigroup and Express Scripts Lead Gain

U.S. stocks rose for the second time in three days as investors speculated takeovers and accelerating economic growth will help shares recoup losses from a global selloff.

Citigroup Inc., the world's biggest financial firm by market value, climbed as the bank pursued its third bid in five months for an Asian financial firm. Shares of Express Scripts Inc. increased after the company boosted its $26.1 billion hostile offer for Caremark RX Inc.

Applied Materials Inc. and KLA-Tencor Corp. gained after Morgan Stanley upgraded the makers of semiconductor- manufacturing equipment on expectations for faster earnings growth. A Bloomberg survey showed economists, looking beyond the recent weakness in housing and the equity market, estimate that the U.S. economy will strengthen this year.

``Valuations are fairly reasonable and there is a lot of liquidity out there to do M&A activity,'' said Malcolm Polley, who oversees $1 billion as chief investment officer at Stewart Capital Advisors in Milwaukee, Wisconsin. ``We're going to see earnings growth slow over the year, but it's still going to be growing. We feel reasonably good about the market.''

The Standard & Poor's 500 Index added 11.68, or 0.8 percent, to 1403.65 as of 9:55 a.m. in New York. The Dow Jones Industrial Average advanced 80.43, or 0.7 percent, to 12,272.88, while the Nasdaq Composite Index climbed 20.52, or 0.9 percent, to 2395.16.

Europe, Japan

Indexes in the U.S. rose after European stocks rallied for a third day, while shares in Japan jumped the most since October. India's Sensitive Index had its biggest gain in eight months.

U.S. stocks had retreated yesterday after D.R. Horton Inc., the nation's second-largest homebuilder, said a yearlong housing slump will continue in 2007 and the Federal Reserve cited slowing growth in several local economies.

A Bloomberg survey released today showed economists expect the U.S. economy to accelerate this year.

Citigroup gained 58 cents to $50.80. The biggest U.S. bank is ``very aggressively'' talking with Bank of Overseas Chinese over the purchase of a stake, an official at the Taiwanese bank said.

Citigroup may buy all of Overseas Chinese for NT$14 billion ($425 million), the Wall Street Journal reported today, citing a person familiar with the talks. Overseas Chinese Executive Vice President Weng Chien said no deal has been reached. Citigroup's Hong Kong-based spokesman Richard Tesvich declined to comment.

This week the New York-based firm bid $10.8 billion for Nikko Cordial Corp., Japan's third-biggest brokerage, and in November it led a $3.1 billion acquisition of Guangdong Development Bank.

Express Scripts

Express Scripts added $2.18 to $76.95. The third-biggest U.S. manager of employee drug benefits increased its offer for rival Caremark by as much as 87 cents a share to $61.97. The offer was Express Scripts' second since its December challenge to CVS Corp.'s agreement to buy Caremark. CVS raised its bid twice.

CVS gained 60 cents to $31.92, while Caremark rose 75 cents to $62.05.

Applied Materials gained 39 cents to $18.59, while KLA- Tencor added $1.21 to $52.26. The makers of semiconductor- manufacturing equipment were upgraded to ``overweight'' from ``equal weight'' at Morgan Stanley, which said their shares may gain 20 percent in the next 12 to 18 months on accelerating earnings growth.

The S&P 500 has fallen 3.8 percent from a six-year high on Feb. 20. Stocks in the S&P 500 index trade at an average 16.9 times current earnings. That is below the average price-earnings ratio of 21.9 since the four-year rally began in October 2002.

Economic Growth

The U.S. economy, the world's largest, may expand at a 2.4 percent annual rate this quarter, and accelerate to 3 percent by year's end, according to the median estimate of 75 economists surveyed by Bloomberg News from March 1 to March 7. The economy grew at a 2.2 percent pace in the last three months of 2006.

Separately, a U.S. Labor Department report on jobless claims showed the number of Americans applying for state jobless benefits fell by 10,000 to 328,000 in the week ended March 3.

Still, the four-week moving average was the highest since October 2005, the latest indication that the housing slump has weakened the job market.

ADP Employer Services said in a report yesterday that companies last month added the fewest workers since July 2003. The Labor Department will likely say tomorrow that employers added the fewest number of jobs in two years, according to economists surveyed by Bloomberg.

Retail Sales

Sales at U.S. retailers in February increased less than analysts expected after colder weather dampened demand for spring merchandise, according to data released today.

Wal-Mart Stores Inc., the world's biggest retailer, said sales at stores open at least 12 months rose 0.9 percent, less than the company's forecast of 1 percent to 2 percent. The shares dropped 45 cents to $47.48.

Ford Motor Co. gained 32 cents to $7.94. Credit Suisse Group said it expects the second-largest U.S. automaker's losses will be less than analysts' estimates and raised its recommendation on Ford to ``neutral'' from ``underperform.''

source:www.bloomberg.com