Sept. 18 (Bloomberg) -- U.S. stocks rose, extending the market’s second straight weekly advance, as analyst upgrades of companies from Procter & Gamble Co. to SanDisk Corp. and Chevron Corp. overshadowed concern equities have grown too expensive.

Procter & Gamble and SanDisk rose at least 3.4 percent and Chevron added 1.6 percent. Hewlett-Packard Co. rose 1.6 percent after Stifel Nicolaus & Co. recommended buying shares ahead of its analyst meeting. Texas Instruments Inc. increased 1.7 percent on plans to boost its dividend. The Dow Jones Industrial Average erased yesterday’s loss and climbed above its highest closing level in more than 11 months.

“The stock market is supposed to be a leading indicator,” David Kelly, chief market strategist for J.P. Morgan Funds in New York, which had $438 billion under management as of June, told Bloomberg Radio. “We’re seeing a rapid improvement in earnings. And I think the stock market is foreshadowing that.”

The S&P 500 rose 0.5 percent to 1,070.35 at 2:23 p.m. in New York. The benchmark measure for U.S. equities has risen 2.7 percent this week. The Dow average advanced 54.72 points, or 0.6 percent, to 9,838.64.

Price swings and trading volume may be greater than average today because futures and options contracts on indexes and individual stocks expire at the close of trading. So-called quadruple witching occurs once every three months.

‘Play the Games’

“More people are on the sidelines letting all the derivatives folks play the games with each other,” said John O’Donoghue, head of equities at Cowen & Co. “So I don’t think there’s a lot from the standpoint of pure investor sentiment that you see out there.”

The 58 percent rebound in the S&P 500 from its 12-year low on March 9 has pushed valuations in the index to about almost 20 times the reported earnings from continuing operations of its companies, the highest level since 2004, according to weekly data compiled by Bloomberg.

Companies that have lagged behind the overall stock market’s rebound are among the most attractive equities, said Donald Yacktman, founder of Yacktman Asset Management Co.

Yacktman’s $962 million Yacktman Fund has gained 7.6 percent in the past five years, beating 97 percent of rivals, according to data compiled by Bloomberg. The investor said he likes shares of Coca-Cola Co.,PepsiCo Inc.,Pfizer Inc. and Procter & Gamble, while he doesn’t have a “big” stake in banks because they probably face more regulation following government bailouts.

Analysts Say Buy

Procter & Gamble was raised to “buy” from “hold” at Citigroup Inc., which lifted its price estimate to $66 from $54 and said in a report the world’s largest consumer-goods company “is readying itself to become more aggressive in order to win back lost market share.” The shares climbed 3.4 percent to $57.41.

SanDisk added 5.4 percent to $22.82. The biggest maker of flash-memory cards was upgraded to “buy” from “underperform” at bank of America Corp., which cited the prospects for a “dramatic” earnings recovery.

Chevron rose 1.6 percent to $73.10. The oil company was raised to “outperform” from “neutral” at Credit Suisse Group AG, which increased its price estimate on the shares to $80 from $70.

Hewlett-Packard rose 1.6 percent to $46.43. Stifel Nicolaus recommended buying shares of the world’s largest personal- computer maker ahead of its analyst meeting on Thursday.

‘Positive Tone’

“We expect management to offer up a generally positive tone regarding the current PC and enterprise server/storage demand environment,” analyst Aaron Rakers wrote in a note to clients.

Texas Instruments gained 1.7 percent to $24.01 The second- largest U.S. chipmaker said it plans to raise its quarterly dividend 1 cent to 12 cents a share. The new dividend will be payable Nov. 16 to stockholders of record on Oct. 30.

Google Inc. rose 0.5 percent to $494.20. Collins Stewart LLC raised its share target for the owner of the world’s most popular Internet-search engine by 20 percent to $600, citing the outlook for material growth acceleration.

“The momentum in the stock market is very strong,” said James Paulsen, who helps oversee $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “Things are improving a lot more rapidly than people think. And that should be reflected in better-than- expected corporate earnings and in investors’ confidence.”
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September 18, 2009 14:25 EDT

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