By Nick Baker
Sept. 29 (Bloomberg) -- U.S. stocks rose this week to complete the steepest September advance since 1998 as the Federal Reserve's interest-rate cut helped energy and raw-material companies lead the market's recovery from a summer rout.
Exxon Mobil Corp., Freeport-McMoRan Copper & Gold Inc. and Monsanto Co. climbed after the falling dollar sent commodities to the biggest monthly gain in 32 years, led by crude oil, gold and wheat. Goldman Sachs Group Inc. rose the most during September in the Standard & Poor's 500 Index, which gained for the fifth straight quarter, after the securities firm reported the third- highest profit in its 138-year history.
The Fed's Sept. 18 reduction to 4.75 percent of its rate for overnight loans sustained the stock market's recovery from losses spurred by subprime-mortgage defaults. In July and August, the S&P 500 had the largest slump in four years.
``The Fed easing was the catalyst for everything,'' said Ed Peters, chief investment officer at PanAgora Asset Management in Boston, which manages $22 billion. ``Commodities will continue rising in price,'' lifting shares of their producers, because the rate cut may boost inflation.
The S&P 500 rose 0.1 percent to 1,526.75 this week, giving the benchmark a 3.6 percent September advance and a 1.6 percent third-quarter gain. The Dow Jones Industrial Average rose 0.6 percent to 13,895.63 this week, 4 percent in September and 3.6 percent during the past three months.
U.S. Treasuries completed the biggest quarterly rally in five years on expectations the Fed will cut interest rates even more in 2007. The yield on the benchmark 10-year note fell 0.05 percentage point to 4.57 percent this week, bringing its decline since June 29 to 0.45 point. Bond yields and prices move inversely.
Exxon, the world's largest oil company, surged 8 percent to $92.56 in September, for its steepest monthly gain since July 2006. Freeport, the world's second-largest copper producer, jumped 20 percent to $104.89. Monsanto, the world's largest seed producer, advanced 23 percent to $85.74 for the S&P 500's second- biggest September rally.
Energy shares in the S&P 500 rose 8 percent as a group, the most among 10 industries, followed by the 7.6 percent advance by raw-material stocks.
The 19-commodity Reuters/Jefferies CRB Index increased 8.1 percent in September, the most since July 1975. Wheat climbed to a record amid a global grain shortfall, boosting corn and soybeans. Oil also hit a record, and gold reached a 27-year high. The dollar's decline, which sent it to a new low against the euro this week, spurred the commodities rally.
$2.85 Billion Profit
Goldman surged the most in the S&P 500 in September, climbing 23 percent to $216.74. Goldman's third-quarter profit increased 79 percent to $2.85 billion after the company bet against the mortgage bonds that roiled credit markets. Earnings beat the highest analyst estimate by more than 20 percent.
General Motors Corp. had the biggest advance in the Dow average, rising 19 percent to $36.70. GM reached a contract agreement that takes $50 billion of future health-care obligations off GM's books and may transform the competitive landscape of the U.S. auto industry. The accord, ending a two-day strike, is designed to allow the Detroit automaker to operate with a cost structure closer to that of its Japanese rivals.
McDonald's Corp. gained 11 percent to $54.47. The world's largest restaurant company boosted its annual dividend by 50 percent as part of a plan to return as much as $17 billion to investors.
Procter & Gamble Co. shares gained in 17 out of 19 trading sessions in September, rising 7.7 percent to $70.34.
Stocks may keep rising in the October-to-December period, if history is any guide. The S&P 500 has climbed in 11 of the past 12 fourth quarters.
``We'll continue to plod along,'' said Jack Ablin, who helps manage $52 billion as chief investment officer at Chicago-based Harris Private Bank. ``Earnings are still holding together.''
Unemployment in the U.S. rose to a one-year high in September and manufacturing slowed for a third month as the effects of the housing recession reverberated through the economy, economists expect reports next week to show.
Last Updated: September 29, 2007 08:56 EDT