By Lynn Thomasson Nov. 7 (Bloomberg) -- U.S. stocks rose for the first time in three days on speculation the Federal Reserve will reduce borrowing costs to combat the highest jobless rate since 1994. Exxon Mobil Corp., the biggest oil company, rose almost 4 percent and Alcoa Inc., the nation's largest aluminum producer, rallied 7 percent as traders bet the Fed will cut its benchmark rate to 0.5 percent at its next meeting. Nvidia Corp. jumped 15 percent on better-than-estimated earnings. The Standard & Poor's 500 Index added 1.7 percent to 920.18 as of 10:06 a.m. in New York, trimming its weekly decline to 5.1 percent. The Dow Jones Industrial Average climbed 149.42 points, or 1.7 percent, to 8,845.21 after losing almost 10 percent in the previous two days. The Nasdaq Composite Index increased 1.6 percent to 1,634.63. Three stocks advanced for each that fell on the New York Stock Exchange. ``I don't think the world is going to come to an end,'' said Stanley Nabi, vice chairman of Silvercrest Asset Management Group in New York, which oversees $10 billion. ``It will revive the possibility that the Fed might take action, not only on the interest-rate front, but on other fronts.'' The Dow and S&P 500 recovered after the steepest two-day declines since 1987 wiped out more than half of the market's rebound from a five-year low on Oct. 27. The S&P 500 is down 38 percent in 2008 on concern almost $700 billion in credit losses and writedowns at financial firms worldwide will push the global economy into recession, hurting the outlook for earnings. Analysts expect full-year profits at companies in the index to drop 7.7 percent, according to estimates complied by Bloomberg. More than $6 trillion has been erased from U.S. equity markets this year. Banks led the drop, losing 52 percent as a group, followed by commodities producers and computer companies. Jobless Concern The U.S. jobless rate climbed in October to 6.5 percent, the highest level since 1994, and payrolls dropped by 240,000 workers, signaling the economic slump inherited by Barack Obama will last well into his first year as president. Economists Stephen Roach at Morgan Stanley and Neal Soss of Credit Suisse say this year's contraction was under way in March. Harvard University economist Martin Feldstein, a member of the National Bureau of Economic Research, said that month that a recession had probably started in the U.S. The group is responsible for dating business cycles in the U.S. The U.S. economy shrank for first time since 2001 a year ago after the drop in housing prices froze credit markets globally. President George W. Bush authorized more than $1 trillion in spending to bail out banks. The S&P 500 closed yesterday at a price that is 19.9 times the average earnings of its companies in the last 12 months. That's 20 percent more expensive than its lowest level of the decade, 16.6 times earnings in July 2006. Futures on the Chicago Board of Trade showed an 84 percent chance the Fed will cut its 1 percent target rate for overnight lending between banks by a half-percentage point at its Dec. 16 meeting, compared with 55 percent odds a week ago. To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

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