By Elizabeth Stanton Dec. 2 (Bloomberg) -- U.S. stocks rose, rebounding from the market’s worst tumble since October, on speculation global central banks will step up efforts to stem a deepening recession. Citigroup Inc. rallied 10 percent after Federal Reserve Chairman Ben S. Bernanke said he may use less-conventional policies to revive the economy. General Electric Co. jumped 9.5 percent on plans to maintain its dividend. Benchmark indexes extended gains as Ford Motor Co. said it doesn’t see a “liquidity crisis” in 2009, sending its shares up 13 percent. “A lot of pretty lousy expectations are already figured in,” Jack Ablin, chief investment officer at Harris Private Bank in Chicago, which oversees about $60 billion, told Bloomberg Television. “As long as expectations are this low, at least the bar is going to be easy to hurdle.” The S&P 500 added 17.17 points, or 2.1 percent, to 833.38 at 11:18 a.m. in New York. The Dow Jones Industrial Average gained 146.39, or 1.8 percent, to 8,295.48, while the Nasdaq Composite Index climbed 2.1 percent to 1,426.74. Five stocks increased for each that fell on the New York Stock Exchange. The S&P 500 yesterday tumbled 8.9 percent as manufacturing contracted at the fastest pace in 26 years. U.S. stock swings will be more than triple the average over the next seven months as investors contend with a global recession and the worst returns since the 1930s, volatility futures show. VIX Watch May contracts on the Chicago Board Options Exchange Volatility Index, or VIX, closed yesterday at 43.80, while futures expiring before then trade at higher levels, showing investors expect the S&P 500 to rise or fall at least 2.8 percent a day through June 17, according to data compiled by Bloomberg. The last time the benchmark index for U.S. stocks moved that much during the same-sized span was 1932. Europe’s Dow Jones Stoxx 600 Index advanced 1.1 percent, reversing an earlier drop of 2.3 percent. The MSCI Asia Pacific Index decreased 4.2 percent as China Petroleum & Chemical Corp. dropped 5.6 percent. Citigroup advanced 65 cents to $7.10, recovering about a third of yesterday’s 22 percent tumble. Banks, insurers and investment firms in the S&P 500 slumped 17 percent as a group yesterday, the steepest drop for the S&P 500 Financials Index since the gauge was created in 1989. The group advanced 3.5 percent today. Energy Valuations Exxon Mobil Corp. climbed $1.28 to $75.59, while ConocoPhillips, the second-largest U.S. refiner, added 1.4 percent to $48.67. The S&P 500 Energy Index, which has slumped 39 percent this year, traded at 6.29 times the reported earnings of its companies at the open of U.S. exchanges. That compares with last week’s low of 5.63, the cheapest since Bloomberg began tracking the data in 1995. The entire S&P 500 was valued at a price-to- earnings ratio of 17.66 at the open, compared with a monthly average this decade of almost 26. “We are seeing valuations that we haven’t seen in decades, literally,” said Mike Allocco, chief investment officer at Brazos Capital Management LP in Dallas, which oversees $300 million. “Three quarters of my portfolio is trading at a P/E of 10 or below. If you can be patient and wait out the bottoming process, which can be difficult and emotional, the next time we begin a sustainable rally and hopefully a new bull market, there’s going to be a tremendous amount of money to be made.” GE, Automakers Climb GE advanced $1.47 to $16.97 after saying it plans to pay its $1.24-per-share dividend in 2009. Profit at its GE Capital unit will decline to $8 billion this year and to $5 billion next year. The company will take a charge of as much as $1.4 billion to accelerate cost-cutting and add to reserves. Ford, the second-largest U.S. automaker, rallied 33 cents to $2.88. General Motors Corp., the biggest, climbed 5.9 percent to $4.86. Ford submitted its request to Congress today seeking a loan of as much as $9 billion, while saying it plans to cut costs and will use the aid as a “back-stop” and “only to the extent needed.” Ford, GM and Chrysler LLC must convince a divided Congress that their plans to shrink are severe enough to ensure repayment of $25 billion in proposed U.S. loans. Today is the deadline for turning in the plans. The Fed is scheduled to announce its decision on borrowing costs Dec. 16. Futures traders see a 54 percent chance the central bank will cut the benchmark rate by 50 basis points to 0.5 percent. There’s also a 6.5 percent probability rates will be reduced to zero percent next month, according to Fed fund futures. ‘Obviously Limited’ The U.S. entered a recession in December 2007, the panel of economists that dates American business cycles said yesterday. Bernanke yesterday said he has “obviously limited” room to lower rates further and may use less conventional policies, such as buying Treasuries. Even so, reducing borrowing costs is “certainly feasible,” he said. Policy makers may decide at their meeting this month on the details of carrying out such a shift, which might resemble the “quantitative easing” strategy the Bank of Japan pursued in 2001-2006 after driving interest rates close to zero. The Fed chief’s readiness to rely more on adding reserves to the banking system prompted JPMorgan Chase & Co. economist Michael Feroli to refer to him as “Bernanke-san” in a note yesterday. Australia’s central bank cut its benchmark interest rate 1 percentage point today, extending the biggest round of reductions since the 1991 recession. Investors are speculating the Bank of England will lower borrowing costs this week. The S&P 500 capped its biggest five-day rally since 1933 last week after the government agreed to protect Citigroup from further losses. The measure is still down 43 percent this year as credit losses and writedowns at financial firms approach $1 trillion and more economists forecast that the U.S. recession will be one of the most severe in the post-World War II era. Retesting Lows Possible A key currency exchange rate suggests U.S. stocks may resume their decline, according to a report today by Merrill Lynch & Co. technical analyst Steve Miley. Over the past six months the value of the British pound against the Japanese yen has been a reliable indicator of the direction of the U.S. stock market, and the rate touched an 18-year low of 137.13 yen today. The S&P 500 is likely to retest its 2008 low, Miley wrote in the report. A drop below that level would likely mean a decline to 738.3, representing a 38.2 percent reversal of the rally that began after the 1987 crash, Miley wrote. Reversals of certain magnitudes, including 38.2 percent, are considered important in technical market analysis, which bases predictions on chart patterns. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.

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