By Rita Nazareth March 29 (Bloomberg) -- U.S. stocks rose, with the Standard & Poor’s 500 Index extending gains from a fourth straight weekly advance, after consumer spending increased for a fifth month and European confidence in the economic outlook improved. Caterpillar Inc. and General Electric Co. helped lead the Dow Jones Industrial Average higher after Commerce Department figures showed 0.3 percent growth in purchases in February, matching economist estimates. Alcoa Inc. paced gains in commodity shares as metal prices rallied. Viacom Inc. rallied as Morgan Stanley recommended buying the shares and Barron’s said Sumner Redstone’s media company may be a takeover candidate. The S&P 500 gained 0.5 percent to 1,172.55 as of 9:38 a.m. in New York. The Dow Jones Industrial Average rose 43.76 points, or 0.4 percent, to 10,894.12. “Consumers are coming back,” said James Paulsen, who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “The latest economic numbers have been pretty good particularly in the consumer front. That indicates a sustainable recovery, which is good for stocks. On top of that, the situation in Europe seems to have calmed down, with confidence rising and the expectation of a resolution of the situation in Greece.” The S&P 500 has advanced 5 percent since Dec. 31, which would be the biggest first-quarter rally since 1998. The index rose 0.6 percent last week, giving it the longest weekly winning streak since August, on speculation the economy is recovering from the worst contraction since the 1930s. Forecast Raised Birinyi Associates Inc., the research and money-management firm founded by Laszlo Birinyi, raised its year-end forecast for the S&P 500 to 1,325. The S&P 500 is trading at the lowest valuation compared with junk bonds in two years, a sign the stock-market rally will continue, if two decades of history are any guide. The lowest-rated debt pays 3.22 percentage points more than the earnings yield on the S&P 500, the smallest gap since 2007 and a discount to the average 5.93 points of the past 22 years, data compiled by Bloomberg show. The measure of profits compared with share prices shows stocks may be undervalued next to the fixed-income investments most closely correlated with equities. European confidence in the economic outlook improved to the highest in almost two years in March, beating economists’ forecasts and signaling the recovery is gathering strength as a weaker euro helps exporters. An index of executive and consumer sentiment in the 16 nations using the euro rose to 97.7 from 95.9 in February, the European Commission in Brussels said today. That was the highest since May 2008 and topped the median estimate of economists in a Bloomberg News survey. To contact the reporters on this story: Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net.

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