June 16 (Bloomberg) -- U.S. stocks rallied and the Standard and Poor's 500 Index posted its best weekly gain since April after bond yields fell from a five-year high and the Federal Reserve said the economy is growing without fueling inflation.
General Motors Corp., Alcoa Inc. and Intel Corp. helped push the S&P 500 and Dow Jones Industrial Average to within 0.5 percent of records. Exxon Mobil Corp., the world's largest oil company, led energy shares to the best gain among 10 industry groups in the S&P 500 as crude prices climbed to the highest since September.
The Fed's upbeat assessment of U.S. regional economies and a Labor Department report showing so-called core consumer prices rose less than forecast last month suggested a pickup in manufacturing and hiring isn't spurring inflation. The yield on the benchmark 10-year Treasury note added 6 basis points, its smallest gain in three weeks, easing concern that rising borrowing costs would curb corporate profits and make takeovers more expensive.
``Inflation fears have receded substantially,'' said Les Satlow, who helps manage $450 million at Cabot Money Management in Salem, Massachusetts. ``That's always a good thing for the equity markets.''
The S&P 500 added 1.7 percent to 1532.91, the best weekly gain since the period ended April 20. The index is 0.4 percent below its all-time high of 1539.18 reached June 4.
The Dow average climbed 1.6 percent to 13,639.48, within 0.3 percent of its 13,676.32 closing record, also reached June 4. The Nasdaq Composite Index rose 2.1 percent to 2626.71, the highest since Feb. 6, 2001.
Beige Book
The 10-year yield, which determines interest rates on home mortgages and corporate loans, ended the week at 5.15 percent. Yields climbed as high as 5.32 percent after former Fed Chairman Alan Greenspan said he expects an increase in benchmark yields and greater premiums on emerging-market debt.
Economic growth, along with higher costs of fuel and food, hasn't increased ``overall'' pressures on wages and prices, the Fed said in its survey, known as the Beige Book for the color of its cover.
Consumer prices excluding food and fuel costs rose 0.1 percent last month, following a 0.2 percent gain in April. Economists had projected a 0.2 percent increase. From a year ago, core prices rose 2.2 percent, the smallest 12- month gain since March 2006.
In other economic data this week, retail sales rose 1.4 percent in May, the most in more than a year. Economists expected a gain of 0.6 percent, according to the median forecast in a Bloomberg survey. Purchases excluding automobiles rose 1.3 percent, the Commerce Department said.
GM, Alcoa
The Fed Bank of New York's manufacturing index jumped to 25.8 from 8.0. That's more than double the median economist estimate compiled by Bloomberg.
``The market is telling us that we don't have nearly as much to worry about as we had perceived,'' said Michael Williams, who helps oversee about $2.8 billion as managing director of Beamreach Trust in New York.
GM, the biggest U.S. automaker, jumped 12 percent to $34.66 for the best gain in the Dow industrials. Alcoa, the biggest U.S. aluminum company by market value, added 4.9 percent to $41.60.
Intel jumped 11 percent to $24.24 for its best weekly gain since April 2003. The world's largest chipmaker said it plans to slash the price of some processors during the next three months to regain market share from rival Advanced Micro Devices Inc.
Separately, Goldman, Sachs & Co. advised clients to buy Intel shares because the company should benefit from Advanced Micro's likely decision to farm out production.
Oil Climbs
Energy shares in the S&P 500 jumped 4.6 percent as a group for the top advance among 10 industries.
Crude prices rose to $68 a barrel in New York on concern that U.S. refiners will be unable to keep up with growing gasoline demand. Prices climbed 5 percent this week.
Exxon gained 3.9 percent to $85.94. Chevron Corp., the second-biggest U.S. oil producer, rose 3.1 percent to $83.17.
Utilities rebounded 3.5 percent as bond yields fell from their highs of the week, making the stocks' dividends more attractive. Collectively, utility shares in the S&P 500 have a dividend yield of 3 percent, the second-highest among 10 industries behind phone companies.
Exelon Corp., owner of the largest U.S. fleet of nuclear power plants, added 5.4 percent to $74.48. Southern Co., the biggest electricity generator, gained 2.9 percent to $35.61.
Elsewhere, Freeport-McMoRan Copper & Gold Inc. advanced 11 percent to $84.42 for its best weekly gain in a year. The world's biggest publicly traded copper company said it may sell assets to pay for debts it incurred in its $26 billion acquisition of Phelps Dodge Corp.
Kodak, Steel Shares
Eastman Kodak Co., the world's largest photography company, jumped 10 percent to $29.31, its best advance since November 2005. Citigroup Inc. said Kodak's new image- sensor technology that eliminates dark and blurry photos will drive the company's growth.
U.S. Steel Corp., the largest steelmaker based in the U.S., fell 7.1 percent to $116.12 for the worst performance in the S&P 500. ThyssenKrupp AG denied on a report it was in talks to buy the company. U.S. Steel shares on June 8 rose the most since November after the Interfax news agency reported Dusseldorf, Germany-based ThyssenKrupp was in talks to buy the company.
Nucor Corp. dropped 5.4 percent to $63.02. The second- largest U.S.-based steel company said second-quarter profit will fall more than analysts estimated as demand from automakers and homebuilders slowed.
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