July 20 (Bloomberg) -- U.S. stocks gained after Federal Reserve Chairman Alan Greenspan said consumer spending may pick up even as the central bank continues to raise interest rates at a ``measured pace.''

RadioShack Corp., the No. 3 U.S. electronics-store chain, advanced after saying 2004 earnings will beat analysts' expectations. Better-than-expected profit from Corning Inc., the largest maker of fiber-optic cable, lifted technology shares.

The Standard & Poor's 500 Index has shed 2.8 percent this month and is down 0.3 percent in 2004 amid concern higher borrowing costs may crimp profits.

``Stock prices have more room to go,'' said Brian Slater, who helps manage $500 million at Condor Capital Management in Martinsville, New Jersey. ``All the ingredients are there for a higher finish in the market this year.''

The S&P 500 rose 7.77, or 0.7 percent, to 1108.67. The Dow Jones Industrial Average added 55.01, or 0.5 percent, to 10,149.07. Both benchmarks gained for the first day in five. The Nasdaq Composite Index, which gets 39 percent of its value from computer-related shares, jumped 33.24, or 1.8 percent, to 1917.07, the biggest advance since June 7.

Seven stocks advanced for every five that declined on the New York Stock Exchange. Some 1.44 billion shares changed hands on the Big Board, 2.6 percent more than the three-month daily average.

Profit Growth

S&P 500 members boosted earnings an average 21.8 percent in the second quarter after a 28 percent jump in the first, according to analysts surveyed by Thomson Financial. Earnings also increased more than 20 percent in the third and fourth quarters of last year, Thomson said.

``At some point, the train will leave the station because profits are so strong,'' said James Swanson, chief investment strategist for MFS Investment Management, which oversees $142 billion in Boston.

The Fed predicted the economy would expand in a range of 4 to 4.75 percent from the final quarter of 2003 to the final quarter of this year, the fastest since 1999 while less than the 5 percent forecast at Greenspan's last report in February.

`Short-Lived'

``Inflation also seems to have been boosted by transitory factors such as the surge in energy prices,'' Greenspan said, according to his testimony to the Senate Banking Committee. ``Those higher prices, by eroding households' disposable income, have accounted for at least some of the observed softness in consumer spending of late, a softness which should prove short- lived.''

The S&P 500 climbed 4 points in the half hour before Greenspan's 2:30 testimony and peaked at 1108.88 shortly after he started speaking.

The Fed on June 30 lifted its benchmark interest rate a quarter-point to 1.25 percent to curb inflation.

Higher interest rates may be taking a toll on construction. Housing starts unexpectedly fell in June to the lowest level in a year. Builders broke ground on homes at a 1.802 million-unit annual pace, the Commerce Department said. Economists expected 1.99 million, according to a Bloomberg News survey.

RadioShack Gains

RadioShack gained $1.94, or 7.2 percent, to $29.02, for the second-biggest advance in the S&P 500. The company expects earnings to rise to $2.07 to $2.09 a share in 2004, as much as 7 cents more than analysts' average estimate in a Thomson poll. Second-quarter profit exceed expectations, according to Thomson.

An index of retailers had the second-biggest gain among the S&P 500's 24 industry groups, rising 2.2 percent. The companies also got a boost as crude oil for August delivery fell 2.3 percent to $40.80 a barrel. Home Depot Inc., the world's largest home-improvement retailer, added 72 cents to $33.99.

Corning led gains among technology companies, climbing $1.42 to $12.69. The 13 percent advance was the biggest in the S&P 500. Second-quarter profit, excluding some items, of 11 cents a share beat the 9-cent average estimate of analysts surveyed by Thomson.

Cisco Systems Inc., the largest maker of equipment to link computer networks, added 52 cents to $21.88. Yahoo! Inc., the Internet company with the most advertising revenue, rallied $1.28 to $29.39.

An index of technology companies added 2 percent, the biggest advance among the S&P 500's 10 industry groups.

Schwab Rises

Charles Schwab Corp., the biggest discount brokerage, rose 55 cents to $8.85. The company ousted Chief Executive David Pottruck and replaced him with founder Charles Schwab after the shares declined 80 percent in the past four years. The stock had fallen each of the past 16 days, losing 17 percent.

Adolph Coors Co., the No. 3 U.S. brewer, added 94 cents to $76.50. Coors and Molson Inc., Canada's biggest beermaker, said they are in ``advanced discussions'' on a possible merger as the two attempt to keep pace with consolidation of their industry. The terms being discussed include Molson Chairman Eric Molson becoming board chairman of the combined company, and Coors Chief Executive Officer Leo Kiely serving as CEO.

Delta Air Lines Inc. slid 54 cents, or 9.1 percent, to $5.40, for the steepest drop in the S&P 500. S&P cut the credit rating on the third-largest U.S. airline to CCC+ from B-, citing an increasing risk of bankruptcy. Yesterday, the carrier reported a second-quarter net loss of $1.97 billion because of costs for pilot pensions, fuel and writing off tax benefits. The stock has lost more than 50 percent this year.

Flextronics Falls

Flextronics International Ltd., the world's No. 1 maker of electronics for other companies, shed 47 cents to $13.59 as inventory increased and the company said profit may fall short of estimates. Flextronics forecast earnings, excluding some costs, of 15 cents to 18 cents a share this quarter, and as much as 24 cents in the third quarter ending in December. Analysts expected second-quarter profit of 17 cents a share and third-quarter profit of 23 cents, according to Thomson Financial.

Taser International Inc., the largest U.S. maker of stun guns, dropped for a second day, lost $5.28 to $31.04. The New York Times reported Sunday that the weapons were connected to about 50 deaths. Taser said it ``strongly refutes'' the story.

Ford Motor Co., the No. 2 U.S. automaker, lost 38 cents to $14.60 after saying earnings will fall short of estimates. Third- quarter profit will be break-even to 5 cents a share, excluding some costs. On that basis, analysts expected 15 cents. Ford forecast full-year earnings of $1.80 to $1.90, excluding some costs. Analysts estimate $1.94, Thomson said.

Reinsurance stocks fell after Converium Holding Ltd. posted an unexpected second-quarter loss and said it may ask shareholders for more money to boost capital eroded by U.S. casualty claims. Converium, a Zurich-based reinsurer, plunged 46 percent in Swiss trading. XL Capital Ltd. lost $2.44 to $71.94, RenaissanceRe Holdings Ltd. sank $2.80 to $50.90 and Transatlantic Holdings Inc. declined $1.39 to $62.95. Everest Re Group Ltd. lost $6.26 to $74.70.

To contact the reporter on this story: Chris Graja in New York at cgraja@bloomberg.net.

Last Updated: July 20, 2004 16:17 EDT