American stocks rallied to the highest level this month as JPMorgan Chase & Co.’s increased bid for Bear Stearns Cos. and a gain in home sales boosted speculation the economy will recover from $200 billion in credit losses. Bear Stearns, which almost collapsed before the Federal Reserve helped broker a takeover, nearly doubled after JPMorgan raised its offer to about $10 a share from $2.52. Tiffany & Co., the second-largest luxury jewelry retailer, climbed the most in more than two years on better-than-forecast earnings. Monsanto Co., the biggest seed producer, posted its steepest advance since January after UBS AG advised buying the shares.

The Standard & Poor’s 500 Index added 20.37 points, or 1.5%, to 1,349.88 as nine of its 10 industry groups advanced. The Dow Jones Industrial Average increased 187.32, or 1.5%, to 12,548.64. The Nasdaq Composite Index gained 68.64, or 3%, to 2,326.75. Nine stocks rose for every two that fell on the New York Stock Exchange.

“It appears that people are interested in buying stocks every time there’s just a whiff of good news,” a manager of $13 billion at Pioneer Investments in Boston, John Carey, said in an interview with Bloomberg Radio. “We’re starting from a fairly modest level of valuations in this downturn and so perhaps people are right in suggesting that downside is limited.”