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(Bloomberg) — U.S. stocks advanced, sending the Standard & Poor’s 500 Index near the highest level in about three years, as the cost of insuring European debt declined the most in two weeks on optimism Greece will get a bailout.

Applied Materials Inc., the largest producer of chipmaking equipment, rose 2 percent after predicting higher profit than estimated. H.J. Heinz Co., the world’s biggest ketchup maker, and Campbell Soup Co., the largest soup maker, added at least 3.7 percent as earnings beat projections. Gilead Sciences Inc., which bought Pharmasset Inc. for $10.8 billion last year to gain an experimental hepatitis C drug, plunged 14 percent as some patients on that medicine relapsed after stopping therapy.

The S&P 500 rose 0.2 percent to 1,360.27 at 10:07 a.m. New York time. It’s near its peak nine months ago of 1,363.61, which was the highest level since June 2008. The Dow Jones Industrial Average added 24.90 points, or 0.2 percent, to 12,928.98. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments slid 11 basis points to 337.

“Greece is the word,” Philip Orlando, the New York-based chief equity strategist at Federated Investors Inc., which oversees about $370 billion, said in a phone interview. “We’re just reacting to what the euro zone is telling us in terms of the state of negotiations. Do I believe that the euro zone will give Greece more money? Yes. Otherwise, Greece defaults.”

U.S. stocks joined a global rally. German Chancellor Angela Merkel, Italian Prime Minister Mario Monti and Greek Prime Minister Lucas Papademos discussed efforts to secure a second bailout for Greece and are confident that euro-area finance ministers will “find a solution for open questions” on Feb. 20, Steffen Seibert, Merkel’s chief spokesman, said in a statement.

Biggest Gains

Seven out of 10 groups in the S&P 500 advanced as consumer discretionary, industrial and telephone shares had the biggest gains. The Morgan Stanley Cyclical Index of companies most-tied to the economy added 0.6 percent. The KBW Bank Index of 24 stocks added 0.4 percent as JPMorgan Chase & Co. climbed 1.4 percent to $38.53.

Applied Materials rallied 2 percent to $13.48. Customers are stepping up equipment spending to ensure they can meet demand for chips used in smartphones, tablets and other mobile devices. Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. are helping fuel the rebound, according to Patrick Ho, an analyst at Stifel Nicolaus & Co.

H.J. Heinz gained 3.9 percent to $54.13. The company reported third-quarter earnings excluding some items of 95 cents a share, beating the average analyst estimate of 85 cents.

Campbell Soup

Campbell Soup added 3.7 percent to $33.25. The company reported second-quarter earnings excluding some items of 64 cents a share. On average, the analysts surveyed by Bloomberg estimated profit of 62 cents.

First Solar Inc. rose 12 percent to $44.62. The biggest maker of thin-film solar panels resolved a permitting issue with Los Angeles County for a $1.36 billion power project under construction, paving the way for financing to resume.

Gilead tumbled 14 percent to $47.30. Among eight patients with hepatitis C genotype 1 in a clinical trial, six had a viral relapse within four weeks after stopping a 12-week treatment with the medicine, GS-7977, plus ribavirin, Gilead said today in a statement. The two other patients are two weeks out from stopping treatment, and haven’t relapsed, the company said.

General Mills Inc. dropped 3.3 percent to $38.45. The maker of Cheerios cereal and Yoplait yogurt reduced its earnings forecast for this year, citing “weak” demand in the U.S.

Most Hated

The companies investors hated the most in 2011 have returned twice as much as the S&P 500 this year, burning speculators who bet stocks from Sears Holdings Corp. to Netflix Inc. would keep falling.

The 26 companies in the S&P 500 with the highest so-called short interest relative to shares available for trading rallied 18 percent this year, compared with 8 percent for the full index, data compiled by Bloomberg show. Speculators who borrowed Sears shares and sold them to profit from a drop got hammered as the stock surged 73 percent. Netflix, with short interest of 17 percent at the end of 2011, rose 76 percent.

Banks, commodity and industrial companies, the only groups to post losses last year, are leading stocks higher on signs the U.S. economy is gaining momentum. That’s forcing speculators to cut bearish wagers after pushing them to the highest levels since the market bottomed in 2009, according to a survey by International Strategy & Investment Group.

“It’s been a rotation back into fundamentally sound, economically sensitive companies that had been unduly punished in the second half of last year,” David Spika, who helps oversee $13 billion as an investment strategist at Westwood Holdings Group Inc. in Dallas, said in a telephone interview. “When the market turns, those shorts have to be covered and that creates momentum.”

–With assistance from, Lu Wang in New York. Editor: Jeff Sutherland