NEW YORK (Bloomberg) - US stocks rose to a five-month high, led by financial shares, after Citigroup Inc.'s earnings topped estimates and an unexpected drop in industrial production added to signs the Federal Reserve will help fuel the recovery.

Citigroup, the bank 12 percent-owned by US taxpayers, rallied 5.4 percent to lead a measure of financial shares to the biggest gain among 10 groups. Hasbro Inc., the second-largest toymaker, advanced 3.8 percent after reporting higher-than- estimated earnings as sales of preschool products gained. Halliburton Co., the second-biggest oilfield-services provider, slumped 4.8 percent as profit missed some analysts' estimates.

The S&P 500 climbed 0.7 percent to 1,184.71 at 4 p.m. in New York, the highest level since May 3. The gauge gained one percent last week after Fed Chairman Ben Bernanke said the economy may need further stimulus and earnings boosted investor confidence. The Dow Jones Industrial Average rose 80.91 points, or 0.7 percent, to 11,143.69.

"We remain positive on the market based on decent earnings and the Fed's expected actions," said Stewart Beach, who oversees $1.1 billion as chief investment strategist at Old Second National Bank in Aurora, Illinois. "Even Citigroup beat earnings, which is kind of amazing considering the problems we're seeing on the foreclosure front."

The S&P 500 has rallied 13 percent since Bernanke said at the Fed's August conference in Jackson Hole, Wyoming, that he has the tools to prevent another recession. The Fed chief said on October 15 that there's a case for "further action" by the central bank in the form of additional monetary stimulus because inflation is too low and unemployment is too high.

The need for more stimulus was highlighted today by a Fed report showing production in the US unexpectedly dropped in September for the first time in more than a year, showing the industry that led the economy out of the recession is cooling. Output at factories, mines and utilities fell 0.2 percent, the first decline since the recession ended in June 2009.

Citigroup jumped 5.4 percent to $4.17 after third-quarter earnings amounted to seven cents a share, compared with a loss of 27 cents a share in the same period a year earlier, as the lender reduced loan-loss reserves by $1.99 billion and CEO Vikram Pandit said the bank may return capital to shareholders in 2012. Ten analysts surveyed by Bloomberg estimated per-share earnings of 5 cents a share at the bank, the third-biggest in the US by assets. Bank of America Corp., Wells Fargo & Co. and Goldman Sachs Group Inc. are also scheduled to post results this week.

Bank of America advanced the most in the Dow, gaining three percent to $12.34. Wells Fargo increased 5.5 percent to $24.87, the first gain in four days as evidence of flawed foreclosure documents triggered a selloff of US bank stocks last week. The S&P 500 Financials Index climbed 1.9 percent, the most among 10 industries in the benchmark measure.

Hasbro increased 3.8 percent to $46.81. Third-quarter earnings excluding some items were $1.09 a share, beating the average analyst estimate in a Bloomberg survey by 5 percent as sales from games such as Monopoly and preschool toys such as the Mr. Potato Head brand, featured in "Toy Story 3", rose.

H&R Block Inc. declined the most in the S&P 500, tumbling 11 percent to $10.94 and helping lead a measure of consumer discretionary shares to the only decline among 10 industry groups. The largest US tax-preparation firm said it may not be able to provide customers refund anticipation loans next year because of a dispute with HSBC Holdings plc.

The US Internal Revenue Service has said it will no longer help banks including HSBC and Republic Bancorp Inc. underwrite tax refund loans that lawmakers and consumer groups say carry unfairly high interest rates. H&R Block has a contract with London-based HSBC to provide the loans through 2013.

Halliburton fell 4.8 percent to $34.09 after gaining 7.5 percent in the previous two weeks. The world's second-largest oilfield-services provider said third-quarter earnings excluding some items were 58 cents a share, exceeding the average analyst estimate by 3.4 percent. The beat was the smallest since the third quarter of 2008, according to Bloomberg data. Some analysts had estimated earnings as much as 62 cents a share.

Of the 24 companies in the S&P 500 that reported results since Oct. 7, 18 have beaten analysts' per-share earnings estimates, according to data compiled by Bloomberg. Analysts surveyed by Bloomberg predict 24 percent growth in third-quarter profit from a year earlier for S&P 500 companies, the fourth straight quarterly increase.

Stocks held gains as confidence among home-construction companies rose in October to the highest level in four months, a sign residential building is stabilising at depressed levels. The National Association of Home Builders/Wells Fargo confidence index increased to 16, exceeding the most optimistic forecast in a Bloomberg News survey, from 13 the prior month. The gauge was projected to rise to 14, according to the median estimate in the Bloomberg survey.

AGA Medical Holdings Inc. soared 41 percent to $20.70. St. Jude Medical Inc. agreed to buy the maker of medical devices for $20.80 a share in a cash and stock transaction valued at $1.3 billion, including assumed debt, to expand its range of heart devices.

Fluor Corp. retreated 5.1 percent to $49.23. The largest publicly traded construction and engineering company in the US lowered its full-year earnings forecast to no more than $2.50 a share, down from its previous forecast of $2.90 a share to $3.20 a share. The company took a third-quarter charge because of delays on a wind-farm project.

McMoRan Exploration Co. slid 13 percent to $16.02. The company, which has been a partner in some of the largest US offshore oil discoveries of the past decade, reported a third- quarter net loss of 26 cents a share, worse than the 22-cent loss forecast by analysts.

Quicksilver Resources Inc. surged 16 percent to $14.65. The natural-gas explorer said controlling shareholders Quicksilver Energy LP and the Darden family are considering taking the company private.