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Stocks rose, reversing an early drop, and the cost to insure Egyptian debt from default declined as the resignation of the nation’s President Hosni Mubarak and a jump in U.S. consumer confidence bolstered investor optimism.

The Standard & Poor’s 500 Index rose 0.6 percent to 1,329.15 at 4 p.m. in New York, its highest level since June 2008. An exchange-traded fund tracking Egyptian equities rallied 4.5 percent and the cost of credit-default swaps on the nation’s debt fell 16 basis points to 322, according to CMA. The Dollar Index climbed 0.2 percent and 10-year Treasury yields fell seven basis points to 3.64 percent. Oil slid to a 10-week low.

Equities turned higher as Mubarak handed power to the military, bowing to demands of protesters who have occupied central Cairo for the past 18 days to demand an end to his 30- year rule. The resignation eased concern that tensions will spread throughout a region that holds more than 50 percent of the world’s oil reserves. Stocks began rebounding earlier as consumer sentiment climbed to an eight-month high.

“We should be able to forget about Egypt, at least in the near term, and focus on improving economic fundamentals,” said John Praveen, the Newark, New Jersey-based chief investment strategist at Prudential International Investments Advisers, a unit of Prudential Financial Inc., which oversees $750 billion. “The consumer confidence report today was just one of a series of very positive figures that show that the recovery is on track. That should bring some short-term relief despite the uncertainties that we may still have about other governments in the Middle East and oil.”

Weekly Advance The S&P 500 extended its weekly advance to 1.4 percent and is up 96 percent from its 12-year low in 2009. Caterpillar Inc., JPMorgan Chase & Co. and Bank of America Corp. rose more than 1.9 percent for the top gains in the Dow Jones Industrial Average. ConocoPhillips rallied 2.1 percent after the energy company announced plans to boost its dividend and buy back as much as $10 billion in shares.

“I’m still hanging in there with stocks,” said Barton Biggs, 78, who runs New York-based hedge fund Traxis Partners LP. “Egypt is a relatively small geopolitical uncertainty compared to the sovereign debt crisis in Europe and U.S. house prices,” he said. I expect “more upheavals, but not necessarily in Gulf monarchies. U.S. high quality, big-cap multinationals are still the best houses in a bad global investment neighborhood.”

Mortgage Insurers Rally MGIC Investment Corp. and Radian Group Inc. rallied more than 9.5 percent to lead mortgage insurers higher after U.S. Treasury Secretary Timothy F. Geithner called for limiting the role of government-backed competitors. Geithner today presented Congress with a set of options for weaning the $11 trillion mortgage market from its dependence on the government, while calling for changes to be phased in “responsibly and carefully” to avoid economic disruptions.

Spreads on Fannie Mae’s five-year unsecured debt fell 0.026 percentage point to 0.108 percentage point, down from 0.19 percent point on Feb. 3, as the proposal suggested shrinking the balance sheets of Fannie Mae and Freddie Mac and the Federal Home Loan Bank system over time, reducing the supply of their borrowing.

The Thomson Reuters/University of Michigan preliminary consumer sentiment index climbed to 75.1 for February. The U.S. trade deficit widened 5.9 to $40.6 billion in December, in line with the $40.5 billion median forecast in a Bloomberg survey, as the cost of imported oil climbed, Commerce Department data showed.

Egypt Bonds Rally

The yield on Egypt’s dollar bonds due 2020 reversed gains after Mubarak’s resignation and were down 15 basis points at 6.34 percent.

Global depositary receipts for Orascom Construction Industries, the country’s biggest publicly traded builder, reversed most of a 6.1 percent slide to close down 0.7 percent. The stock exchange in Cairo has been shut for two weeks amid the protests. The Market Vectors Egypt Index ETF rallied 4.5 percent to $18.60.

The Stoxx Europe 600 Index also erased earlier declines and rose 0.4 percent as auto companies and commodity producers rallied.

Michelin & Cie. climbed 3.7 percent as the world’s second- largest tiremaker announced that full-year profit exceeded analysts’ projections. Nokia Oyj tumbled 14 percent after announcing that it will make phones for Microsoft Corp.’s mobile operating system. L’Oreal SA sank 4.2 percent after the world’s largest cosmetics maker reported profit that failed to beat analysts’ estimates.

Asian Markets The MSCI Asia Pacific Index excluding Japan sank 0.8 percent. Newcrest Mining Ltd., Australia’s biggest gold producer, dropped 1.4 percent after first-half earnings missed estimates.

The dollar strengthened against 11 of 16 major peers, appreciating 0.3 percent against the euro and 0.3 percent versus the yen. The Australian dollar dipped below $1 versus the U.S. dollar for the first time in more than a week after the country’s central bank Governor Glenn Stevens said policy makers judged it “sensible of late” to leave interest rates unchanged. The Aussie pared losses to depreciate 0.3 percent to $1.0019.

Oil for March delivery declined 1.3 percent to $85.58 a barrel, the lowest settlement since Nov. 30, as Mubarak’s resignation reduced concern that crude shipments in the Middle East will be disrupted.

Cotton futures surged to a record for a third straight day as increased exports from the U.S., the world’s largest shipper, signaled that global demand remains robust. Cotton for March delivery climbed as much as 3.7 percent to $1.9455 a pound.