Dow and S&P 500 rise as financials lead advance

The Dow Jones Industrial Average and Standard & Poor's 500 rose for a fourth day, recording their biggest weekly gains since September.

Financial stocks such as Citigroup Inc led the advance on speculation the Federal Reserve will cut interest rates this year to keep the economy from slipping into recession.

"The predominant news this week was the consensus moving to the Fed cutting rates," said Owen Fitzpatrick, who oversees US$7 billion in large company stocks at Deutsche Bank Private Banking. "That's what's helped the market."

Benchmark indexes moved between gains and losses Friday after WorldCom Inc said it found another US$3.3 billion in improper accounting, suggesting to investors that further revelations of corporate wrongdoing may still weigh on the market.

The Dow added 33.43, or 0.4 percent, to 8,745.45 Friday. The S&P 500 rose 3.18, or 0.4 percent, to 908.64. The NASDAQ Composite Index shed 10.40, or 0.8 percent, to 1,306.12.

For the week, the Dow gained 5.2 percent and the S&P 500 climbed 5.1 percent. For both, it was the largest advance since the week ended Sept. 28. The benchmarks rose for a third week, their longest streaks since March.

The NASDAQ advanced 4.7 percent, its first weekly climb since the week ended June 28.

Feeling the bottom

"Buyers are saying this may be as close to a bottom as we're going to get," said Keith Gertsen, head NASDAQ trader at Deutsche Bank Securities Inc. The S&P 500 has gained 14 percent since touching a five-year low on July 23.

Five stocks rose for every four that fell on the New York Stock Exchange while four declined for every three that advanced on the NASDAQ Stock Market.

Some 1.25 billion shares traded on the Big Board, according to preliminary statistics, the fewest since July 8.

Federal Reserve policy makers meet Tuesday. Richard Berner, chief US economist at Morgan Stanley, told clients today that he expects they'll cut the overnight lending benchmark by half a percentage point "to insure that emerging economic weakness doesn't turn into a double-dip recession."

Morgan Stanley is first among the 22 Wall Street firms that deal directly with the Fed to predict the central bankers will lower their 1.75 percent benchmark rate at the upcoming meeting.

In the last week, other firms have said they expect rate cuts sometime before the end of the year.

A rate cut may be needed, economists say, because a rebound in the US economy faltered in the second quarter.

Stocks were also helped by a Labor Department report showing worker productivity rose more than expected in the second quarter.

"The better the productivity, the less we need growth to justify earnings expectations," said Barry Hyman, investment strategist at Ehrenkrantz King Nussbaum.

Citigroup, the biggest financial-services company, gained US$0.41 to US$34.31. Fannie Mae, the biggest purchaser of mortgages, rose US$1.78 to US$75. General Electric Co, owner of the largest non-bank financial company, advanced US$0.49 to US$32.44, giving the S&P 500 its biggest boost. The largest insurer, American International Group Inc, added US$1.44 to US$66.95.

Financial companies were the best-performing group in the S&P 500 Friday, accounting for two-thirds of the gain.

Rising total

Misreported results by WorldCom now total US$7.18 billion. The bankrupt company, the second-biggest long distance provider, said it may have to write off as much as US$50.6 billion to reflect the declining value of assets.