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Shares soar after Microsoft boosts forecasts

Major markets * The S&P 500 added 5.19 on Friday, or 0.6 percent, to 884.39. * The Dow climbed 47.36, or 0.6 percent, to 8,322.40. * The NASDAQ Composite Index rose 15.57, or 1.2 percent, to 1,287.86.

US stocks rose, sending the Standard & Poor's 500 Index and Dow Jones Industrial Average to their largest weekly gains in more than a year, as Microsoft Corp boosted forecasts for sales and profits.

Traders and investors said the rally that lifted the benchmarks 14 percent from five-year lows set last week has buoyed investor confidence. More than 60 percent of the S&P 500 companies to report quarterly results have beaten analysts' estimates, according to Thomson First Call.

"What we have finally begun to see is a strong, positive shift in earnings," said Diane Garnick, global investment strategist at State Street Global Advisors, which manages US$770 billion in Boston. "The change from an earnings depression to a slight earnings recovery is making it much more optimistic for equities," Garnick told Bloomberg Television.

The S&P 500 added 5.19, or 0.6 percent, to 884.39. Microsoft, the most valuable company in the index, contributed more than a quarter of the gain. The Dow climbed 47.36, or 0.6 percent, to 8,322.40. The NASDAQ Composite Index rose 15.57, or 1.2 percent, to 1,287.86. Each closed at its highest in a month.

For the week, the S&P 500 surged 5.9 percent and the Dow 6 percent. Each had its largest weekly advance since the five days ended Sept. 28, 2001. That was the second week of trading after the Sept. 11 terrorist attacks. Stocks plunged the previous week.

The NASDAQ added 6.4 percent this week, its largest weekly gain since May.

Profit growth for companies in the S&P 500 is expected to be 6.4 percent in the third quarter, according to First Call. At the start of the third quarter, analysts forecast 17 percent growth.

Analysts and investors have set "a pretty low bar" for corporate profits, said Franklin Morton, director of research at Ariel Capital Management Inc, which oversees about US$10 billion in Chicago. "Don't confuse beating analyst expectations with a good quarter."

"I would think we're most of the way through this rally," said Morton. The Ariel Fund, which Morton helps manage, has returned 11.8 percent per year for the last three years, putting it in the top 3 percent of all stock mutual funds for the period, according to Bloomberg data.

Today, rising and falling stocks were about even on the New York Stock Exchange and the NASDAQ Stock Market. Some 1.42 billion shares traded on the Big Board, down 7.2 percent below the three- month daily average.

Microsoft climbed US$2.38 to US$53.15. The company said it will earn as much as US$1.95 a share for the fiscal year ending June 30 on sales of as much as US$32.6 billion, above its prior estimates. The largest software maker had forecast profit of US$1.85 to US$1.91 on sales of US$31.4 billion to US$32 billion.

Rational Software Corp climbed US$1.25, or 22 percent, to US$6.85. Excluding certain costs, second-quarter earnings at the maker of automation software would have beaten the average estimate of analysts surveyed by First Call.

Biogen Inc advanced US$3.44, or 10 percent, to US$36.81. Biogen Inc regained royalties from Schering-Plough Corp's billion-dollar hepatitis treatments, bolstering revenue as it faces competition for its only product, the multiple sclerosis drug Avonex.

Siebel fell US$1.10, or 15 percent, to US$6.20 after posting its first quarterly loss since 1998. The largest maker of customer relationship management software lost US$0.19 a share in the third quarter because of costs for dismissing workers and shutting offices.

Broadcom dropped US$1.82, or 15 percent, to US$10.63. The biggest maker of cable-modem semiconductors said revenue will be unchanged in the fourth quarter from the third. Analysts surveyed by First Call had forecast higher sales.

Siebel and Broadcom fell even as rivals in their industries advanced. During the rally over the past six sessions, 90 percent of the stocks in the S&P 500 rose.

Siebel rival PeopleSoft Inc gained US$0.78 to US$17.14. Among makers of chips and chip equipment, Maxim Integrated Products Inc gained US$0.65 to US$29.63, and Teradyne Inc advanced US$0.66 to US$10.56.

Ford Motor Co slid US$0.23 to US$8.26 and General Motors Corp, the world's largest automaker, fell US$1.09 to US$34.31.
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