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Dow, S&P rise on growing optimism

Major indexes * The NASDAQ composite index slipped 0.57, or 0.03 percent, to 1,745.73 * The Dow Jones industrial average closed up 59.64, or 0.6 percent. at 9,323.54. * Standard & Poor's 500 index gained 3.10, or 0.3 percent, to 1,087.20.

Betting that the economy won't get much worse and that business will indeed improve next year, investors pushed the stock market mostly higher Friday for a second straight day. In focusing on the future, the market set aside its disappointment over a surge in unemployment.

Analysts said investors for the most part shrugged off the jobless report because they believe the economy will turn around next year thanks to this year's nine interest rate cuts and the possibility of a tax cut package being pushed by President George W. Bush. The market, which also looked past Thursday's reports of big drops in consumer spending and manufacturing activity, is also increasingly hopeful about the government's retaliation for the Sept. 11 terrorist attacks.

``There's a whole bullish case revolving around the notion that we will be successful in degrading the terror threat, and our economy can expand again, and that 2002 will be better than 2001,'' said Joseph Battipaglia, chief investment strategist at Gruntal & Co.

The Dow Jones industrial average closed up 59.64, or 0.6 percent. at 9,323.54. The blue chips, which recovered from an earlier 54-point loss, added to their 188-point surge from Thursday.

But the broader market finished narrowly mixed. The NASDAQ composite index slipped 0.57, or 0.03 percent, to 1,745.73, while the Standard & Poor's 500 index gained 3.10, or 0.3 percent, to 1,087.20.

News that the nation's unemployment rate soared to 5.4 percent in October, a 0.5 percent rise over September, pushed the entire market lower early Friday. Investors were disturbed to hear that it was the biggest one-month jump in joblessness since May 1980 as a massive 415,000 jobs were eliminated last month and it's the highest unemployment rate since December 1996.

Investors later resumed buying, and analysts said they were focused on expectations for next year. In fact, the market rewarded companies that announced layoffs, believing such steps will help boost profits. Boeing, which announced it will speed up its plans to lay off thousands of workers, rose US$1.16 to US$34.35.

Analysts said investors should be encouraged by companies efforts to trim operations and costs.

"What we are telling clients is, `You know companies are leaner and meaner now ... If you have cash on the sidelines, there are some great opportunities out there,'" said Thomas Lydon Jr., president of Global Trends Investments in Newport Beach, California.

After a dismal third quarter marked by steep declines in profits or wider losses, analysts expect companies to have an easier time posting earnings growth in the fourth quarter and next year.

``Earnings could be recovering six months out, and generally, investors buy ahead of profits turning positive,'' said Ronald Hill, investment strategist at Brown Brothers Harriman & Co in New York.

Another catalyst for Friday's upturn was news from Thursday that Microsoft and the Justice Department had reached a tentative agreement in the historic antitrust case against the software maker.

After soaring US$3.69 on Thursday, Microsoft slipped US$0.44 to US$61.40 on Friday.

Overall, the tech sector was mixed. Semiconductors traded higher for a second day, rising Thursday as the Semiconductor Industry Association said Thursday that business will improve next year. Advanced Micro Devices rose US$0.75 to US$12.25.

On the downside, Cisco, which is to release third-quarter earnings results tomorrow, fell US$0.40 to US$17.26.

As for blue chip dealing, gains occurred across an array of sectors and industries, which has been the case with the market's recent rallies. Merck rose 83 cents to US$65.03, Wal-Mart gained US$0.73 to US$52.97, and Honeywell advanced US$0.70 to US$31.15.

Still, analysts have also cautioned that in the near term, the market's rallies aren't likely to hold up because of the ongoing economic slump, the political anxiety following the terrorist attacks and the spread of anthrax that began soon after.

Advancing issues narrowly outnumbered decliners 16 to 15 on the New York Stock Exchange. Volume was 1.11 billion shares, compared with the 1.31 billion shares traded Thursday.

The Russell 2000 index, the barometer of smaller company stocks, fell 1.81, or 0.4 percent, to 433.07.
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