US stocks rose on Friday, snapping a five-day losing streak, after AOL Time Warner Inc said Chairman Stephen Case bought 1 million shares of the biggest media and Internet company this week, signaling to some investors benchmark indexes' declines were overdone.
Stocks rallied in the final 90 minutes as Case's purchase shored up optimism an economic recovery will boost corporate profits. Tyco International Ltd and WorldCom Inc extended their rebound after executives said the companies are financially sound.
"Things got to an absurd point -- not everybody in the world is going out of business," said Donna Van Vlack, head trader at Brandywine Asset Management, which has US$8 billion in assets in Wilmington, Delaware.
The Standard & Poor's 500 Index rose 16.05, or 1.5 percent, to 1,096.22. The NASDAQ Composite Index climbed 36.77, or 2.1 percent, to 1,818.88. The Dow Jones Industrial Average gained 118.80, or 1.2 percent, to 9,744.24.
The S&P 500 fell for the fourth week in five on concern corporate accounting practices misstate profits. Qualcomm Inc.
tumbled to its lowest level since August 1999 after a research organization questioned the company's accounting.
For the week, the S&P 500 dropped 2.3 percent, the Nasdaq lost 4.8 percent and the Dow fell 1.7 percent.
For many companies "there may be and probably is no fraud at all, but the confidence isn't there and investors who have lost real money are right to say, `I need to be cautious,'" said Michael Farr, president of Farr Miller & Washington, which oversees US$350 million in Washington, DC.
Farr is holding onto his General Electric Co shares, which slid on concern about accounting practices of firms that have grown through purchases. The washing machine maker and owner of the NBC television network has dropped 7.2 percent this year.
Some 1.3 billion shares traded on the New York Stock Exchange, the fewest in two weeks. About two stocks rose for every one that fell on the Big Board and the NASDAQ Stock Market.
AOL Time Warner climbed US$1.91, or 7.5 percent, to US$27.36, the biggest one-day gain since Sept. 24. Case said in a statement "the purchase underscores the confidence I have in the company and its growth prospects."
Based on yesterday's closing price, the purchase would be valued at US$25.5 million.
"Steve Case buying back AOL stock with his own money sends a very positive signal to investors," said Erik Gustafson, a manager at Stein Roe & Farnham Inc, which has US$30 billion. "It's recognition from a person who would know best that his company is undervalued."
Tyco rose US$1.83 to US$29.88, bringing its three-day advance to 29 percent. The company, which has lost almost half its value this year on speculation it misstated earnings, will likely sell rather than spin off its finance unit to ease concern it's strapped for cash, analysts and shareholders said.
JP Morgan Chase & Co, Tyco's leading lender, climbed US$1.05 to US$31.12.
WorldCom climbed US$0.66 to US$8.18. JP Morgan Chase Securities Inc analyst Marc Crossman said the long-distance carrier has set a "realistic" forecast given sluggish expectations about the economy and has cleared up accounting concerns. He raised the stock, which has dropped 42 percent this year, to "buy" from "long-term buy."
American International Group Inc rose US$2.89 to US$74. Morgan Stanley Dean Witter & Co analyst Alice Schroeder said the largest insurer's profit will growth 15 percent this year and next, making its shares "very attractive."
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