US stocks rose as investors anticipate that the Federal Reserve will cut interest rates next week, dimming the allure of bonds. Computer-related shares such as Intel Corp and Cisco Systems Inc led the advance.
Benchmark indexes finished a fourth week of gains as reports showing rising unemployment and slowing manufacturing lifted speculation the central bank will lower borrowing costs to shore up growth.
"The drop in interest rates is starting to make stocks look really good," from said Edgar Peters, who oversees US$12 billion as chief investment officer at PanAgora Asset Management in Boston.
He said he's planning to shift assets into equities from bonds, which are outperforming stocks for a third year.
The Standard & Poor's 500 Index added 15.20, or 1.7 percent, to 900.96, its highest close since Sept. 11. Computer-related shares contributed a fifth of the gain, and all 10 of the index's industry groups rose, as investors expected lower rates will spur more capital spending.
The Dow Jones Industrial Average climbed 120.61, or 1.4 percent, to 8,517.64. The NASDAQ Composite Index advanced 30.95, or 2.3 percent, to 1,360.70, its highest finish since Aug. 26.
For the week, the S&P 500 gained 0.4 percent, the Dow 0.9 percent and the NASDAQ 2.2 percent. The indexes haven't recorded a losing week since Oct. 4.
Speculation the central bank will lower rates next week picked up after the Labor Department said the unemployment rate rose to 5.7 percent in October from 5.6 percent the prior month and the economy lost 5,000 jobs.
Further evidence the recovery is weakening came as the Institute for Supply Management reported its factory index was 48.5 last month. A reading below 50 indicates manufacturing contracted.
Disappointing reports on consumer confidence, economic growth and joblessness this week also stoked concern the recovery is losing momentum.
The data "might convince investors that the Fed will take necessary action to ensure that the economy will recover," said John Piccard, who handles US$2 billion at JP Morgan Fleming Asset Management. "The numbers show the economy isn't taking off."
More than two stocks rose for every one that fell on the New York Stock Exchange and the Nasdaq Stock Market. Some 1.45 billion shares traded on the NYSE, in line with the three-month daily average.
Semiconductor and telecommunications shares led the S&P 500's gain. Prospects for lower borrowing costs may encourage companies to increase spending on computer equipment.
Intel, the biggest chipmaker, jumped US$1 to US$18.30.
Cisco, the largest maker of computer-networking equipment, jumped US$0.43 to US$11.61.
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