US stocks rallied, sending the NASDAQ Composite Index to its biggest gain in six weeks, after networking-equipment maker Cisco Systems Inc said orders are meeting forecasts.
Cisco's report raised optimism that corporate profits may reverse their slide, helping lift shares of technology companies including Juniper Networks Inc, Microsoft Corp and Sun Microsystems Inc. Their gains propelled the NASDAQ to its first winning week since Aug. 3.
Stocks also got a boost after new-home sales unexpectedly rose in July, on pace to make 2001 the best year on record for the industry.
As the third-largest NASDAQ company by market value, "Cisco carries weight," said Barry Hyman, investment strategist at Ehrenkrantz King Nussbaum. "The housing numbers showed the consumer is still in the game, which means a second-half recovery may still be possible. For an investor, the time to get in is now," he said.
The NASDAQ rose 73.83, or 4 percent, to 1,916.80. The Standard & Poor's 500 Index gained 22.84, or 2 percent, to 1,184.93, with all 11 of its industry groups climbing. The Dow Jones Industrial Average advanced 194.02, or 1.9 percent, to 10,423.17, as 27 of 30 members rose. Twenty-one of the 25 most-active US stocks climbed. For the week, the NASDAQ gained 2.7 percent, the S&P 500 rose 2 percent and the Dow climbed 1.8 percent.
More than three stocks rose for every two that fell on the NASDAQ Stock Market and the New York Stock Exchange. More than 1 billion shares traded on the Big Board, 6.5 percent below the three-month daily average.
While new-home sales surged in July, a separate report showed durable-goods orders fell to the lowest level in three years as sales of semiconductors and computers dropped. That made some investors less optimistic the economy and corporate profits are rebounding.
"Cisco didn't say orders have improved, they used the words `stabilized,'" said James Fargis, a money manager for Fleet Bank, which manages over US$100 billion. "Durable-goods orders were down. This isn't the stuff another leg up is made of."
Still, Fargis said he's holding a higher percentage of technology stocks, including Intel Corp, EMC Corp and Microsoft, than their weighting in benchmark indexes, as he expects those stocks to have the fastest earnings growth when the economy does improve.
Cisco rose US$1.49, or 8.9 percent, to US$18.25 and was the most-active stock, with 86 million shares changing hands.
The biggest maker of computer-networking equipment said orders in the quarter that began July 29 are meeting its forecast and that "we are beginning to see signs that our business is stabilizing." Cisco also announced its biggest management reorganization since 1997 and said the head of its telecom-products unit quit.
Juniper, the second-largest maker of network routers, gained US$1.08 to US$17.28, and Sun Microsystems, one of the biggest manufacturers of server computers that run corporate networks and Web sites, rose US$1.15 to US$14.97.
Among other large technology companies, software maker Microsoft rose US$2.93 to US$62.05 and JDS Uniphase Corp, the largest fiber-optic parts maker, advanced US$0.64 to US$7.66.
The possibility the economic decline may be over lifted all 16 stocks in the Philadelphia Semiconductor Index, which climbed 6.2 percent, its biggest gain in a month.
Chips, which are used in everything from greeting cards to cars to cellphones, are seen as one of the earliest groups to benefit from a resurgent economy.
Intel, the largest chipmaker, rose US$1.41 to US$29.08. Micron Technology Inc, the No. 1 maker of PC memory chips, jumped US$2.26 to US$38.54. Teradyne Inc, the biggest maker of semiconductor-testing equipment, surged US$3.79 to US$35.05. Rambus Inc, which licenses computer-memory chip patents, rose US$0.81 to US$5.67.
Linear Technology Corp rose US$2.82 to US$42.43, Applied Materials Inc advanced US$2.76 to US$46.89, KLA-Tencor Corp rose US$2.99 to US$51.57.
Qualcomm Inc rose US$3.16 to US$66.11. Goldman, Sachs & Co analyst Nathaniel Cohn said Qualcomm, which licenses patents for mobile telephones used by 90 million people, is seeing an increase in its chipset sales that is likely to continue in the fourth quarter.
Siebel Systems Inc, a provider of software and services for customer relations and sales, gained US$1.63 to US$23.53.
Lucent Technologies Inc rose US$0.37 to US$7.02. The biggest US phone-equipment company said it may break even next fiscal year, after losing money for the past three quarters. The company is seeking a buyer for its customer-care and billing division formerly known as Kenan Systems, the
Lucent is selling off businesses and cutting more than half its workforce.
Novell Inc rose US$0.44 to US$4.74 after the maker of software for running corporate computer networks said it expects to match full-year earnings estimates of US$0.02 a share.
HeadHunter.net Inc soared US$2.21 to US$9.16. Tribune Co, publisher of the Chicago Tribune and Los Angeles Times, and Knight Ridder Inc, which owns the Miami Herald and Philadelphia Inquirer, agreed to pay US$9.25 a share for the money-losing online recruiter to expand their CareerBuilder Inc recruitment venture.
Electronics Boutique Holdings Corp jumped US$4.75 to US$40.68.
The video and computer-games retailer reported a narrower-than-expected loss of US$0.07 a share in the second quarter. Analysts had forecast a US$0.22 loss.
Williams-Sonoma Inc rose US$3.61 to US$32.21. The kitchen-goods and home-furnishings retailer reported second-quarter earnings that beat estimates. It also forecast third-quarter profit of US$0.05 to US$0.07 a share, as little as half what analysts projected.
Kohl's Corp climbed US$2.02 to US$56.91 after Goldman, Sachs & Co analyst George Strachan said the retailer has the "highest-quality" growth prospects in the industry. He raised his rating to "recommend list" from "market outperform." Providian Financial Corp fell US$2.77 to US$40.88 after Goldman, Sachs & Co. analyst Robert Hottenson Jr. said the No. 5 US issuer of Visa and MasterCard credit cards "continues to be challenged by the effects of a continued week economy." Hottenson lowered his profit estimates for this year and next.
Kmart Corp slid US$0.73 to US$10.24. Prudential Securities Inc analyst Wayne Hood cut the No. 2 discount retailer to "hold" from "buy." Hood cited lower expected earnings and the likelihood of rising debt levels.
The Russell 2000 Index of smaller stocks rose 7.39, or 1.6 percent, to 480.81. The Wilshire 5000 Total Market Index, the broadest measure of US shares, climbed 196.33, or 1.8 percent, to 10,948.41, adding US$226 billion to the market value of US stocks.
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