The Standard & Poor's 500 Index rose on speculation the worst of the economic slump is ending and corporate profits will rebound next year. Benchmark indexes finished higher for the fourth week in five.
Defense contractors United Technologies Corp and Boeing Co boosted the Dow Jones Industrial Average after Lockheed Martin Corp lifted its earnings forecast for this year and next. JDS Uniphase Corp and VeriSign Inc declined on slumping sales, dragging down the NASDAQ Composite Index.
"We are in better shape than we were a month ago," said Allen Ashcroft, who manages US$400 million at Allied Investment Advisors Inc. "The market is slowly starting to come out of whatever funk we were in before the Sept. 11 terror attacks."
Ashcroft has been buying shares of technology and energy companies because he says those groups will rally when the economy picks up. He has been selling telephone stocks.
The Dow climbed 82.27, or 0.9 percent, to 9,545.17, boosting its gain this week to 3.7 percent. The S&P 500 rose 4.52, or 0.4 percent, to 1,104.61, pushing it up 2.9 percent for the week.
General Electric Co, AOL Time Warner Inc. and Exxon Mobil Corp led the advance.
The NASDAQ lost 6.51, or 0.4 percent, to 1,768.96. Even so, it rose 5.8 percent in the past five days.
While the S&P 500 has recouped losses stemming from the Sept. 11 terrorist attack, the index still is down 16 percent this year.
The NASDAQ, which is 4.3 percent above its pre-attack level, has lost 28 percent since the beginning of the year. The Dow is down 12 percent for the year.
"We're not expecting a moon shot from here," said Sally Anderson, who helps manage US$2.5 billion at Kopp Investment Advisors in Edina, Minnesota. Stocks could retreat and test the lows reached in the week following the attack. The S&P 500 touched a three-year low on Sept. 21.
Analysts expect corporate profits to rebound next year, starting in the second quarter. They predict earnings for S&P 500 companies will rise 10.1 percent in the April-to-June period and will grow 15.8 percent for the full year, according to Thomson Financial/First Call.
With more than three-quarters of the S&P 500 having reported, third-quarter earnings have dropped 21.1 percent from a year ago, according to First Call.
Stocks are rising because of "the ability of institutional investors to look over" this period of falling profits, said Joe Demarco, a trader at HSBC Asset Management Inc. "There is growing confidence that there is a recovery perhaps late next year and investors are willing to take that leap now."
More than 1.2 billion shares traded on the New York Stock Exchange, 5.4 percent below the three-month daily average. Almost three stocks rose for every two that fell on the Big Board, while seven stocks advanced for every six that declined on the NASDAQ Stock Market.
General Electric jumped US$1.01 to US$38.88, leading the S&P 500 to its fourth gain this week. AOL Time Warner advanced US$1.02 to US$33.50, and Exxon Mobil rose US$0.50 to US$41.06.
Lockheed Martin climbed US$1.93 to US$50.83 after the largest defense contractor raised its profit forecast for this year and next. The stock has gained 33 percent since the attacks on expectations for increased military spending to combat terrorism.
Lockheed and Boeing were vying to win the US$200 billion Joint Strike Fighter contract to build fighter jets for the US. After exchanges closed, the Pentagon awarded Lockheed the costliest military program ever.
Boeing, the largest plane maker, gained US$1.78 to US$37.68 and United Technologies, which makes Pratt & Whitney jet engines, advanced US$2.54 to US$57.01.
Raytheon Co, whose Tomahawk missiles are being used in the US attacks on Afghanistan, gained US$0.75 to US$34. Honeywell International Inc, the largest maker of cockpit equipment and automated controls, rose US$1 to US$30.
JDS Uniphase fell US$1.19 to US$8.77. The biggest maker of fiber-optic components said fiscal first-quarter sales tumbled 58 percent and second-quarter revenue may fall 10 percent to 15 percent from the previous period as demand for telecommunications gear wanes.
"We do not believe that September was the bottom, but December or March might be," Chief Executive Officer Jozef Straus said.
JDS and other equipment makers including Sycamore Networks Inc. and Corning Inc have struggled as telecommunications companies slowed plans to expand networks, decreasing demand for fiber-optic products. JDS Uniphase, Sycamore and Corning have all lost more than three-quarters of their value this year.
Ciena Corp, which also makes fiber-optic equipment, slid US$1.99 to US$19.80. Corning lost US$0.09 to US$8.63 and Sycamore Networks gained US$0.10 to US$4.48.
VeriSign shed US$10.52, or 20 percent, to US$42.82. The provider of Internet registration and security services reported slower sales in the third-quarter. Deferred revenue, or sales booked in advance of when service is provided, rose 3 percent in the third-quarter compared to a 5 percent increase in the second quarter and a 7 percent gain in the first quarter.
Flextronics International Ltd dropped US$2.96 to US$21.72 after the second-largest contract electronics manufacturer said earnings for this quarter will fall short of forecasts. The company projected fiscal third-quarter profit between US$0.15 and US$0.18 a share, while analysts' expected US$0.19 a share.
Flextronics said it is firing 10,000 workers, or 15 percent of its staff, and shifting work to cheaper plants to save money.
Ericsson AB gained US$0.13 to US$4.48 after the largest maker of wireless networks said Michael Treschow will replace Lars Ramqvist as chairman, sparking optimism he will help speed the company's return to profit.
WorldCom Inc jumped US$1.07 to US$13.38 after Merrill Lynch & Co analyst Adam Quinton raised his rating on the No. 2 long-distance company to "accumulate" from "neutral."
SBC Communications Inc, the No.2 US phone company, rose US$0.30 to US$39.20 and Verizon Communications Inc. gained 42 cents to US$50.61.
Overture Services Inc, formerly known as GoTo.com Inc, rose US$6.45 to US$25.50. The provider of Internet search services said it expects fourth-quarter profit of US$0.17 a share, beating the US$0.06 average estimate of the three analysts surveyed by First Call.
Enron Corp dropped US$0.95 to US$15.40. The largest energy trader tapped a US$3 billion credit line as investors expressed concern the company's credit rating may be cut, reducing its ability to fund daily operations.
The company has lost more than half its value in the past eight days amid an investigation by the Securities and Exchange Commission into its transactions with affiliated companies run by the company's former chief financial officer.
The Russell 2000 Index of smaller stocks rose 2.69, or 0.6 percent, to 438.65. The Wilshire 5000 Total Market Index, the broadest measure of US shares, climbed 42.41, or 0.4 percent, to 10,185.53. Based on changes in the Wilshire, the value of US stocks gained US$334.2 billion this week.
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