US stocks rose, sending the Standard & Poor's 500 Index to its fourth gain in five days, on optimism the deepest slump in company earnings in a decade is ending.
Nortel Networks Corp rallied after predicting a narrower than-anticipated loss. Nike Inc climbed after reporting quarterly profit that beat forecasts. A larger-than-expected rise in consumer confidence added to evidence the economy is improving.
"The market is expecting an economic recovery in the second half of next year," said Eric Green, who oversees US$700 million at Penn Capital Management in Cherry Hill, New Jersey. He has been buying XM Satellite Radio Holdings Inc shares on speculation demand for the company's satellite-radio service will rise.
The S&P 500 rose 4.96, or 0.4 percent, to 1,144.89. Its 1.9 percent gain this week was the biggest in six weeks.
The NASDAQ Composite Index climbed 27.29, or 1.4 percent, to 1,945.83. The Dow Jones Industrial Average advanced 50.16, or 0.5 percent, to 10,035.34.
Profits for companies in the S&P 500 are expected to fall 16.3 percent this year, according to Thomson Financial/First Call.
That would be the biggest slump since a 16.7 percent drop in 1991.
Investors have bought semiconductor, software and retail shares in the past three months, driving the NASDAQ and S&P 500 toward their best quarterly performance in two years, on speculation the groups will benefit the most from an economic rebound.
The NASDAQ has gained 30 percent this quarter and S&P 500 has climbed 10 percent. The Dow has risen 13 percent in the fourth quarter, the biggest quarterly advance since December 1998.
While the S&P 500 rose four of the past five days, some investors are concerned its 18 percent rally the past three months aren't justified by the profit outlook.
"We've had an incredible rally, but we don't know whether the economy has actually bottomed," said Lois Roman, who manages US$2.5 billion for Zurich Scudder Investments. "The market may just plod along until we get more evidence" earnings are improving.
She has been buying shares of Exxon Mobil Corp and energy companies that stand to benefit from an increase in oil prices.
"I'd like to think the worst is over, but I need to see one more quarter of proof before I can make that conclusion," Roman said.
The Dow rose 2.3 percent this week while the NASDAQ dropped 0.4 percent.
Almost 1.7 billion shares traded on the New York Stock Exchange, 25 percent more than the three-month daily average. More than three stocks rose for every two that fell on the Big Board and the NASDAQ Stock Market.
Trading was above average as stock and index options and index futures expired, an event known as ``triple witching,'' which comes four times a year.
Investors also shifted portfolios to reflect changes in indexes including the NASDAQ 100 Index, a benchmark for large technology companies. Symantec Corp and Cephalon Inc were among the 13 stocks added to the index after exchanges closed today, and Ariba Inc and 3Com Corp were among those removed.
JDS Uniphase Corp, the largest supplier of components used in fiber-optic networks, advanced US$0.25 to US$8.45. Tellabs Inc, the top maker of equipment used to manage traffic on phone networks, rose US$1.11 to US$14.97.
Shares of semiconductor companies led the S&P 500 higher. PMC-Sierra Inc, which makes chips for telecommunications gear, jumped US$1.75 to US$20.01. Texas Instruments Inc, whose chips power two-thirds of the world's cellphones, climbed US$1.50 to US$28. Intel Corp, the biggest chipmaker, rose US$0.43to US$32.41.
Nike, the largest maker of athletic shoes, rose US$2.51 to US$56.30, extending its gain for the quarter to 20 percent. The company's fiscal second-quarter earnings of 48 cents a share, beat analysts' estimates by US$0.02.
The company said it controlled costs, boosted sales overseas and sold more basketball-related clothing in the US.
"It's very difficult to keep the US consumer down," said Jim McCabe, who runs the US$124 million Gerrard North American Growth fund. "After going through a bad period for sneakers and sports clothing, that area of the fashion business has come back lately."
Retailers gained after a report showing a greater-than-expected rise in consumer confidence in November added to evidence the economy is improving. Wal-Mart Stores Inc, the largest retailer, advanced US$1.31 to US$57.57. Target Corp, a discount retailer, rose US$0.91 to US$38.21.
Gap Inc gained US$0.99 to US$13.16. Prudential Securities Inc analyst Stacy Pak said the largest clothing chain may rise with other retailers as investors bet the economy will rebound.
Still, Pak said sales aren't improving. She raised her rating to "hold" from "sell."
Western Digital Corp gained US$0.58 to US$6.10. The computer- disk-drive maker said it will top its own sales and earnings forecasts for the fiscal second-quarter on higher-than-expected disk-drive sales.
Integrated Circuit Systems Inc climbed US$2.56 to US$21.51. The maker of silicon-timing devices raised its second-quarter revenue-growth estimate to between 5 percent and 10 percent from the previous quarter. Integrated Circuit previously forecast a 5 percent jump in sales.
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