US stocks rose, driving the Standard & Poor's 500 Index to its second straight winning week, as better-than-expected reports on consumer confidence and unemployment shored up optimism the economy is recovering.
American Express Co and other credit card companies rallied on expectations more free-spending shoppers will keep racking up debt. AOL Time Warner Inc advanced after the biggest Internet provider said it added 1 million new users in the past month.
"There are all sorts of very optimistic forecasts for huge earnings recoveries next year and you have the idea that you don't want to be left behind," said Donald Coxe, chairman and chief strategist for Chicago-based Harris Investment Management, which oversees US$17 billion.
The S&P 500 rose 3.89, or 0.3 percent, to 1,161.02. The NASDAQ Composite Index climbed 10.85, or 0.6 percent, to 1,987.27. The Dow Jones Industrial Average gained 5.68, or 0.1 percent, to 10,136.99.
Just 894 million shares traded on the New York Stock Exchange, down 30 percent from the three-month average as many traders and investors took off Christmas week. It marked the first time since August that less than 1 billion shares traded on three consecutive days. Almost two stocks rose for every one that fell on the Big Board.
The Dow climbed 1 percent this week. The average, which had sunk as much as 24 percent for the year following the Sept. 11 terrorist attacks, has cut its loss for the year to 6 percent.
The S&P 500 gained 1.4 percent this week and is down 12 percent this year. The NASDAQ rallied 2.1 percent the past five days and is down 20 percent this year. That has brought its decline the past two years to 50 percent.
Earnings for companies in the S&P 500 have dropped every quarter this year and are expected to fall in the first three months of next year before rising 8.8 percent in the second quarter, according to Thomson Financial/First Call.
Stocks rallied in the past three months in anticipation of improved earnings. Still, the gains may be overdone considering expectations for two more quarters of declining profits, some investors said. While a "huge rebound in profits next year is a more probable concept than the tooth fairy, I am not sure how much more probable it is," Coxe said.
Stocks rose today as consumer confidence surged this month, the first increase since June, according to a survey suggesting Americans feel the worst of the recession is over. The Conference Board's index had its largest gain since February 1998.
A government report showed jobless claims rose less than expected last week, a sign the biggest employment losses related to the terrorist attacks may be over.
"Some economic recovery is on the horizon and that should continue to be good for stocks," said James Luke, manager of the US$200 million BB&T Asset Management Large Company Growth Fund in Raleigh, North Carolina. Luke has been adding to holdings of Dell Computer Corp, EMC Corp and ChevronTexaco Corp. The fund has lost 22 percent this year.
American Express, the charge-card company and biggest travel agency, added US$1.05 to US$36.05 after the economic reports underscored confidence the recession hasn't deterred individuals from spending as much as expected.
AOL Time Warner added the most to the S&P 500. The biggest media and Internet company advanced US$0.67 to US$33.10, paring its loss for the year to 4.9 percent. The company added 1 million subscribers in about four weeks to its America Online Internet service, raising the total to more than 33 million.
Micron Technology Inc. gained, extending a rally that has boosted the Philadelphia Semiconductor Index 41 percent since stocks fell to three-year lows on Sept. 21.
Micron climbed US$0.49 to US$31.66. The maker of personal-computer memory chips has soared 51 percent since Sept. 21.
Investors anticipate chip companies, whose products are used in everything from cell phones to greeting cards, will be among the first to benefit when the economy begins to grow.
Micron is likely to form an alliance in the memory-chip business with Hynix Semiconductor Inc of Korea, which also makes chips for computers.
Atmel Corp gained US$0.34 to US$7.83. The chip company jumped 13 percent yesterday after an analyst at AG Edwards said it is inexpensive.
Other chip companies advanced. Novellus Systems Inc rose US$1.57 to US$41.32, Xilinx Inc gained US$1.43 to US$41 and Altera Corp climbed US$1.18 to US$22.40.
Intel Corp, the largest chipmaker, fell 48 cents to $32.19.
Nokia Oyj rose US$0.44 to US$25.25. Investors are optimistic the maker of cellphone equipment had strong handset sales before Christmas and that an economic rebound will encourage consumers to increase their spending.
Citigroup Inc and JP Morgan Chase & Co led financial shares higher. The two lead lenders to the bankrupt energy trader Enron Corp won a 23-day extension to get commitments for US$1 billion in financing the trader says it needs to stay in business. Citigroup rose US$0.45 to US$51.19 and JP Morgan Chase advanced US$0.23 to US$36.55.
Brokers extended their three-month rally, led by Merrill Lynch & Co. The Amex Securities Broker/Dealer Index has gained 36 percent this quarter, outpacing benchmark indexes. It is down 7 percent this year.
"Brokers move with the market, and we think the market will improve next year," said Richard Sichel, who oversees US$600 million as chief investment officer at Philadelphia Trust Co.
Morgan Stanley Dean Witter & Co jumped US$1.47 to US$56.87.
Yahoo Inc gained US$0.53 to US$18.30. The most-used Internet search service rose for a third day after Merrill Lynch analyst Henry Blodget raised his fourth-quarter revenue estimate to US$175 million from US$168 million.
Chinadotcom Corp surged US$0.48, or 19 percent, to US$3.
Chinese companies trading in the US rose after President George W. Bush approved permanent normal trade relations with China, the same low-tariff trading status most countries enjoy with the US.
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