Posted at 11:53 a.m., Friday, January 4, 2002

Market anticipates economic turnaround

By Lisa Singhania
Associated Press

NEW YORK — Stocks rose today for a third straight session, posting solid gains despite the worst monthly unemployment report in more than six years.

Investors focused on data that showed fewer jobs were cut in December than in previous months; those numbers seemed to strengthen Wall Street's conviction that there will indeed be an economic turnaround this spring. Technology stocks, which have led the market this week, continued their advance, and the momentum again spread to the broader market.

The Dow Jones industrial average closed up 87.60, or 0.9 percent, at 10,259.74, according to preliminary calculations. It was the Dow's third consecutive advance and its best close since late August.

Broader indicators also rose. The technology-focused Nasdaq composite index was up 15.11, or 0.7 percent, at 2,059.38. The Standard & Poor's 500 index was up 7.24, or 0.6 percent, at 1,172.51.

"Investors are looking beyond the valley of that tragic event (the Sept. 11 attacks), to the peaks ahead," said Alfred E. Goldman, chief market strategist for A.G. Edwards & Sons Inc. in St. Louis.

The market moved higher today even after the Labor Department reported the nation's unemployment rate increased to 5.8 percent in December as businesses trimmed 124,000 jobs. Still, the losses were less severe than in recent months. Job losses had averaged about 400,000 a month in October and November.

Investors took that decrease as an indication the economy had bottomed and that a recovery was now even more likely. Stocks across the market rallied, with particularly strong noticeable gains in technology.

Intel advanced 27 cents to $35.79, benefitting for a second straight session from a J.P. Morgan analyst's bullish comments that the company's business might soon improve. Intel competitor Advanced Micro Devices, which soared 18 percent yesterday in reaction to that assessment, rose another 63 cents to $20.

Wall Street also bid DaimlerChrysler higher after the automaker said its 2001 operating profit had met the lower end of its expectations. The shares were up $1.22 cents to $45.62.

Pharmaceutical and consumer goods companies didn't fare as well, falling back again as investors refocused on technology. Merck dropped 14 cents to $58.89, while Procter & Gamble slipped 77 cents to $78.46.

January is historically a strong time for the market, as the pressure from end-of-year tax selling lifts. This year, Wall Street is also reacting to increasing signs that the economy's worst troubles may be behind it. In addition to the job figures released today, manufacturing activity also appears to be stabilizing. The Institute of Supply Management reported Wednesday that manufacturing activity shrank in December, but not as much as expected.

In the past few days, the market has rallied significantly, achieving levels not seen since late summer. The Dow appears to have comfortably broken through the 10,000 level, while the Nasdaq is hovering above 2,000. Market watchers say they are encouraged but suggest caution, rather than exuberance, is the best approach for investors.

For the week, the Dow rose 1.2 percent, the Nasdaq gained 3.6 percent and the S&P advanced nearly 1.0 percent.

"It does appear the recessionary forces are abating," said Bryan Piskorowski, market commentator at Prudential Securities. "These are steps in the right direction but it's still difficult to call a turn here and know when things are exactly going to improve."

Advancing issues outnumbered decliners nearly 2 to 1 on the New York Stock Exchange. Volume came to 1.49 billion shares, up from 1.41 billion shares at the same point in the previous session.

The Russell 2000 index rose 3.79 to 499.30.

Overseas, Japan's Nikkei stock average rose 3.1 percent. In Europe, Germany's DAX index gained 0.9 percent, Britain's FT-SE 100 rose 0.1 percent, and France's CAC-40 was essentially unchanged.