NEW YORK – Stocks closed the week on a high note Friday, building on Thursday's rally, as investors bet interest-rate and tax cuts will spur an economic recovery next year.
Tech stocks slipped on a dim sales outlook from JDS Uniphase but still managed a 5.8-percent jump for the week.
The blue-chip Dow Jones industrial average gained 82.27 points, or 0.87 percent, to end at 9,545.17, bolstered by fighter jet engine maker United Technologies Corp. The technology-laced Nasdaq Composite Index dipped 6.51 points, or 0.37 percent, to 1,768.96 and the broader Standard & Poor's 500 Index was up 4.52 points, or 0.41 percent, at 1,104.61.
For the week, the Dow climbed 3.7 percent, Nasdaq jumped 5.8 percent and S&P 500 rose 2.9 percent.
Most market indexes, closing out one of the busiest weeks of the third-quarter earnings season, surpassed levels before the Sept. 11 attacks on New York and near Washington, D.C. Wall Street is betting the U.S. government's tax cuts and the Federal Reserve's rate cuts will boost the lagging economy and stimulate profit growth for Corporate America in coming months.
"The stock market is six months ahead of the economy," said Phil Foreman, who helps oversee $1.3 billion for Evergreen Investment. "There's no doubt we're in a bad recession now, but that's old news. We should focus on the probability of a recovery in 2002."
Companies have reported the worst earnings in a decade — down almost 22 percent — but Wall Street is unfazed. For now, investors are jumping into stocks battered by a year-and-a-half slide.
"We've had tax stimulus, the biggest interest-rate cuts in a long time and an 18-month bear market," said Joseph Williams, a portfolio manager with Commerce Trust Co., which oversees $10 billion. "Looking out a year, things are going to be much better."
Defense stocks rallied in anticipation of Washington's decision to award a $200 billion contract to either Lockheed Martin Corp. or Boeing Co. to build its next-generation fighter jet. After the market closed, the government announced Lockheed got the blockbuster contract — the richest bonanza in military history.
Lockheed rose $1.02 to $49.92, while Boeing gained $1.78 to $37.68. United Technologies, which makes engines for both companies, surged $2.54 to $57.01.
Fiber-optics components maker JDS Uniphase posted a steep loss for the quarter and said it expects sales to drop further as it completes a massive restructuring to survive a downturn in the telecom industry. JDS dropped $1.19 to $8.77.
VeriSign Inc., which provides Web address and security services, tumbled $10.52 to $42.82 after investment bank Bear Stearns downgraded the stock, saying deterioration in the company's domain name business may hurt profits.
Amgen Inc. rose $1.20 to $59.45 after the world's No. 1 biotechnology company reported earnings rose 5 percent and said it expects double-digit earnings for the year.
Enron was down 84 cents to $15.51, after it said it had drawn down $3 billion from credit lines.
Drilling stocks were Wall Street's strongest sectors, as investors bet a downturn in North American natural gas drilling could carry the seeds of its own recovery.
"The perception is that the sooner these guys quit drilling, the sooner production drops, the sooner gas prices go up, the sooner drilling increases," said Banc of America Securities analyst Jim Wicklund.
The Philadelphia stock exchange's OSX oilfield services index was up 4.7 percent.
Investors shrugged off the latest news on the economy. The University of Michigan's consumer sentiment index rose to 82.7 in October from 81.8 in the prior month, as expected, indicating consumers shook off the gloom triggered by the Sept. 11 attacks and rising joblessness.
A separate government report showed U.S. new home sales fell 1.4 percent in September were the lowest since August 2000 as the weak economy weighed on the housing sector. September's seasonally adjusted annual rate of 864,000, however, exceeded the expectations of analysts polled by Reuters, who had forecast at rate of 856,000.
The Russell 2000 index, which measures the performance of smaller company stocks, was up 2.69 at 438.65.
Advancing issues outnumbered decliners by a nearly 3-to-2 margin on the New York Stock Exchange, where volume came to 1.2 billion shares, down from Thursday's 1.37 billion.
Overseas, Japan's Nikkei stock average ended Friday down 0.8 percent. Germany's DAX index was up 2.2 percent, France's CAC-40 rose 2.3 percent, and Britain's FT-SE 100 advanced 2 percent.
Reuters and the Associated Press contributed to this report.