NEW YORK – Stocks soared Friday, with the Dow reaching a six-month high, after reports showed robust personal spending in January and the manufacturing sector regaining strength in February, adding to hopes that the U.S. economy is emerging from its slowdown.
The Dow Jones industrial average surged 262.73 points, or 2.6 percent, to 10,368.86, its highest close since Aug. 27. The broader Standard & Poor's 500 Index leaped 25.06 points, or 2.26 percent, to 1,131.79. The technology-laced Nasdaq Composite Index gained 71.26 points, or 4.12 percent, to 1,802.75.
"For several months now, the economic data has been stronger than the market," said Edward Hemmelgarn, chief investment officer of Shaker Investments, which oversees $2.3 billion. "People are taking the better economic numbers and, for the first time, believing that that may translate into better corporate (earnings) numbers."
For the week, the Nasdaq rose 4.54 percent, snapping a four-week losing streak. The Dow average rose for the third straight week, gaining 4.02 percent, while the S&P 500 climbed 3.85 percent.
A key report showed factories had boosted production in February for the first time since July 2000 to meet a wave of new orders as demand for manufactured goods soared. That, plus data showing U.S. consumer spending surged in January and construction spending grew at its fastest pace in a year, offset a drop in a closely watched consumer sentiment gauge.
"That is ... a critical confirmation that the economy is surprising us on the upside," said David Sowerby, market strategist for investment firm Loomis Sayles.
Semiconductor stocks were helping lead the Nasdaq's rebound after an upbeat business update by Novellus Systems Inc. (NVLS), a major producer of chip-making equipment. Novellus gained $5.97 to $48.56.
"There are signs of the downturn going away," Novellus Chairman and Chief Executive Richard Hill said. "We see that February has followed January with continued signs of recovery."
The Philadelphia Stock Exchange's semiconductor index jumped 11 percent, reflecting gains in the shares of others such as Applied Materials , up $4.51 at $47.98.
Chip giant Intel Corp. (INTC) climbed $2.43 to $30.98, helping both the Dow and the Nasdaq. It reported China was set to overtake Japan as its largest Asian customer within two years.
Chartered Semiconductor Manufacturing (CHRT), the world's third-largest independent foundry, raised its guidance and pointed to a sector rebound. It rose $2.87 to $25.35.
Crown Castle International Corp. , the No. 2 wireless tower operator, rose 27 percent, or $1.69, to $7.90, after it reported greater-than-expected leasing revenues for the fourth quarter amid a downturn in the industry.
AT&T Wireless Services Inc. (AWE) fell sharply as the nation's No. 3 wireless company warned that revenue growth — excluding a recent acquisition — will slow due to the weak economy and increased competition. It was the most active stock on the Big Board, slumping $1.49 to $8.60.
Shares of biotechnology companies Invitrogen Corp. (IVGN) and Protein Design Labs Inc. (PDLI) sank after each said sales growth in 2002 would be slower than expected. Invitrogen fell $11.52 to $34.12. Protein Design fell 93 cents to $14.94.
The markets got their first dose of data with a report from the U.S. Commerce Department that showed personal income rose 0.4 percent in January, while spending rose by a similar amount. Economists had predicted personal income rose 0.1 percent in January, while spending gained 0.3 percent.
"Both numbers were good, and they indicated even more than before that consumers are a major factor in the U.S. economy and the market," said Alan Ackerman, market strategist at Fahnestock and Co.
U.S. consumer sentiment stumbled in February for the first time in five months, according to market sources, as accounting fears on Wall Street and a sluggish economy dented Americans' hopes for a vigorous recovery.
The University of Michigan's final February consumer sentiment index fell to 90.7 from 93.0 in January.
But investors shrugged that off after the Institute of Supply Management reported its manufacturing activity index jumped to a bigger-than-expected 54.7 in February from 49.9 in January, breaking above the 50 level and indicating expanding factory activity after 1-1/2 years of decline.
Construction spending also jumped more than expected, surging 1.5 percent in January — the fastest rate in a year, the government reported.
The Dow muscled right through a key technical "resistance" level at 10,300. A close above that level, technical analysts now believe, opens the way to tackle resistance at 10,400 to 10,500.
Resistance — a level where sellers are likely to emerge — is now set at 10,500 for the Dow, 1,850 for Nasdaq, and 1,132 for S&P, according to Schaeffersresearch.com.
Support — where buyers are expected to swoop in — is at 1,750 for Nasdaq, 10,200 for the Dow, and 1,120 for the S&P. The levels are key elements of technical analysis, which studies prices, volume and charts.
Advancing shares outnumbered decliners 7 to 3 on the New York Stock Exchange, where volume was light.
The Russell 2000 index, which measures the performance of smaller company stocks, rose 8.98, or 1.9 percent, to 478.34.
Overseas, markets rose Friday. Japan's Nikkei stock average finished up 2.12 percent, while in Europe, Britain's FTSE advanced 1.3 percent, France's CAC-40 rose 0.5 percent and Germany's DAX climbed up 1.2.
Reuters and the Associated Press contributed to this report.