Stocks staged a late rally Friday, posting their third straight week of gains, as investors snatched up shares of Intel Corp and Merck & Co. on growing hopes for a lasting turnaround on Wall Street despite a mixed bag of economic data.
The blue-chip Dow Jones Industrial average climbed 126.65 points, or 1.52 percent, to 8,443.99, after dipping earlier in the session. The broad Standard & Poor's 500 rose 15.15 points, or 1.72 percent, to 897.65. The technology-loaded Nasdaq Composite index jumped 32.42 points, or 2.50 percent, to 1,331.13.
For the week, the Dow and the S&P 500 climbed 1.5 percent, while the Nasdaq climbed 3.4 percent. Investors are holding out hope that stocks have finally scraped bottom after the broad market hit a 5-year low on Oct. 9.
"We have gotten to the point now where we are buying on the dips instead of selling on the rallies. People don't want to miss this," said Todd Leone, head of listed trading at S.G. Cowen. "There's a lot of money still on the sidelines, and I think we could get a sustained rally for the end of the year. That's what people are talking about."
Stocks got off to a weak start after a government report showed orders on costly and long-lasting durable goods posted their largest drop in 10 months in September. But the market recovered and then chugged higher after a separate report showed the housing market is still buoyant as homeowners take advantage of interest rates at 40-year lows.
"The market's mood is one of more resiliency right now," said Brian Belski, fundamental market strategist at U.S. Bancorp Piper Jaffray. "People are in more of a buying mood."
Traders reported little impact on the market from news that Democratic U.S. Sen. Paul Wellstone died with seven others when their plane crashed in his home state of Minnesota.
Wellstone's death could have an impact on the Nov. 5 congressional elections because Democrats control the Senate by only one vote. Wellstone had a slight lead in recent opinion polls in his bid for a third term.
"In general, earnings numbers are proving to be better than expected," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Banking, which oversees $7 billion. "But I think people are reluctant, and rightfully so. There are still some major issues that haven't yet been resolved about the strength of the economy."
Three technology titans buoyed the Dow. Intel (INTC) jumped 96 cents, or more than 6 percent, to $16.59. Computer maker Hewlett-Packard Co. (HPQ) tacked on 82 cents, or almost 6 percent, to $14.62. Computer giant International Business Machines Corp. (IBM) climbed $2.46, or more than 3 percent, to $74.56.
Merck (MRK) climbed $2.42, or almost 5 percent, to $52.91, adding more support to the blue-chip Dow. Schering-Plough Corp. (SGP), another drug maker, jumped $1.23, or more than 6 percent, to $20.35. Investors were betting on possible approval of the companies' cholesterol drug Zetia. Investment bank Lehman Brothers also upgraded Schering-Plough's stock based in part on valuation.
Cigna (CI) tumbled $24.21 to $39.39 and topped the Big Board's most active list. The company cut its profit forecasts due to higher health-care costs.
The surprise, which also included a warning that shareholder equity would be cut by up to $700 million in the fourth quarter from increased liabilities to fund pensions, caused a slew of analysts to cut their earnings estimates for the company.
Household International Inc. (HI) added $1.26 to $24.09, or 5.5 percent, after an early decline and ranked No. 2 among the most active shares on the Big Board. Household, whose shares sank 22 percent in the previous two days, said it raised about $900 million by issuing common shares and convertible securities. Household also agreed in principle to sell $3.2 billion of loans and $4.3 billion of thrift-related deposits.
JDS Uniphase (JDSU) fell 22 cents, or more than 9 percent, to $2.20. The world's largest supplier of fiber-optic parts said it will cut more jobs and close more plants to lower costs further as sales of its fiber-optic gear fell for a seventh consecutive quarter. It warned of even lower revenues in the quarter now under way.
Amazon.com Inc. (AMZN) fell 56 cents, or almost 3 percent, to $19.30. The Internet retailer reported a narrower net loss in the third quarter on sharply higher revenues. Still, Prudential Securities cut the rating on Amazon to a "sell" from a "hold," questioning whether the company's future performance could justify its stock price.
Emulex Corp. (ELX) soared $4.08, or more than 29 percent, to $17.88. Deutsche Bank Securities raised the rating on storage software maker to "buy" from "hold," after the company reported healthy quarterly results. Emulex reported that quarterly revenue rose 34 percent and earnings doubled, excluding charges.
Stocks tumbled after the durable goods report but took comfort from later data showing the housing market is still robust.
The Commerce Department said durable goods orders fell 5.9 percent in September, pulled down by weak demand for cars and aircraft equipment. Excluding transportation, orders fell 1.0 percent.
The Commerce Department said in another report that sales of new U.S. homes rose to a record level in September. New single-family home sales climbed 0.4 percent to a seasonally adjusted annual rate of 1.021 million units last month from an upwardly revised 1.017 million unit pace in August.
A separate report that came out shortly after the open showed signs that confidence of U.S. consumers is shaky. The University of Michigan's final October consumer sentiment index fell to 80.6 from 86.1 in September. That was slightly lower than forecasts for a reading of 81.1.
Technical support for market indexes, areas where buyers usually come in, is at 8,300 for the Dow, 1,280 for Nasdaq and 880 for the S&P 500, according to Schaeffer's Investment Research. Resistance, an area where sellers emerge in bulk, was set at 8,550 for Dow, 1,350 for Nasdaq and 910 for the S&P.
Advancing stocks beat out decliners by a ratio of 11 to 5 on the New York Stock Exchange and about 5 to 3 on Nasdaq. More than 1.34 billion shares changed hands on the Big Board and more than 1.46 billion shares on Nasdaq in moderate trading.
The Russell 2000 index, which tracks smaller company stocks, rose 6.62, or 1.8 percent, to 372.64.
Overseas, Japan's Nikkei stock average finished 1.3 percent higher. In Europe, Germany's DAX index was up 0.4 percent, France's CAC-40 fell 0.6 percent, and Britain's FTSE 100 declined 1.3 percent.
Reuters and the Associated Press contributed to this report.