U.S. stocks rose on Thursday after a Wall Street analyst said brokerage shares were undervalued and McDonald's Corp (MCD) raised its annual dividend by 50 percent.
The Dow ended up 133.23 points, or 1 percent, at 13,424.88. The Standard & Poor's 500 Index was up 12.39 points, or 0.84 percent, at 1,483.95. The Nasdaq Composite Index was up 8.99 points, or 0.35 percent, at 2,601.06.
Shares of U.S. investment banks, besieged by concerns over tightening credit conditions, jumped after a Bernstein Research analyst said their values had fallen to a 10-year low. Lehman Brothers (LEH) gained 4.6 percent to $59.68.
The mortgage sector, at the heart of the recent market turmoil, was lifted by news that the biggest lender, Countrywide Financial Corp (CFC) had obtained $12 billion of additional financing. Its shares jumped 13.9 percent to $18.93 on the New York Stock Exchange.
McDonald's rose to an all-time high after saying on Wednesday that it was raising its dividend and the cash it expects to return to shareholders. Investors said other cash-rich companies may follow the fast-food chain's lead at a time when takeover deals are difficult to consummate.
"It's nice to see stocks moving on positive company-specific news rather hand-wringing over what the Fed is going to do," said Scott Vergin, portfolio manager at Thrivent Financial in Minneapolis.
Federal Reserve policy-makers are widely expected to cut interest rates at a meeting next Tuesday. Investors and economists are divided over how much the central bank will reduce borrowing costs to keep economic growth from slowing.
Vergin added, "A couple of big companies are talking about returning money to shareholders."
Tyco International Ltd (TYC) raised its quarterly dividend and said it planned to repurchase up to $1 billion of shares. Its stock rose 2 percent to $43.58 on the NYSE.
McDonald's rose 6.1 percent to $54.30 on the NYSE, after hitting the lifetime high of $54.68.
Energy shares extended Wednesday's gains, with Exxon Mobil Corp. (XOM) up 1.1 percent at $88.62, as the approach of Hurricane Humberto forced U.S. Gulf refineries to shut, sending oil prices back above $80 a barrel to another record.
Shares of General Motors Corp. (GM), a Dow component, rose to its highest in more than a year after Citigroup recommended the shares as a "buy," citing a favorable risk-reward trading proposition around the automaker's labor talks.
GM shares surged 10 percent to $33.29, and were the second-biggest lift for the Dow. Shares of rival Ford Motor Co. (F) gained 5.6 percent to $7.92.
Other investment banks with solid gains included Bear Stearns Cos (BSC), up 4.3 percent at $114.83; Goldman Sachs Group (GS), up 3.3 percent at $188.47; and Merrill Lynch and Co. Inc. (MER), the world's largest brokerage, up 3 percent at $75.14.
A number of investment banks are scheduled to report quarterly earnings next week.
Shares of Target Corp. (TGT) rose after the retailer said late on Wednesday it had hired an investment bank, was considering selling its credit-card assets and would evaluate the pace of its share repurchases.
Target rose 2.7 percent to $64.42 on the NYSE.
Trading volume was less than average on the NYSE, with about 1.27 billion shares changing hands. Last year's estimated daily average was 1.84 billion. On Nasdaq, about 1.69 billion shares traded, below last year's daily average of 2.02 billion.
Rising stocks outnumbered falling ones by a ratio of about 19 to 13 on the NYSE and by 15 to 14 on Nasdaq.