NEW YORK – Blue-chip stocks rose Wednesday, with the Dow closing above the key 10,000 level, as news suggested that the worst of the economic downturn is over and Congress is nearing a deal on the stimulus package.
But technology stocks sagged on news of profit woes from Motorola and Micron Technology.
The Dow Jones industrial average gained 72.10 points, or 0.72 percent, to 10,070.49, its first close above the psychologically-important level since Dec. 7. The broader Standard & Poor's 500 Index rose 6.64 points, or 0.58 percent, to 1,149.56. The technology-laced Nasdaq Composite Index slipped 21.87 points, or 1.09 percent, to 1,982.89.
The market took a hit in early trading after mobile phone giant Motorola warned of weaker sales and announced job cuts. An earnings warning from the world's top aluminum producer, Alcoa Inc. , and a grim earnings report from No. 2 memory chipmaker Micron Technology Inc. also undermined the Nasdaq market.
Indexes began to turn up, however, after a key forecasting gauge -- The Conference Board's U.S. index of leading indicators -- rose for a second straight month in November, pointing to possible economic recovery in the first half of 2002.
Stocks also got a jolt after President Bush said he had worked out a package with some U.S. lawmakers on an economic stimulus package. Senate Democratic leader Tom Daschle of South Dakota, however, said differences remained.
"The leading indicators are saying the economy is going to recover and if they do reach an agreement on a stimulus package, all the better," said Hugh Johnson, chief investment officer at First Albany Corp. "It makes the case for a recovery -- which is already strong -- better."
"It's this balance between worrying about corporate profits and, 'Let's look forward to an economic rebound,"' said John Forelli, portfolio manager at Independence Investment LLC. "Investors are fearful of selling stocks in the thought that in two weeks, they'll be wanting to buy them back."
Blue-chip stocks were supported by news that Citigroup , the No. 1 U.S. financial services firm, plans to sell up to 20 percent of its Travelers Property Casualty unit to the public and spin off the rest to its stockholders by the end of 2002, in a move to ditch the slow-growing and volatile business. Citigroup gained $1.90 to $50.
Weakness in technology shares was reflected in semiconductor issues, which retreated broadly under heavy volume. The Philadelphia Semiconductor Index tumbled by 5.20 percent, to 537.61.
Micron finished the session down $1.61 at $30.20. It reported a bigger-than-expected loss and said sales fell 73 percent as it continued to be hurt by plunging prices and a glut in capacity.
Motorola, the world's No. 2 mobile phone maker, became the latest telecom equipment firm to admit it has been hit by weak demand after it said it will cut another 9,400 jobs and that it sees lower revenues in 2002. Motorola fell 85 cents to $15.76.
An earnings warning from the world's top aluminum producer, Alcoa Inc. , weighed on the Dow early in the session after it warned earnings were likely to miss Wall Street's estimates due to unpaid bills and charges to restructure operations. Alcoa fell $2.28 to $35.38.
The stock market has rallied since late September, but corporate earnings may suffer their worst drop of the year in the fourth quarter.
Companies in the S&P 500 posted a 21.6 percent tumble in profits for the third quarter, marking the biggest drop in earnings since the last recession of 1991, according to Thomson Financial/First Call. Analysts are forecasting a 20.1 percent decline in earnings in the fourth quarter, but the research firm believes that number could widen to 22 percent.
Solectron Corp. , the world's largest contract electronics manufacturer, saw its shares fall sharply for the second session -- down $1.29 at $10.81. On Tuesday, the company reported a quarterly loss of $52.5 million, and said it saw sharp declines in its personal computer and telecommunications operations.
Calpine Corp. was one of the most actively traded issues on the New York Stock Exchange. It rose 69 cents to $14.69, after it said it plans to sell $400 million of convertible debentures amid investor fears that independent power producers will be unable to access funding for their power plants.
Williams Cos. , an energy trader and pipeline operator, rose after it said it would cut 2002 capital spending by 25 percent in a move to strengthen its balance sheet. It said it may cut earnings growth targets because of the slowing economy and other factors. It rose $2.60 to $24.70.
The stock of Dynegy Inc. rose $3.08 to $23.98, after a federal judge handed the company an early victory in its fight to take a lucrative pipeline from its former merger partner, bankrupt Enron Corp. , by allowing the lawsuit to be heard in a state court.
One other bright spot was network equipment maker 3Com Corp. , which posted a narrower-than-expected quarterly loss late Tuesday and said it hopes to return to profitability by the fourth quarter. 3Com's shares gained 78 cents to $6.09.
Oil stocks were helped by news from the U.S. government's Energy Information Administration, which released figures showing a 1.1 percent drop in fuel inventories. The broad oil index gained 1.28 percent, or 6.35 points, to 501.70.
Declining issues led advancers 8 to 7 on the New York Stock Exchange. Volume came to 1.44 billion shares, compared with 1.32 billion Tuesday.
The Russell 2000 index fell 3.42 to 482.07.
Overseas, Japan's Nikkei stock average rose 0.4 percent. In Europe, Germany's DAX index fell 1.1 percent, Britain's FT-SE 100 dropped 0.6 percent, and France's CAC-40 lost 0.3 percent.
Reuters and the Associated Press contributed to this report.