Setting aside concerns about profit warnings, investors focused on positive economic data to help stocks end higher on Wednesday.
The Conference Board's Leading Indicators index rose 0.5% in May -- the biggest gain since a matching 0.5% rise in December 1999 -- after growing 0.1% in April. "I think the leading indicators are showing just a slight, positive uptick in economic activity, raising some hopes perhaps the worst is over for the economy," said Peter Cardillo, chief strategist at Westfalia Investments.
But all was not rosy. Investors struggled to shrug off profit warnings from tech companies including communications equipment maker Tellabs Inc. (TLAB ). Shares of Tellabs and other semiconductor stocks ended lower.
The market also searched for any clues about future interest rates. Federal Reserve Chairman Alan Greenspan made two appearances to talk about work skills and the financial system. Testifying before the Senate Banking Committee, Greenspan noted U.S. inflation remains muted.
Heading into next week's meeting of the Federal Open Market Committee (FOMC), the policy-making arm of the Federal Reserve, Westfalia's Cardillo said he anticipates the market will try to stabilize and consolidate. "Don't expect any major moves to the upside or the downside," he added.
The last rate cut in May –- the fifth so far this year -– brought the key Fed funds down 2.5 percentage points, to a rate of 4% - the lowest in seven years. The discount rate was also lowered by 50 basis points to 3.5%.
Among the stocks in the news Wednesday, AOL Time Warner (AOL ) CEO Gerald Levin said advertising revenues were already stabilizing and the Internet and media group remains on track to meet its 2001 financial targets.
After trading lower earlier in the session, stocks gained steam in late afternoon activity. The Dow Jones Industrial Average ended up 50.66 points, or 0.48%, to 10,647.33. The technology-laced Nasdaq Composite added 38.50 points, or 1.93%, to 2,031.16. The broader S&P 500 index was higher by 10.55 points, or 0.87%, to 1,223.13.
U.S. Treasuries rebounded and finished in positive territory, led by longer dated securities, in the wake of friendly inflation comments from Greenspan.
European markets ended mixed. In London, the Financial Times-Stock Exchange 100 index added 19.20 points, or 0.34%, to 5,699.60. In Germany, the DAX Index lost 46.49 points, or 0.78%, to 5,876.04. In France, the CAC 40 shed 28.92 points, or 0.56%, to 5,170.49.
In Asia, markets finished mixed. In Japan, the Nikkei gained 100.38 points, or 0.80%, to 12,674.64, following an afternoon rally. In Hong Kong, the benchmark Hang Seng index dropped 214.95 points, or 1.64%, to 12,918.71.
By Heesun Wee in New York