Stocks Close Higher

Upbeat economic reports lifted the market as the March rally got back on track

Stocks pushed higher on Wednesday in apparent continuation of a rally that begin earlier this month as Wall Street toasted yet more evidence indicating the U.S. economy is on the mend.

On Wednesday, the Dow Jones industrial average closed up 140.88 points, or 1.35%, to 10,574.29, led by cyclical, financial and pharmaceutical components. The tech-heavy Nasdaq composite index was up 24.07 points, or 1.29%, to 1,890.36. The broader Standard & Poor's 500 index was up 16.62 points, or 1.45%, to 1,162.72.

Since the stocks advance began on Mar. 1, the Dow Jones industrial average and the broader Standard & Poor's 500 index have both gained 5% while the tech-heavy Nasdaq has jumped some 9%.

Adding to a view that the economy is emerging from its slump was news on Wednesday that U.S. factory orders rose 1.6% in January, which was slightly better than expected. Orders had risen 0.7% in December.

And the Federal Reserve's Beige Book, a snapshot of U.S. economic activity, found signs of "economic improvement" in January and early February, though the labor markets had some apparent "slack."

Investors on Thursday will likely again be focusing their attention on yet more economic reports for more evidence that the economy is improving. Due out are fourth quarter productivity numbers, with S&P MMS expecting a 4.8% increase.

In a separate report, initial jobless claims for the week ended Mar. 2 are expected to come in at 380,000, an increase of 2,000 over the previous week.

But the most important report of the week is set for Friday, when February payrolls data are to be released. MMS economists are expecting the nation's unemployement rate to tick up to 5.8% from 5.6%.

Wall Street will also have more earnings news to digest Thursday. Biotech firm Genzyme (GENZ ) and chipmaker National Semiconductor (NSM ) are both due to report.

Before its late move into positive territory, the Nasdaq traded lower for much of Wednesday's session amid some negative corporate news. Internet retailer Inc. (AMZN ), a tech bellwether, said Chief Financial Officer Warren Jenson is leaving.

On the positive side, Sprint Corp. (FON ), the No. 3 long-distance telephone company, said it is on track to meet its 2002 expectations in both its long distance and Sprint PCS (PCS ) wireless units. The news helped boost other telecom stocks.

In merger news, computer and printer maker Hewlett-Packard Co. (HWP ) received critical backing for its proposed $22.3 billion purchase of Compaq Computer Corp. (CPQ ) from proxy service Institutional Shareholder Services (ISS). The union has been opposed by some key shareholders.

UAL Corp. (UAL ), the parent of United Airlines, reached a tentative agreement with its mechanics and cleaning workers that will allow the carrier to avert a strike that had been set for Thursday.

Procter & Gamble Co. (PG ), the consumer products giant, said it plans to shutter three Clairol plants and one warehouse, resulting in the loss of about 750 jobs.

Treasury Market

Treasuries remained beaten down Wednesday, as stocks continued to forge higher and large corporate issues were distributed.

Philadelphia Federal Reserve President Santomero said Wednesday he expects monetary policy "must shift to neutral as evidence of recovery builds." In that regard, he expects the forces for a balanced recovery should be in place over the next quarter (Q2), says Standard & Poor's MMS.

It appears he personally anticipates that the Fed's rate-setting committee to switch to a neutral bias by the May or June meeting. Though this fits with the thinking in Fed funds futures, which have be steadily nudging forward risk of a quarter point rate hike from June, it may prove a little unnerving to Treasuries.

Durable goods orders in January were revised lower to +2.0% from +2.6% and inventories shrank by 0.6% from -0.9% in December. Overall, the data should not dent Treasuries much and may not prove that encouraging to the dollar or stocks, says MMS.

Meanwhile, in its Beige Book report, the Fed noted that eight of 12 districts reported gains in retail sales, while the rest were more mixed. It warns, however, that factory activity is still generally weak, though showing signs in some industries of "positive results" and some industries were not slashing their workforce to the same degree as in 2001. This suggests some stability is returning in labor demand. As to real estate, they see stronger residential demand than commercial. Overall the report leans slightly more to the cautious side than previously billed and may prove a little more supportive to bonds than stocks initially.

World Markets

European markets closed higher. In London, the FTSE 100 index was up 31.50 points, or 0.60%, at 5,245.50, as the U.S. market traded mixed. There was little reaction to a report that U.K. distribution growth slowed to 0.8% in the fourth quarter. However, demand for workers increased in February for first time in 10 months, suggesting the U.K. economy is reviving.

In Germany, the DAX index was up 56.59 points, or 1.08%, to 5,285.26. The German unemployment rate remained unchanged at 8.1% in February with the number of jobless rising less than expected. But factory orders unexpectedly fell 2.1%. The data suggest a slow German economic recovery.

In France, the CAC 40 index gained 7.39 points, or 0.16%, to 4,588.14.

Asian markets ended mildly higher. In Japan, the Nikkei 225 index gained 10.08 points, or 0.09%, to 11,358.53 as the upside from technical buy-backs in big-cap stocks related to new restrictions to short sales was offset by profit-taking after sharp gains over the past week.

In Hong Kong, the Hang Seng index added 17.16 points, or 0.16%, to 11,033.00.

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