Stocks Finish with Small Gains

The market climbed for a third straight session after the release of some positive economic data

Stocks ended Friday's session with modest gains, marking the third straight positive session, after economic data reinforced a view that the U.S. economy may be nearing a turnaround. But with only one trading day left until 2002, it also appears all but certain the major averages will see their second straight year of declines.

On Friday, the Dow Jones industrial average finished up 6.30 points, or 0.06%, to 10,137.61. The Nasdaq composite index gained 10.75 points, or 0.54% to 1987.17. The broader S&P index rose 3.89 points, or 0.34% to 1161.02.

In the latest in a series of heartening reports on Friday, the private research group known as The Conferece Board said its index of consumer confidence jumped to 93.7 in December -- the first increase in six months.

Separate reports showed that orders for durable goods in November and new and existing homes sales for the same month were suprisingly solid.

Meanwhile, the number of Americans filing for the first time for unemployment benefits was lower than expected for the week ended Dec. 22, another report showed.

Standard & Poor's economic research unit MMS says the data for durable goods orders provided further indication that gross domestic product is unlikely to post a decline in the fourth quarter and that its forecast has now been revised upward to zero.

Among Friday's stocks in the news, power gernerator Allegheny Energy Inc. (AYE ) said it expected to post slightly lower than expected earnings per share in 2001, excluding an accounting change.

Nanometrics Inc. (NANO ), a semiconductor equipment company, said fourth-quarter sales will fall 25% from the third quarter because customers have excess inventory.

Stocks of oil majors Exxon Mobil (XOM ) and ChevronTexaco (CVX ) rose after news that OPEC, the oil cartel, would limit its crude production.

Shares of Internet media company Yahoo Inc. (YHOO ) rose after influential Merrill Lynch analyst Henry Blodget upped his fourth-quarter estimates on the company and said its ad revenue increase 5% over the third quarter.

Internet and media company AOL Time Warner (AOL ) rose after saying it added 1 million subscribers in about four weeks to its Internet service, raising the total to more than 33 million.

MMS said hopes of a recovery in the U.S. look set for the 2002 second quarter, but a rebound could be speeded up by a buoyant consumer sector.

Worries could return next week with payrolls data, expected to be released on Jan. 4, which could see a 200,000 drop and a startling rise in the unemployment rate to 6.0%, according to MMS. This could give stocks a pause next week, though longer-term equities and the economy appear to have turned the corner.

MMS also said that both trading volume and interest, however, should steadily increase into the employment report from paltry, pre-holiday levels.

Monday kicks off the week and ends a tumultuous 2001 with a full session for stocks and an abbreviated trading day for bonds. U.S. financial markets will be closed on Tuesday, Jan. 1, for the New Year's holiday.

Of note, Tuesday offers the roll-out of the Euro across Europe. Market players return on Wednesday to a fresh year with the National Assocation of Purchasing Managers report on manufacturing activity due, while Thursday offers jobless claims, construction spending, and auto sales data.

Friday rounds out the week with payrolls as the highlight, with non-manufacturing NAPM due as well.

Treasury Market

Treasuries finished mixed, with the two-year note slightly in the black while the rest of the yield curve saw losses. Bonds were generally weak following the initial claims and durable goods orders reports.

More specifically, orders for big ticket items in November were encouraging. MMS says that although U.S. durable goods orders fell 4.8% in November, as expected, defense and transportation orders accounted for most of the weakness. Nondefense capital goods orders were up a healthy 4.8% and excluding transportation, orders were up 1.1%.

Both new and existing home sales outpaced expectations in November, according to Standard & Poor's economic research unit MMS. New home sales surged 6.4% to a 934,000 annual rate following a revised 878,000 level in October. The figures for November were boosted by unseasonably mild weather. Existing home sales rose modestly in November to a 5.21 million annual pace, though this marked a continued improvement from post-September 11 levels, notes MMS.

And U.S. initial jobless claims rose 7,000 to 392,000 while economists had beeen forecasting 400,000 claims. Overall the jobs picture remains soft, though the data beat out more bearish expectations, MMS says.

World Markets

European markets closed higher. In London, the Financial Times-Stock Exchange 100 was up 29.20 points, or 0.56%, to 5242.40 on news OPEC has agreed to cut production 1.5 million barrels a day.

In Germany, the DAX index gained 42.97 points, or 0.84%, to 5,160.10 after IW Institute forecast Germany's economy will be stronger than many expect next year. But a newspaper report says government may have to borrow more than anticipated next year.

France's CAC 40 index advanced 33.42 points, or 0.73% to 4624.58 even though the French November unemployment rate rose to a 12-month high 9% from 8.9% in October.

In Asia, stocks rallied. Japan's Nikkei 225 index rose 85.01 points, or 0.81%, to 10,542.62 on the last trading day of the year. Stocks climbed on the back of improved sentiment in the bank sector as Prime Minister Junichiro Koizumi said that he is willing to inject more public funds into banks to prevent an economic crisis. An influx of buy-orders for window-dressing at the end of the year also boosted the market. For all of 2001, the Nikkei posted a loss of 23.5%.

In Hong Kong, the Hang Seng index rose 72.09 points, or 0.63% to 11,421.59.

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