Stocks Finish with Sharp Gains

The rally stretched into a second straight session. Next week brings a fresh set of economic data and earnings updates from big names like Intel, IBM, and J&J

Stocks posted impressive gains on Friday for the second straight session. The advance was led by strength in blue-chip stalwarts General Electric (GE ) and IBM (IBM ).

Many analysts speculate that short-covering by hedge funds was at the heart of Friday's rally. Nonetheless, after the bruising sell-off of recent weeks, a positive week in the stock market is much welcomed. Increases in the major indexes came one day after a strong rally Thursday -- and two days after multi-year lows hit on Wednesday.

The Dow Jones industrial average added 313.63 points, or 4.16%, to 7,847.58. In addition to GE and IBM, United Technologies (UTX ) and 3M (MMM ) helped lead the average higher. The tech-heavy Nasdaq composite index jumped 47.10 points, or 4.05%, to 1,210.47, led by gains in tech leaders Microsoft (MSFT ), Intel (INTC ), Cisco Systems (CSCO ), and Oracle (ORCL ). And the broader Standard & Poor's 500-stock index added 31.40 points, or 3.91%, to 835.32.

Next week, after the Columbus Day holiday, a raft of new economic data will help determine the direction of the market. Investors will look at data on September industrial production. The August update showed a decline in factory output. Another decline would suggest that the economic recovery is stumbling.

Reports on housing, unemployment and manufacturing are due on Thursday of next week. The latest read on consumer price index, a measure of inflation at the retail level, is expected to show a modest increase in September.

The week will also be loaded with earnings news. Appliance maker Maytag (MYG ) will release results Monday. On Tuesday, Motorola, Intel (INTC ) and Johnson & Johnson (JNJ ) are set to unveil quarterly profit updates. Over the rest of the week: Coca-Cola Co. (KO ) and IBM on Wednesday, EMC (EMC ) on Thursday, and Merck (MRK ) and Avon Products (AVP ) on Friday.

On Friday, earnings from Dow component GE were in line with the company's forecast of $0.41 in earnings per share. Many Wall Street analysts had already lowered estimates on the company's results and markets reacted to the in-line results with buying.

Investment bank Lehman Brothers raised its rating on shares in IBM, another member of the Dow average, on the assumption that information technology spending should improve in 2003. The upgrade provides a signal that the profit malaise in IT may soon be over.

In other corporate news, Household International (HI ), a large player in the businesss of lending to consumers with higher credit risk, announced a preliminary nationwide agreement to settle allegations it engaged in predatory lending for up to $484 million.

The telecom sector was also in the news. Telecom equipment maker Nortel Networks (NT ) reconfirmed third-quarter sales estimates of $2.36 billion.

On a bleaker note, Nortel competitor Lucent Technologies (LU ) said it would report a wider-than-expected loss in the fourth-quarter, cut another 10,000 jobs, and take $4 billion in charges for severance and a decline in its pension assets.

Treasury Market

U.S. Treasuries finished down sharply in price for a second consecutive session as investors rotated into equities. The damage came as softer economic data was treated more as a contrarian indicator by equities,notes MMS International.

In other economic news, the producer price index, a measure of inflation at the wholesale level, rose 0.1%.

The bond market closed early at 2:00 p.m. Friday, and there will be no trading on Monday, in observance of the Columbus Day holiday.

World Markets

European stocks rallied on strength in the U.S. equities market. London's Financial Times Stock exchange index finished up 176.10 points, or 4.66%, to 3,953.40. Meantime, Germany's DAX index finished up 197.55 points, or 7.23%, to 2,930.74. France's CAC index ended higher by 143.74 points, or 5.21%, to 2,902.27.

Asian stocks finished up Friday. Tokyo's benchmark Nikkei 225 index added 89.99 points, or 1.07%, to 8,529.61. Hong Kong's Hang Seng Index finished up 107.04 points, or 1.21%, to 8,965.73.

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