Wall St. Extends Winning Ways

Stocks rallied broadly Friday, sending the market to its sixth winning week in the last seven, as encouraging reports on manufacturing and consumer sentiment fueled hopes that the U.S. economy is on the mend.

Although analysts pointed to economic data as the catalyst of the day, money managers said the market’s steady climb since March 11 had gradually but clearly changed the tone on Wall Street.

“The rally is feeding on itself,� said Erik Gustafson, manager of the Liberty Growth Stock fund. “Investors on the sidelines have to scramble to catch up.�

The Dow Jones industrial average climbed 139.08 points, or 1.6%, to 8,850.26; the broader Standard & Poor’s 500 index added 13.95 points, or 1.5%, to 963.59; and the technology-heavy Nasdaq composite index gained 20.96 points, or 1.3%, to 1,595.91, its highest level in almost a year.

In heavy trading, winners swamped losers by 3 to 1 on the New York Stock Exchange and by more than 2 to 1 on Nasdaq.

Nasdaq and the S&P; 500 both rose for the sixth week in seven, surging 5.7% and 3.3%, respectively, while the Dow scored its fourth winning week in five by gaining 2.9%. All three indexes also notched healthy gains for May. It was the third winning month in a row for the S&P; 500 -- the first time that has happened since late 2001 -- and the fourth in a row for Nasdaq, which last saw that occur in late 1999.

Since the prewar low March 11, the Wilshire 5,000 index, the broadest measure of U.S. stocks, has risen 21.2%, adding $1.9 trillion in market value.

In Friday’s economic news, the Chicago Purchasing Managers index climbed to a higher-than-expected reading of 52.2 for April, hinting that the factory sector might be snapping out of its funk. The University of Michigan’s final consumer sentiment gauge for May came in at 92.1 -- lower than forecast but up sharply from April.

“The market smells recovery six months down the road, even if currently the economic environment remains muted,� Gustafson said. “This rally is broad-based, it is powerful, and it is sensing a turn.�

John Snider, co-manager of the TCW Galileo Large Cap Value fund in Los Angeles, agreed:

“I think fund managers are willing to bet that if not by the second half, then by early next year, things are going to get better. There is a lot of stimulus trying to heal this economy, and the market always moves before you see evidence of a recovery.�

Snider noted that first- quarter earnings have been decent and that company guidance for the rest of 2003 has been guardedly optimistic. According to Thomson First Call, first-quarter profit for the S&P; 500 rose 11.7% from a year earlier; for 2003 overall, analysts expect earnings to climb 12.2%.

The recent federal tax cut, which reduced taxes on dividends and capital gains as well as regular income, also is buoying investors, analysts said.

Strategists caution, however, that recession or terrorism still could derail the market.

“Geopolitical risks are still out there,� Gustafson said. “The other big risk is the economy doesn’t turn� and “businesses don’t use the ‘free’ capital that’s available and start investing in themselves again.�

Although Nasdaq has soared 25.5% from March 11 and other indexes have notched big gains as well, analysts warn investors against expecting a 1990s-style go-go market, noting that the economy may be staging only a modest rebound.

In Friday’s Treasury market, the yield on the benchmark 10-year T-note rose to 3.37% from 3.34% on Thursday. The dollar strengthened against the euro and the yen.

In other highlights:

* Big gainers in the S&P; 500 included Starbucks, up $1.07 to $24.67; medical products maker Baxter International, up $1.52 to $25.34; and Allied Waste Industries, up 52 cents to $9.88.

* In the tech sector, data storage specialist EMC climbed 67 cents to $10.82, chip equipment maker Novellus Systems rose $2.50 to $34.67, and printer maker Lexmark International advanced $3.73 to $74.40.

Molex gained $2.57 to $27.37 after the maker of fiber optic and electrical connectors said it expected strong sales this quarter.

But 3Com slid 59 cents to $4.91 after warning of a revenue shortfall late Thursday and Citrix Systems lost 48 cents to $21.79 on an analyst downgrade.

* Some investment firms rallied on hopes that a healthier stock market would improve their profits. T. Rowe Price Group rose $2.31 to $36.71, and Franklin Resources added $1.29 to $37.37.

Market Roundup, C4-5