Newly optimistic investors sent stocks sharply higher Friday, propelling the Dow Jones industrials 112 points higher, as new economic data showed strength in manufacturing and the departure of PeopleSoft Inc.’s chief executive raised hopes for a merger in the tech sector. The major indexes closed the week with respectable gains.
With the Institute of Supply Management’s manufacturing index posting the 16th straight month of growth in that sector, investors’ faith in the economic recovery was renewed. Strong increases in construction spending also improved the mood on Wall Street.
Oil prices could remain a problem, however, as futures trading closed above $50 per barrel for the first time due to uncertainty over the political situation in Nigeria, one of Africa’s top oil producers. A barrel of light crude settled at $50.12, up 48 cents, on the New York Mercantile Exchange. Crude futures prices rose 2.5 percent for the week.
“We’ve gotten through September, traditionally the worst month for stocks, in pretty good shape,” said Joseph Keating, chief investment officer at AmSouth Asset Management. “If oil prices can move down further, I think we’ll be set up nicely for a rally in November, December and early January.”
The Dow Jones industrial average rose 112.38, or 1.1 percent, to 10,192.65.
Broader stock indicators were sharply higher. The tech-focused Nasdaq composite index gained 45.36, or 2.4 percent, to 1,942.20, its highest closing level since July 9. The Standard & Poor’s 500 index was up 16.92, or 1.5 percent, at 1,131.50, posting its best finish since June 30.
For the week, the Dow gained 1.5 percent, the Nasdaq was up 3.3 percent and the S&P 500 rose 1.9 percent. Bargain hunting in the technology sector and portfolio shuffling at the end of the quarter helped stocks move higher despite rising oil prices and losses due to Dow component Merck & Co, which lost 27 percent of its value Thursday after pulling its Vioxx arthritis drug from the market due to an increased risk of heart attack and stroke.
On Friday, signs of strength in manufacturing buoyed stocks, though whether the strength will translate into more jobs won’t be known until the government’s next jobs report, due next Friday. The September ISM manufacturing index reading came in at 58.5, slightly better than the 58.3 analysts had expected, but lower than the 59.0 reading in August.
The Commerce Department reported construction spending rose 0.8 percent in August, far outstripping the 0.3 percent Wall Street expected. July’s construction spending increase was revised upward as well, to 1.1 percent from 0.4 percent, giving investors hope that both businesses and consumers continued to put money into real estate despite recent interest rate increases from the Federal Reserve.
A lower-than-expected University of Michigan consumer sentiment index did not appear to have a negative impact on the market. The index reading for September was 94.2, down from the 95.8 posted in August and less than the 96 reading Wall Street had forecast.
PeopleSoft surged $2.98 to $22.83 after the business software maker fired chief executive Craig Conway, replacing him with chairman and founder David Duffield. The company is currently fending off a $7.7 billion takeover bid by rival Oracle Corp., which gained 62 cents to $11.90 on the news.
“It looks like Oracle is going to be able to close their deal for PeopleSoft, which has tech investors excited. And that could indicate more mergers down the road in the tech sector, which bodes well,” said Keith Keenan, vice president of institutional trading at Wall Street Access. “Add to that the economic data, which looks decent, and the start of the third quarter, and that’s got things going today.”
Semiconductor shares saw renewed interest after J.P. Morgan upgraded two semiconductor equipment makers, Novellus Systems Inc. and Teradyne Inc., breathing new life into the struggling technology sector. Novellus Systems climbed $1.36 to $28, while Teradyne rose 96 cents to $14.36. The Philadelphia Semiconductor Index was up more than 4.6 percent as well.
Northwest Airlines Corp. announced that CEO Richard Anderson was leaving the company to become executive vice president at UnitedHealth Group Inc. Northwest moved 34 cents higher to $8.55, while UnitedHealth was up 2 cents at $73.76.
Research In Motion Ltd., maker of the popular Blackberry e-mail pager, fell $2.54 to $73.80 despite a strong earnings report late Thursday. The company beat Wall Street forecasts for its latest quarterly earnings by 2 cents per share on a substantial hike in revenue. The company also upgraded its profit outlook for the current quarter.
Advancing issues outnumbered decliners by more than 4 to 1 on the New York Stock Exchange, where volume came to 1.58 billion shares, compared with 1.75 billion on Thursday.
The Russell 2000 index of smaller companies was up 12.09, or 2.1 percent, at 585.03.
Overseas, Nikkei stock average climbed 1.5 percent, and the U.S. markets’ performance further boosted European stocks. Britain’s FTSE 100 closed up 1.9 percent, France’s CAC-40 rose 2.5 percent for the session, and Germany’s DAX index surged 2.6 percent.