Semiconductor shares benefited from talk Wednesday of an increase in memory-chip prices after The Philadelphia Stock Exchange semiconductor index shot up 36 points to 581.40. Wall Street also drew encouragement from a report issued Wednesday by the Semiconductor Industry Association that worldwide chip sales rose 1.6% on a three-month moving average basis to $10.6 billion in November -- the second straight month that the industry saw sequential growth. The association also reported that PCs, wireless, consumer products and auto applications also were leading a chip sales rebound.
Also boosting the chip sector: a bullish call Thursday by JP Morgan on Intel (INTC
). The firm says investors should buy Intel ahead of its fourth-quarter earnings release.
Goldman Sachs helped storage stocks after making positive comments about Sun Microsystems (SUNW
). Salomon Smith Barney also upgraded data-storage company EMC Corp. (EMC
) to buy from outperform.
Airline companies made gains after a major brokerage firm cut its quarterly loss estimate on Continential Airlines (CAL
). Rivals Delta (DAL
) and American Airlines' parent, AMR Corp. (AMR
), rose sharply on the heels of the outlook upgrade.
UAL Corp.'s (UAL
), parent of United Airlines, rose after announcing it will close five U.S. reservations offices and lay off about 900 employees because of a "soft" U.S. economy as well as fewer flights and lower sales after the September 11 attacks.
Energy, information technology consulting firms, biotechs, and insurance brokers underperformed.
Investors tuned in to weaker economic data, including initial jobless claims, which climbed 36,000 to 447,000 for the week ending December 29, a higher number than Wall Street had expected. The news could signal a higher unemployment rate in the December jobs report, due out Friday. On the upside, November construction spending rose 0.8% -- a bit more than expected.
In corporate news, Dow Chemical (DOW
) says it won't make its fourth-quarter estimates, due to lower volumes than expected plus continued margin pressure for commodity products.
S&P downgraded Pfizer (PFE
), saying Big Pharma stocks are likely to tread water near term amid tougher pricing in state Medicaid programs, patent expirations, a more cautious FDA, and a dearth of new blockbusters. However, S&P says Pfizer is better situated than the overall group in terms of product portfolio, patent expirations and its pipeline.
Morgan Stanley cut its outlook on KMart (KM
), reflecting concern about recent weakness in sales, plus growing wariness in financial markets about the discount retailer's financial health.
Data management systems provider Fair Isaac & Co. (FIC
) fell sharply after Robertson Stephens said a review of the company's 10-K report raises concerns about its fourth-quarter earnings.
On the economic front Friday, unemployment data is due at 8:30 a.m. EST. Standard & Poor's MMS expects nonfarm payrolls data drop 200,000 and the unemployment rate to rise to 5.9% from 5.7%, which would leave the rate at the highest level in more than seven years.
While S&P believes the worst of the declines is over, this month's data should still be depressed. Labor market conditions have significantly deteriorated over the past two months due to ongoing weakness in manufacturing and temporary employment, a surge in layoffs at travel-related businesses following the attacks, and lackluster holiday-related hiring.
Rounding out the report are expectations for the workweek to hold at 43.1 hours, while hourly earnings are expected to rise 0.3%
Also due Friday at 10:00 a.m. EST are data on goods-producing jobs, or nonfarm manufacturing jobs, which are seen dropping another 135,000, with manufacturing again accounting for most of the fall. S&P sees private-service jobs are falling 95,000 with widespread weakness across most industries. Government payrolls are expected to remain an area of modest growth, however, reporting 30,000 net new jobs, says S&P.
The Dow Jones industrial average rose 98.74 points, or 0.98%, to 10,172.14. The tech-heavy Nasdaq composite index rose 64.92 points, or 3.28%, to 2,044.17. The broader S&P index gained 9.19 points, or 0.80%, to 1,163.86.
Treasuries rose after the government reported the jump in weekly jobless claims, and also benefitted from from bargain hunting ahead of Friday's payrolls report. But Thursday's short-term strength in bonds may not last long as traders look to sell on any further confirmation that the economy has turned the corner. Stronger stocks on Friday could also keep Treasuries on the heavy side.
European markets finished solidly higher on new year buying spawned by hopes the U.S. economy will rebound. In London, the Financial Times-Stock Exchange 100 index climbed 100.50 points, or 1.93%, to 5,318.80, on a report that retailers had their best Christmas sales season in 14 years and that consumer credit is expected to climb. In Germany, the DAX Index gained 111.51 points, or 2.16%, to 5,279.39. In France, the CAC 40 rose 100.76 points, or 2.20%, to 4,681.20.
In Asia, the Tokyo stock market was closed for the holidays Monday through Thursday of this week (Dec. 31, 2001 through Jan. 3, 2002). The Nikkei ended 2001 up 85.01 points, or 0.81%, to 10,542.62. In Hong Kong on Thursday, the Hang Seng rose 72.67 points, or 0.64%, to 11,423.54. By Suzanne Robitaille in New York