Stocks Surge on Upbeat Data
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By Elizabeth Lazarowitz
NEW YORK (Reuters) - Stocks rose sharply on Friday after a report showed the U.S. factory sector clawed its way out of its deepest slump in a decade, adding weight to Wall Street's growing conviction that the economy is on the mend.
"That is ... a critical confirmation that the economy is surprising us on the upside," said David Sowerby, market strategist for investment firm Loomis Sayles.
A key report showed factories had ramped up production in February for the first time since July 2000 to meet a wave of new orders.
Other surveys showed a robust gain in U.S. consumer spending in January and a hefty jump in construction spending in the same month, and
The data overshadowed a closely watched consumer sentiment gauge that posted a bigger-than-expected drop in February.
"Since manufacturing has really been the weak point in the economy, seeing that turn around is really encouraging," said Jay Mueller, economist and portfolio manager at Strong Capital Management.
The Dow Jones industrial average <.DJI> gained 162.6 points, or 1.61 percent, to 10,268.73, while the broader Standard & Poor's 500 Index <.SPX> rose 16.44 points, or 1.49 percent, to 1,123.17. The technology-laced Nasdaq Composite Index <.IXIC> climbed 43.26 points, or 2.5 percent, to 1,774.75.
Semiconductor stocks were helping lead the Nasdaq's rebound after an upbeat business update by Novellus Systems Inc. , a major producer of chip-making equipment.
"There are signs of the downturn going away," Novellus Chairman and Chief Executive Office Richard Hill said in a conference call with investors on Thursday. "We see that February has followed January with continued signs of recovery."
Novellus' shares rallied $3.71 to $46.30. The Philadelphia Stock Exchange's semiconductor index <.SOXX> jumped 7.23 percent.
Chip giant Intel Corp. climbed $1.65 to $30.20. It reported China was set to overtake Japan as its largest Asian customer within two years.
Chartered Semiconductor Manufacturing , the world's third largest independent foundry, raised its first quarter guidance and pointed to a sector rebound. It rose $2.14 to $24.62.
The markets got their first dose of data with a report from the U.S. Commerce Department that showed personal income rose 0.4 percent in January, while spending rose by a similar amount. Economists had predicted personal income rose 0.1 percent in January, while spending gained 0.3 percent.
"Both numbers were good, and they indicated even more than before that consumers are a major factor in the U.S. economy and the market," said Alan Ackerman, market strategist at Fahnestock and Co.
U.S. consumer sentiment stumbled in February for the first time in five months, according to market sources, as accounting fears on Wall Street and a sluggish economy dented Americans' hopes for a vigorous recovery.
The University of Michigan's final February consumer sentiment index fell to 90.7 from 93.0 in January.
But investors shrugged that off after the Institute of Supply Management reported its manufacturing activity index jumped to a bigger-than-expected 54.7 in February from 49.9 in January, breaking above the 50 level and indicating expanding factory activity after 1-1/2 years of decline.
Construction spending also jumped more than expected, surging 1.5 percent in January -- the fastest rate in a year, the government reported.
AT&T Wireless Services Inc. , the nation's No. 3 wireless company, revised its 2002 outlook to include its acquisition of TeleCorp PCS and said it expects more revenue and subscriber growth but less operating cash flow growth.
It was the most active stock on the Big Board, slumping 47 cents to $9.62.
Shares of biotechnology companies Invitrogen Corp. and Protein Design Labs Inc. both fell sharply after each said sales growth in 2002 would be slower than expected. Invitrogen dropped $13.69 to $31.95, and Protein Design fell $1.07 to $14.80.
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