Wall Street's rally gained momentum Thursday, with stocks rising sharply for the second straight day, this time on Hewlett-Packard's better-than-expected results.
The Dow Jones Industrial Average rose more than 220 points and closed at their highest level in three months. The Nasdaq composite index soared nearly 50 points, and surpassed its post-Sept. 11, 2001, closing low, an achievement last seen more than four months ago.
Along with H-P's news, investors were enthused about two economic reports, one of which suggested the employment slump might be easing. The other showed a flat but still stronger-than-expected reading in the Index of Leading Economic Indicators, a closely watched economic forecasting gauge.
But analysts were more subdued than the market, knowing that stocks typically rally spectacularly in the final three months of the year only to fizzle in the first quarter.
"It's nice to see some gains. This may be the start of the year-end rally, but I don't think it's going to be straight up from here," said Mike Kayes, chief investment officer at Eastover Capital in Charlotte, N.C.
The Dow closed up 222.14, or 2.6 percent, at 8,845.15. The blue-chip average finished at a level not seen in three months, or since Aug. 26 when it stood at 8,919.01.
Thursday's advance was the Dow's best one-day point gain in more than a month, or since Oct. 11, when it jumped 316.34. And, along with Wednesday's gain of 148.23, the Dow was well positioned for its seventh straight weekly win.
But the biggest gains came in the technology-laden Nasdaq, which surged 48.20, or 3.4 percent, to 1,467.55. The index finished above its post-Sept. 11 low close of 1,423.19 for the first time since July 5.
The Standard & Poor's 500 index climbed 19.61, or 2.2 percent, to 933.76.
Analysts attributed much of the rally simply to timing as the fourth-quarter is typically the strongest for stocks.
" 'Tis the season," said Brian Belski, fundamental market strategist for US Bancorp Piper Jaffray. "People are used to being bullish in the fall."
H-P rose $2.14, or nearly 12.7 percent, to $18.99 as investors reacted to the company's better-than-expected earnings. The technology bellwether also reaffirmed its forecasts for the current quarter. The buying spread to other technology stocks.
The gains were helped by encouraging reports from the Labor Department and Conference Board. First, the Labor Department reported new claims for unemployment benefits fell last week to the lowest level in four months.
Then, the Conference Board reported that its Index of Leading Economic Indicators was unchanged at 111.4 in October, after slipping a revised 0.4 percent the previous month. Analysts had predicted a drop of 0.1 percent for October in the index, used to measure future economic activity.
Still, analysts were cautious.
"The psychology is getting better and we definitely think the bottom of market was hit in October and some of these signs that companies are starting to improve their profits is first step to good market," said Matt Brown, head of equity management at Wilmington Trust. "I think we're on track. The only thing that would knock us off is the international uncertainty, the Iraq issue, terrorism. And that's still out there."