Stocks Climb Amid Recovery Hopes

Updated from 4:15 p.m. EST

Technology stocks were the stars Friday as investors interpreted a surprise decline in unemployment as convincing evidence an economic recovery is already in the works. Blue-chips also gained ground but closed well below their session highs.

The Dow Jones Industrial Average finished with a gain of 47.12 points, or 0.5%, to 10,572.49. The Nasdaq rose 48.04 points, or 2.6%, to 1929.67, and the S&P 500 added 6.77 points, or 0.6%, at 1164.31.

The Labor Department said nonfarm payrolls rose 66,000 in February and the unemployment rate dropped to 5.5%. The report showed unexpected strength and capped a week of indications that the economy is getting stronger.

While the news surrounding the overall economy seemed to be driving the bulk of the buying action, investors also had plenty of corporate announcements to influence their opinions, starting with semiconductor maker Intel (INTC Quote - Cramer on INTC - Stock Picks). The company provided a sobering outlook for the chip sector in its midquarter update Thursday, saying it sees no signs of an economic recovery in its business. The Santa Clara, Calif., company also tightened its first-quarter revenue estimates to a range of $6.6 billion to $6.9 billion, trimming the high and low ends of its previous forecast.

Subsequently, Lehman Brothers analyst Dan Niles lowered his first-quarter and 2002 estimates on the chipmaker. But the company's shares rose $1.19, or 3.6%, to $34.17. Other research firms mostly stuck with their previous opinions on Intel. The Philadelphia Stock Exchange Semiconductor Index was up 4.4%.

Sun Microsystems (SUNW Quote - Cramer on SUNW - Stock Picks) reaffirmed its guidance for the fiscal third quarter, saying it still expects a sequential rise in revenue, but the company cautioned investors that some new orders could come in too late to be counted toward the top line. The company on Thursday did say it expects to turn a profit in the fourth quarter, and the stock climbed 13.3% to $10. Separately, Sun said it has filed an antitrust lawsuit against Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks) in a California district court and is seeking damages of more than $1 billion.

Discount retail chain Kmart (KM Quote - Cramer on KM - Stock Picks) announced that it will close 284 of its roughly 2,100 stores and cut 22,000 jobs as part of its restructuring efforts under Chapter 11 bankruptcy protection. As a result, the company will take a charge of $1.1 billion to $1.3 billion. The move is expected to increase its cash flow by $550 million. Shares rose by 4% at $1.29.

Biogen (BGEN Quote - Cramer on BGEN - Stock Picks) fell $4.75, or 8.4%, to $51.65 after regulators cleared the way for Serono (SRA Quote - Cramer on SRA - Stock Picks) to sell its multiple sclerosis treatment Rebif in the U.S. Biogen said it is confident that its Avonex will remain the nation's leading MS therapy. Serono's shares rose 13.4% to $22.21.

Schering-Plough (SGP Quote - Cramer on SGP - Stock Picks) faced increased selling pressure after it volunteered to offer its hit allergy drug Claritin over-the-counter. The move would prevent generic drugmakers from putting their Claritin alternatives on the shelves for another three years. The company said it remains comfortable with current forecasts for 2002, due the fact that the nonprescription variety of Claritin won't be introduced until the end of 2002. Shares ended the day off 5.5%.

Analysts at Salomon Smith Barney issued negative comments on brokerages this morning, citing valuations and a lack of visibility. Salomon downgraded Goldman Sachs (GS Quote - Cramer on GS - Stock Picks), Merrill Lynch (MER Quote - Cramer on MER - Stock Picks), Morgan Stanley (MWD Quote - Cramer on MWD - Stock Picks) and Lehman Brothers (LEH Quote - Cramer on LEH - Stock Picks), and lowered its price targets and 2002 and 2003 estimates. Despite the move, all the stocks posted closed higher.

Elsewhere on the research front, fiber-optic gearmaker JDS Uniphase (JDSU Quote - Cramer on JDSU - Stock Picks) was downgraded by Merrill Lynch. The brokerage said recent visits to optical companies indicate its market might recede 20% in 2002, as opposed to the previous estimate of a 12% decline. JDS shares lost 4 cents at $6.37.

The Federal Communications Commission halted its evaluation of EchoStar's (DISH Quote - Cramer on DISH - Stock Picks) proposed $26 billion merger with Hughes Electronics (GMH Quote - Cramer on GMH - Stock Picks) until the satellite television company provides further information. The FCC had been reviewing whether the marriage of the two companies would create a monopoly within the industry and if the deal was in the best interest of the public.

U.S. Treasury issues were again decidedly lower. Around 4 p.m. EST, the 10-year note was down 23/32 to 96 19/32, yielding 5.32%.

Overseas, stocks were higher, with London's FTSE 100 up 0.1% at 5286 and Germany's Xetra DAX up 1.3% at 5360. Japan's Nikkei 225 rose 2% to 11,886, and Hong Kong's Hang Seng added 0.4% to close at 11,233.