Friday's Market: Nasdaq Adds 1.9%, Ending Middling Week on up Note

A midday rally propelled stocks to an up close Friday, ending a middling week on a positive note as Wall Street decided that the latest jobs and manufacturing data didn't derail expectations for an improving economy.

"The market got to a level where investors are comfortable putting money to work," said trader Rob Cohen at Credit Suisse First Boston, adding he did not think there was any other catalyst during the day.

The Dow Jones Industrial Average , ended up 78.47, or 0.72%, to 10,990.41 points -- below the 11,000 resistance level. It is now 17.1% above its two-year low of 9,389.48, reached on March 22. The blue-chip index was buoyed by chip bellwether Intel(INTC Quote), which closed up 6.4% to $28.74, Boeing (BA Quote), which added 3.4% to $65, and General Motors (GM Quote). GM, which rose 2.9% to $58.54, reported stronger-than-expected car and truck sales for May.

The tech-heavy Nasdaq Composite fared well most of the day, closing up 39 points, or 1.85%, to 2149.4 points. It's up 31.2% since its 32-month low of 1638.8 reached on April 4. The broader-market S&P 500 finished higher by 4.85 points, or 0.39%, to 1260.67. It is up 14.3% from its 31-month low 1103.25 on April 4.

For the four-session week, the Nasdaq ended down 4.5%, while the Dow shed 0.1% and the S&P eased 1.3%.

One question at the start of today's session was how the market would digest this morning's double dose of economic data: the employment report , which showed the first drop in the unemployment rate in eight months, and the purchasing managers' index , which showed continued weakness in the manufacturing sector.

Tom Gallagher, head of trading at CIBC World Markets, believes the market has factored in the worst of the economic news. "There are still some questions about the economy and it's clear to everyone that we're in a serious slowdown with the possibility of one negative quarter of growth," he said, "but market is saying we've suffered the worst. And when the tax cuts kick in and with the Fed acting over the next few months, I think there's a positive tone coming back."

Chips and PC stocks did well, while the defensive drug index stayed in positive territory all day. Transportation, natural-gas and insurance stocks were among the day's weakest sectors, and retail ended in the red.

Today's economic numbers have not altered expectations for an interest-rate cut when the Federal Reserve meets on June 26 and 27. The fed funds futures are currently putting a 90% chance on a 25 basis-point cut at the coming meeting. Yesterday, they were pricing in a 92% chance. If the Fed does move again, it will be the sixth rate cut since the year began.

For the first time in eight months, the monthly unemployment rate fell on a month-to-month basis, declining to 4.4% in May from 4.5% in April. Nonfarm payrolls decreased by 19,000, though, slightly higher than economists' expectations for a 17,000 decline. Job losses were concentrated in the manufacturing sector, which shed 124,000 jobs in May, compared to 113,000 in April. Since last July, 675,000 manufacturing jobs have been lost, with more than two-thirds of that decline occurring since December.

The purchasing managers' index for May fell to 42.1. The survey -- of approximately 300 purchasing executives nationwide -- measures conditions in the factory sector. A reading of 50 or above signals expansion, while a measure below 50 signals contraction. The index has not been above 50 since July 2000. The latest reading is lower than last month's and the 43.5 that economists had expected.

Meanwhile, earnings worries have been looming over the market since Sun Microsystems(SUNW Quote) warned on Tuesday that it would miss its second-quarter targets, kicking off the second-quarter confession season. Sun rose 1% to $16.63.

The latest round of earnings news was mixed. Filing into the confession pew, chipmaker Altera(ALTR Quote) after the close yesterday lowered its revenue guidance for the second quarter, citing lower-than-expected international sales. But in a conference call last night, chip-equipment maker Novellus(NVLS Quote) maintained its prior financial guidance for the second quarter. There had been some buzz on Wall Street that the company would warn.

Shares of Altera finished up 4.6% to $25.11, while Novellus ended ahead 5.2% to $50.40.

"The market knows that we're entering that phase [of earnings preannouncements] and a lot of the over the counter stocks are not moving as well because people are waiting and holding back in order to pick up stocks at a cheaper rate," Gallagher said. "But mostly I think people know the bad news has been widely distributed."

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Market Internals

Market Internals
Exchange	Advancers	Decliners	New Highs	New Lows	Volume
New York Stock Exchange	1,562	1,407	73	18	645 million
Nasdaq Stock Market	1,947	1,662	108	39	968 million

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Most Active Stocks

NYSE Most Actives
Company	Shares Traded
Tyco (TYC Quote)	21.4 million shares
Lucent (LU Quote)	12.6 million shares
Sprint (FON Quote)	10.7 million shares

Nasdaq Most Actives
Company	Shares Traded
Cisco (CSCO Quote)	43.3 million shares
Intel (INTC Quote)	35.6 million shares
Oracle (ORCL Quote)	26.9 million shares

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Bonds/Economy

Treasury prices were rising at midday, with more strength on the long end of the bond market.

The benchmark 10-year Treasury note was rose 2/32 at 97 6/32, pushing the yield down to 5.375%.

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