Stocks Get Late Push

The Dow and S&P 500 close near their 2005 highs.
By Robert Holmes ,

Updated from 4:06 p.m. EST

Stocks closed solidly higher Tuesday as several prominent brokerage calls and generally positive economic data helped stir up momentum.

The

Dow

rose 63.77 points, or 0.6%, to 10,830.00, while the

S&P 500

was up 6.81 points, or 0.6%, at 1210.41. Both levels were close to the 2005 highs set last Friday. The

Nasdaq

added 19.53 points, or 0.9%, to 2071.25. All three indices slid Monday, ending a three-day winning streak.

Volume on the

New York Stock Exchange

was 1.71 billion shares, with advancers beating decliners by a ratio of almost 2-to-1. Volume on the Nasdaq was 1.94 billion shares with advancers outpacing decliners 3-to-2.

In other markets, the 10-year Treasury bond rose 3/32 in price to yield 4.37%, while the dollar was higher against the euro and lower against the yen.

"Some people may have missed some of the February move, having exited in January," said Robert Pavlik, portfolio manager with Oaktree Asset Management. "They are putting more money to work. With all the positive news and upgrades today, it all added up. You see some bargain hunting that might continue before the big news on non-farm payroll figures Friday."

Oil was slightly lower following the latest bout of winter weather in the Northeast and word from OPEC. In Nymex trading, the April crude contract finished down 7 cents to $51.68, still near a four-month high, after OPEC's secretary general said that the cartel will not cut output at its March 16 meeting.

On the economic front, the Institute of Supply Management's manufacturing index fell to 55.3 in February, following a reading of 56.4 in January. The index was expected to post a slight gain, but the level remained strong by historical standards. Also, January construction spending rose 0.7%, a bit stronger than the 0.4% consensus, while November and December readings were revised higher.

"The markets are doing better after economic news that has been pretty in line with expectations," said Peter Cardillo, chief market analyst with S.W. Bach & Co. "We're going to be stuck in this trading pattern as the market keeps waiting for more evidence on inflation. The semiconductors upgrade today is definitely lending a strong hand to the broader market."

Strengthening sectors Tuesday included airlines, semiconductors, drugs and telecom, while money flowed out of some previously strong areas, including oil services, steel, and energy stocks.

"The overall trend is ragged but it's up," said Phillip Roth, chief technical market analyst with Miller Tabak & Co. "There's a vicious rotation going on between different sectors, and there's no question money is flowing rather than sitting on the sidelines. It's not a long-lasting trend, but it's what you're seeing today."

Supporting tech issues Tuesday was a semiconductor upgrade by J.P. Morgan, which cited expectations for accelerating growth and margins. Among biggies,

Intel

(INTC) - Get Report

was upgraded to overweight,

Texas Instruments

(TXN) - Get Report

was upgraded to neutral, and

National Semiconductor

(NSM)

was bumped up to neutral from underweight.

Intel added 63 cents, or 2.6%, to close at $24.62. Texas Instruments gained 68 cents, or 2.6%, to $27.15. National Semiconductor was up 70 cents, or 3.5%, to $20.65. The Philadelphia Semiconductor Sector index benefited from the brokerage upgrades, rising 2.2%.

"J.P. Morgan was the latest in brokerage upgrades to the semiconductor industry," said Michael Sheldon, chief market strategist with Spencer Clarke LLC. "If you look at the technicals for the group, they've improved greatly over the past few days. If the Philadelphia Semiconductor index can break out from its current price, it would be very encouraging over the intermediate term. If you're an investor in the industry, you're hoping you'll have a spill-over into the Nasdaq, which has lagged the Dow and the S&P 500 in 2005."

Stocks fell Monday after biotech giant

Biogen Idec

(BIIB) - Get Report

and partner

Elan

(ELN)

pulled their multiple sclerosis drug Tysabri from the market, causing their shares to crash. The Dow fell 75 points at 10,766, and the Nasdaq gave up 14 points to 2052. Both indices roughly halved their loss in the last 90 minutes of trading.

Analysts' reckoning of the Tysabri blowup was all over the map Tuesday, with Piper Jaffray and Lazard downgrading the stock to hold from buy and lowering their price targets to the $40 range. Meanwhile, Smith Barney raised the stock to buy while setting a $49 target. It said that if nobody else comes down with the disease that led to the withdrawal, Tysarbi could get back on the market with warning labels.

The brokerage also moved Elan to hold from sell on similar grounds. Biogen rose $2.61, or 6.7%, to $41.26, while Elan dipped 3 cents, or 0.4%, to close at $7.97.

Another prominent call Tuesday involved satellite radio providers

XM Satellite

(XMSR)

and

Sirius

(SIRI) - Get Report

. UBS raised both to buy from neutral and upped XM's price target to $40.50 from $38. The brokerage cited the latter's subscription price increase, which was announced yesterday, and said Sirius should be able to hit 2005 subscriber targets.

XM added 31 cents, or 0.9%, to $33.27, while Sirius rose 32 cents, or 5.8%, to $5.89.

In earnings news Tuesday,

BJ's Wholesale

(BJ) - Get Report

said fourth-quarter earnings fell about 2% from a year ago to $47 million, or 67 cents a share, thanks to a charge of 6 cents a share to change its lease accounting. Excluding the charge, earnings beat estimates by 2 cents a share. BJ's jumped $2.63, or 8.6%, to $33.20.

Marsh & McLennan

(MMC) - Get Report

posted a fourth-quarter loss of $676 million, or $1.28 a share, compared with a profit of $375 million, or 69 cents a share, a year ago. The nation's largest insurance broker blamed the loss on restructuring costs and charges to settle allegations from the New York attorney general's office. Revenue declined 1% from last year to $2.99 billion. Analysts expected a loss of 60 cents a share on revenue of $2.94 billion, according to Thomson First Call. The per-share number wasn't comparable to Marsh's bottom-line number.

Also, the company said it may cut another 2,500 jobs on top of the 3,000 previously announced. It will also pay a 17-cent dividend on March 30, half of last quarter's payout. Shares closed up 35 cents, or 1.1%, to $33.00.

ExxonMobil

(XOM) - Get Report

is selling up to $1.43 billion worth of shares in China's

Sinopec Corp.

, representing its entire stake in the company. The move will make Exxon the last major western oil company to sell its stake in the largest oil refiner in Asia. Exxon lost $1.21, or 1.9%, to $62.10.

J.P. Morgan Chase

(JPM) - Get Report

said Tuesday that it will spin off its $13 billion private equity fund, J.P. Morgan Partners LLC, which will become an independent partnership. Shares finished up 54 cents, or 1.5%, to $37.09.

Merrill Lynch upgraded

Johnson & Johnson

(JNJ) - Get Report

to buy from neutral as it expects less EPS dilution because of the

Guidant

(GDT)

acquisition. J&J announced in December it would acquire Guidant in a deal worth $23.9 billion in cash and stock. The broker said it feels J&J's sales and earnings growth outlook is favorable and ahead of previous low-single-digit gains projections. Shares added $1.05, or 1.6%, to $66.65.

Pepsi Bottling Group

(PBG)

was 2.8% higher after Prudential Equity Group upgraded shares to neutral weight from underweight and gave the stock a price target of $27. The brokerage sees less downside risk but noted that the price target doesn't necessarily mean upside. The brokerage is still concerned about overall returns in the U.S. Pepsi rose 75 cents to $27.97.

Overseas markets closed mostly higher, with London's FTSE 100 recently up 0.6% to 5000, while Germany's Xetra DAX rose 0.8% to 4383. In Asia, Japan's Nikkei rose 0.3% overnight to 11,780, while Hong Kong's Hang Seng fell 1% to 14,061.

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