Updated from 4:05 p.m. EST

Late buying spawned by hopes of a Federal Reserve rate cut boostedstocks Friday, as investors found a silver lining in weak jobs data and a report showing the manufacturing sector contracting.

The

Dow Jones Industrial Averagegained 120.61 points, or 1.4%, to 8517.64, making this thefourth-consecutive week of gains for the Dow. Meanwhile, the

Nasdaq Composite rose 30.96 points, or 2.3%, to 1360.71, while the

S&P 500

added 15.20 points, or 1.7%, to 900.96. All three indices posted gains for the week, with the Dow up 73 points, the Comp up 29 points and the S&P up 3 points.

Friday's release of employment data confirmed suspicions that the job market isn't improving, with nearly all the data points were in line with expectations for an anemic labor picture. The unemployment rate is now 5.7%, up one-tenth of a percent, roughly in line with Wall Street expectations. The average work week fell to 34.1 hours, while payrolls declined by 5,000 jobs.

Meanwhile, the Institute for Supply Management's factory index came in at 48.5 for October, down slightly from September but not as bad as some had feared. A gauge of orders in the index rose to 50.9% from 50.2%, a positive sign for the economy.

The bad economic news has been good for stocks, since it bolsters the case for a cut to the federal funds rate when the Federal Reserve meets on Nov. 6. But much of the upside move has nothing to do with fundamentals; rather, it's a trading rally that has the bears on the run. "A lot of hedge funds are getting squeezed. They were looking for the market to pull back a bit after the end of the month games. But there's anticipation that the Fed will cut and big money still wants to jam us higher," said James DePorre, trader and

RealMoney.com

columnist.

In fact, the disconnect between the dire economic forecasts and themarket performance over the last month could make for a nasty week nextweek, when the market digests the results of the mid-term elections and the Federal Open Market Committee meeting. "We are setting up for a 'sell the news reaction' after the election and the FOMC meeting," DePorre said. "My screens are almost all tech stocks up and little else, with a lot of the small stocks up today, which is usually a sign that a rally is getting old," DePorre said.

Indeed, investors continued to pick through the tech stock dollar bin, lifting names with extremely depressed share prices. Video-game maker

Acclaim

(AKLM)

rose 17%,

Vitesse Semiconductor

(VTSS)

rose 12.2% and

Atmel

(ATML)

rose 12%. Within the networking space,

JDS Uniphase

(JDSU)

added 10.2%, while

Corning

(GLW) - Get Report

gained 10.2%.

The goodwill toward tech was especially evident in the semiconductor space, with the Philly Chipmakers gaining 6.1%.

Intel

(INTC) - Get Report

rose 5.8% to $18.30,

Xilinx

(XLNX) - Get Report

rose 8.3% to $20.57, while

Advanced Micro Devices

(AMD) - Get Report

rose 6% to $6.51.

Heath insurer

Cigna

(CI) - Get Report

reported third-quarter earnings that beat analyst estimates by 2 cents a share. Cigna also told investors that the SEC had opened up an informal inquiry into the company's operations. The stock gained 6.3% to $38.40.

A tough week for

Tenet Healthcare's

(THC) - Get Report

concluded with more bad news. Earlier in the week, the company was hit by fears that slumping Medicare outlier payments could sap earnings. Then on Thursday, 40 federal agents stormed a Redding, Calif., hospital run by the company, investigating the actions of two doctors. Friday, Goldman Sachs downgraded the company to market outperform and took it off the recommended list. The company dropped 7.8% to $26.50, capping its week with a total loss of 46.3%.

Aside from Tenet, the rest of the healthcare sector rallied after CIBC defended the industry, maintaining its overweight rating on healthcare stocks. Specifically, CIBC pooh-poohed the idea that Medicare outlier payments would slip and reiterated the view that operating trends have been positive.

Columbia/HCA

(HCA) - Get Report

was upgraded to sector outperform, while Tenet's rating was suspended in light of the company's recent troubles.

Columbia HCA rose 4% to $45.23,

Province Healthcare

(PRV)

rose 6.5%, and

Universal Healthcare Services

(UHS) - Get Report

rose 2.8%.

Confirming rumors from earlier in the week,

Teva Pharmaceuticals

(TEVA) - Get Report

has been selected to join the Nasdaq 100 index, effective Nov. 7. Teva will replace

Concord EFS

(CEFT)

, which is moving over to the NYSE. Teva slid 1.1% to $76.53, while Concord gained 5.7% to $15.10.

Lucent

(LU)

had another rough session after the

Wall Street Journal

reported that the SEC's probe into the company's accounting might be wider than the company has let on. Instead of just probing issues from 1999 to the present, the paper said the SEC is looking back to the mid-1990s. The stock lost 7.3% to $1.14.

Celestica

(CLS) - Get Report

gained 2.9% to $14.20, despite being cut to attractive from buy at Thomas Weisel Partners, which said the company will face challenges with its top-tier customers. Rival

Solectron

(SLR)

rose 9.3% to $2.46.

Albertson's

(ABS)

was downgraded to sell from reduce by UBS Warburg in the wake of the company's warning yesterday. UBS cut the company's price target to $16 and told investors that its stock did not deserve to be valued at a premium over peers like

Safeway

(SWY)

and

Kroger

(KR) - Get Report

. As a result, Albertson's stumbled for a second day, dropping 10.2% to $20.04. Safeway fell 0.9% to $22.89, while Kroger added 0.7% to $14.90.

Jefferson-Pilot

(JP) - Get Report

was downgraded to sell from neutral byMerrill Lynch, which warned investors that the company could miss earnings targets next year. Instead of Jefferson, Merrill recommends investors look at

Torchmark

(TMK)

. Jefferson was off 3.3% to $38.81, while Torchmark gained 0.6% to $36.01.

Overture Services

(OVER)

was downgraded to in-line from outperform at Solomon Smith Barney, which cut its 2003 estimates and dropped its price target from $31 to $21, more than $6 lower than Thursday's close. Overture dropped 16.3% to $23.05 on the news.

Novartis AG

, in an attempt to promote the Foradil Aerolisterinhaler, its struggling asthma treatment, has signed a licensing deal with rival

Schering-Plough

(SGP)

. Schering will pay an undisclosed upfront sum to market the drug in America, along with payments if sales reach certain milestones. Schering rose 1.7% to $21.72.

The Novartis-Schering deal wasn't the only pharmaceutical news moving the market on Friday.

Biovail

(BVF)

slid 1.1% to $31.30 despite receiving tentative FDA approval for a new version of Zolpidem, the sleep aid sold under the brand-name Ambien by

Sanofi Synthelab

(SNY) - Get Report

in the U.S. Sanofi gained 1.5% to $30.84.

The little purple pill is about to change colors. A consortium led by generic drugmaker

Andrx

(ADRX)

is set to launch a generic version ofPrilosec, the blockbuster allergy fighter from

AstraZeneca

(AZN) - Get Report

. As a result, Andrx rose 18.9% to $18.37, while AstraZeneca fell 5.7% to $35.42.

Overseas markets were mostly lower. London's FTSE 100 was down 1.1% to 3997 while Germany's Xetra DAX was up 0.6% to 3171. In Asia, Japan's Nikkei rose 0.5% to 8686, and Hong Kong's Hang Seng was losing 0.4% to 9408.

Treasuries were lower, with the 10-year note down 29/32, raising the yield to 4.00%.