Stocks Shift Into Overdrive

Updated from 4:05 p.m. EST

Stocks soared to a higher close Thursday, as

Hewlett-Packard's

(HPQ) - Get Report

strong quarter and several positive economic reports ignited a broad-based rally.

The

Dow Jones Industrial Average closed up 222 points, or 2.6%, at 8845. The

Nasdaq gained 48 points, or 3.4%, to 1467, and the

S&P 500 added about 20 points, or 2.2%, to 933. The Dow is up nearly 500 points since last Monday.

Semiconductor, storage, auto, computer hardware, airline, auto, defense and oil service shares were showing the most strength, while consumer products, healthcare, beverage, and gold issues were under pressure.

KLA Tencor

(KLAC) - Get Report

,

QLogic

(QLGC)

and

Emulex

(ELX)

all posted sharp gains.

The Philadelphia Semiconductor Index, or SOX, rose 8.1%, and the AMEX Networking Index gained 7.5%.

The rally spilled over into the software sector, pushing up the Goldman Sachs Software Index by 5.6%.

BEA Systems

(BEAS)

jumped 10.3%,

Check Point Software

(CHKP) - Get Report

rose 9.4%,

Veritas

climbed 8.9% and

Siebel Systems

added 7.9%.

J.D. Edwards

(JDEC)

soared 12% on an upgrade to a buy from a neutral rating by First Albany. Autodesk, which warned earlier this month, rose 7.9% in advance of releasing its third-quarter results after the market close. Bellwether

Microsoft

(MSFT) - Get Report

meanwhile, posted a 1.9% gain.

Overall, market breadth was positive. Advancers outpaced decliners 11 to 5 on the New York Stock Exchange, where 2.04 billion shares changed hands. On the Nasdaq, winners beat losers 2 to 1on volume of 2.41 billion shares.

"Volume is very strong and the bulls and bears are debating whether this is an upside blow-off or a volume breakout," said Keith Keenan, vice president of institutional trading and a partner at Wall Street Access. "I believe it's an upside blow-off and any follow-through will be limited. I am more bearish now than I have ever been," Keenan said.

General Electric

(GE) - Get Report

rose after it disclosed a big charge and an earnings shortfall, and raised its dividend. The company expects to earn $1.51 to $1.65 in 2002, compared with the First Call consensus of $1.65. For 2003, it sees earnings of $1.55 to $1.70, compared with the consensus of $1.70. The 2002 shortfall is attributable to a charge of $1.4 billion, or 14 cents a share, to increase reserves at its reinsurance operations. GE also raised its quarterly dividend 6% to 19 cents. The stock jumped 8.3% to $26.85.

"This rally is being driven by fear and performance anxiety. The long-only managers are fearful of missing a continued rally; these managers can't afford to fall behind their peers. They have to be fully invested. And, the shorts are fearful of losing all their profits and in return their year end bonus," Keenan said. "The Philly Fed and the jobless claims just added fuel to the fire," he added.

The Labor Department said jobless claims totaled 376,000 in the latest week, their lowest level in four months, while the prior week's numbers were revised upward to 401,000. The decline brought the four-week average to 396,000, the first time it has been below 400,000 in almost three months. The Philadelphia Fed Index rose to 6.1 in November reversing a negative reading of -13.1 in October, suggesting that economic conditions are improving.

Separately, the Conference Board's leading economic indicators showed a moderation in its recent decline coming in flat last month after a 0.4% drop in September. Economists were expecting a 0.1% decline in October

Meanwhile, Hewlett-Packard skeptics had a harder job making their case Thursday after the computer and printer giant posted fiscal fourth-quarter revenue of $18 billion, about $700,000 more than analysts predicted and up 9% sequentially, and net income of $390 million, or 13 cents a share. Before charges the company earned 24 cents a share, 2 cents better than forecasts. The stock jumped 12.7% to $18.99 on the news.

In the retail space, home improvement chain

Home Depot

(HD) - Get Report

announced it is raising its quarterly dividend to 6 cents a share, a 20% increase from the 5 cents a share it doled out last quarter

Elsewhere,

Vivendi

(V) - Get Report

surged 19.5% to $14 after the company reportedly received and rejected a $15 billion offer for its media businesses from onetime 20th Century Fox owner Marvin Davis. Various reports said the offer, which encompassed Universal Studios and Music, its theme-park operations and its cable networks, was turned down by the cash-strapped conglomerate because the assets aren't for sale.

In the drug sector, Dow component

Merck

(MRK) - Get Report

saw its shares climb 2.3% to $58.82 after the company said preliminary tests of its experimental cervical cancer vaccine proved effective in virtually every case.

Barnes & Noble

(BKS) - Get Report

said it earned 5 cents a share in the third quarter on a 14% rise in sales to $1.13 billion. Both numbers beat analysts' estimates. The shares closed down 1.1% at $23.64.

Treasuries were lower, with the 10-year note losing 24/32 to yield 4.15%. The 30-year bond was down 1 8/32, pushing its yield up to 5.01%.

Overseas markets were higher, with London's FTSE 100 adding 2.3% to 4190 and Germany's Xetra DAX gaining 2.6% to 3295. In Asia, Japan's Nikkei rose 25% to 8668, and Hong Kong's Hang Seng gained 0.3% to 10004.