Bulls charge ahead

Wall St surge on Microsoft upgrade, improved investor psychology

By Alexandra Twin
CNN/Money Staff Writer

NEW YORK (CNN/Money) -- U.S. stocks rallied sharply Thursday -- extending the previous session's surge and pushing the Dow Jones industrial average past 9,000 -- on an upgrade of tech leader Microsoft, a bounce in some battered techs and a rally in big cap blue chips.

The Dow Jones industrial average gained 96.41, or 1.08 percent, to 9,053.64, continuing a nearly 1,300-point resurgence since July 23, and closing above 9,000 for the first time since July 9. The Nasdaq composite gained 13.70, or 0.97 percent, to close at 1,422.95. The Standard & Poor's 500 index rose 13.34, or 1.41 percent, to close at 962.70.

So far, for the week, the Dow is up 3.14 percent, the Nasdaq is up 4.55 percent and the S&P 500 is up 3.65 percent.

"This is a market of momentum and right now the bulls have the bears pretty much in a bad spot and I don't see anything (in the next few weeks) to turn that around," John Pickett, a specialist at LaBranche & Co. told CNNfn's Street Sweep.

Microsoft (MSFT: up $0.95 to $53.23) helped boost the software sector after Salomon Smith Barney upgraded the No. 1 software maker to "outperform" from "neutral" and raised its price target to $59 from $56. The news boosted other software makers.

Chips showed a more modest recovery, but wireless, networking and Internet stocks traded higher on the Nasdaq.

Broad-based buying helped boost the Dow, with Home Depot (HD: up $1.18 to $33.86), Hewlett-Packard (HPQ: up $0.60 to $15.30) and American Express (AXP: up $1.16 to $38.19) among the biggest gainers.

"We're seeing continued gains, although in some sectors more than others -- a little choppiness in chips -- and the rally seems more muted than earlier in the week," said Hedi Reynolds, head of Nasdaq trading at Morgan Keegan. "But the mood is definitely more positive, it's not as reactive."

"There were no big economic bombshells this week, there's some short-covering, and you have some technical factors helping," Reynolds added. "You have the Nasdaq pushing through its 50-day moving average and the Dow going through 9,000 for the first time in ages, and that sends a good message for the psychology."

Software surges

J.D. Edwards (JDEC: up $2.30 to $14.15), another software maker, reported third-quarter earnings of 8 cents per share, beating estimates by 2 cents and following a loss in the year-earlier period. The company's CEO also said the company is well on the way to recovery.

The news, in conjunction with Microsoft's upgrade, boosted others in the sector, including Oracle (ORCL: up $0.43 to $11.19), PeopleSoft (PSFT: up $1.80 to $21.30) and BEA Systems (BEAS: up $0.15 to $6.99).

"It's late August and there's not a lot else going on, so these two pieces of good news are providing follow-through for some of the other beaten-up names in the sector," said Brad Reback, a software analyst at CIBC World Markets. "Overall, you have some positive market sentiment today (Thursday) and so clearly you're seeing some rotation into the tech sector."

Nextel Communications (NXTL: up $0.60 to $7.80) led the list of wireless stocks trading higher, while chip stocks managed to temper most of their earlier losses, with the exceptions of leader Intel (INTC: down $0.44 to $19.15) and Cree (CREE: down $1.20 to $15.71), which dipped after UBS Warburg downgraded the stock to "reduce" from "hold."

Shares of Ciena (CIEN: down $0.37 to $4.12) fell after the fiber-optic equipment maker reported third-quarter revenue that missed analysts' estimates and a per share loss that was narrower than what analysts expected. The company reported a profit a year earlier. Looking forward, the company said its fourth-quarter revenue will be flat to slightly improved from the third quarter, which is less than what analysts expected.

But the losses didn't hurt the rest of the sector, with JDS Uniphase (JDSU: up $0.20 to $2.60), Lucent (LU: up $0.11 to $1.58, Research, Estimates), Nortel Networks (NT: up $0.12 to $1.29) and others making gains on heavy volume.

Home Depot, Merck on the rise

Blue chips remained higher, although off their best levels.

Home Depot was up for the third straight day after topping fiscal second-quarter earnings estimates Tuesday.

Drugmaker Merck (MRK: up $1.92 to $53.80) built on its gains from the previous session after brokerage Thomas Weisel Partners initiated coverage on the stock with a "market perform" rating. On Tuesday, the company's Medco unit received an offer to begin settlement talks from regulators in Pennsylvania, who have been investigating whether pharmacy benefits managers broke anti-kickback and other laws.

Hewlett-Packard (HPQ: up $0.60 to $15.30) said a report shows its share of the printer market grew in the second quarter, although another report showed that its share of the computer server market declined in Europe, the Middle East and Africa.

In other news, bookseller Barnes & Noble (BKS: down $0.50 to $22.93) reduced its forecast for the rest of the current fiscal year. The news sent shares of its stock sharply lower, adding to the mixed picture for retailers.

In the day's economic news, weekly first-time unemployment claims eased to 389,000 last week from a revised 391,000 the prior week, the Labor Department said. Economists were expecting 385,000 new claims, according to Briefing.com.

Treasury prices fell, sending the 10-year note yield up to 4.30 percent from 4.20 percent late Wednesday.

European markets closed higher, and Asian-Pacific stocks also finished higher Thursday. The dollar rallied versus the yen and euro.

Light crude oil futures fell 40 cents to $28.24 a barrel, while gold was lower.

Market breadth was positive. On the New York Stock Exchange, advancers beat decliners by more than 5-to-3 as 1.36 billion shares traded. On the Nasdaq, winners edged losers 10-to-7 as 1.81 billion shares changed hands.

"Major indexes are up," said Peter Cardillo, director of research at Global Partners Securities. "The Microsoft upgrade certainly helps, as does the absence of bad economic news. Also, oil prices are retreating a little, the dollar is up and a little money is coming out of Treasurys and into equities."