Stocks edged higher Friday as spreading optimism about the U.S. economy boosted companies that benefit from broad economic growth. BlackBerry maker Research in Motion plunged after slashing its forecast for holiday sales.
Materials and industrial companies helped propel market indexes higher, signaling that traders expect the economic recovery to remain on track. The Dow Jones industrial average broke a three-day slump Thursday after a report showing sharply fewer layoffs and signals that business conditions for manufacturers are improving.
Utility and telecommunications companies lagged the market Friday as traders sold companies considered safer when the economy is weak.
Proposed spending cuts in Italy also soothed fears about the threat posed by Europe’s debt crisis. A flat reading on U.S. inflation sent bond yields lower.
Some analysts believe nervousness about Europe this fall and winter pushed stock prices lower than their fair value. Investment adviser Uri Landesman, president of Platinum Partners, expects stocks to rise into next year because of the growing likelihood that economic news and European headlines will remain positive.
“The odds are, the news is going to be better than the market is discounting,” Landesman said. He said the market is near the low end of its recent trading range, and a dose of positive news could set off a mini-rally. Any market moves next week could be sharp as trading volume thins out before the Christmas holiday, Landesman said.
The Dow Jones industrial average rose 34 points, or 0.3 percent, to 11,903 at noon Eastern time. The Standard & Poor’s 500 index gained 8, or 0.7 percent, to 1,223. The Nasdaq composite index rose 26, or 1 percent, to 2,566.
The gains were broad. Nine of 10 industry groups in the S&P 500 index rose, lifted by materials and industrial companies. U.S. factories in some regions have seen shipments and orders rise this month, according to two surveys released Wednesday. Materials companies are benefiting from soaring commodity prices.
Home Depot Inc. and JPMorgan Chase & Co. helped lift the Dow, rising 2.6 percent and 1.8 percent, respectively.
Online game developer Zynga Inc. edged down 1 percent in its first hours of trading on the Nasdaq. The maker of Farmville’s initial public offering was priced late Thursday at $10 per share, raising $1 billion. That means the San Francisco company can boast the biggest Internet IPO since Google Inc. first offered shares in 2004.
Research In Motion Ltd. plummeted 11 percent after the company said late Thursday that new phones seen as critical to its future will be delayed until late next year. RIM also is taking a big loss on unsold tablet computers and predicted that its BlackBerry sales will fall sharply during the holiday sales season.
The yield on the 10-year Treasury note plunged to 1.84 percent from 1.93 percent earlier Friday after the government said consumer prices were unchanged last month, suggesting that inflation remains low. Low inflation makes bonds more attractive because it doesn’t diminish the buying power of the fixed return a bond provides over time.
If stocks hold their gains, it will be only their second rise this week. Indexes gained Thursday after positive economic news brought relief to choppy markets. The Dow rose 45 points after separate reports showed sharply fewer layoffs and better business conditions for factories on the Eastern seaboard.
Italy’s lower house of parliament approved an austerity package in hopes of lowering the country’s escalating borrowing costs. The measures are seen as a crucial step toward soothing fears about Europe. Italy’s borrowing costs have risen in recent weeks to levels at which other nations, such as Greece and Portugal, were forced to take bailouts.
The cuts are aimed at persuading bond traders that Italy can emerge from the widening crisis without defaulting on its debts.
Among the other companies making big moves:
- New York-area cable TV provider Cablevision Systems Corp. plunged 15 percent, the most in the S&P 500, following the sudden departure of its chief operating officer, Tom Rutledge.
- Adobe Systems Inc. jumped 8.4 percent, the most in the S&P 500, after the software maker reported earnings and revenues that were far better than what analysts had expected. Analyst Walter Pritchard at Citigroup said the quarter was a “blow-out when most expected weakness.”
© 2011 The Associated Press