NEW YORK, Dec. 5 (UPI) -- Stock prices on the New York Stock Exchange and the Nasdaq Stock Market were sharply higher in busy trading at midday Wednesday, lifting the Dow Jones Industrials above the 10,000 level for the first time in three months in a buying binge ignited by hopes the slowdown in the technology sector has run its course.
Strength in the technology sector drove the Nasdaq composite index above the 2,000 mark for the first time in four months.
At midday, the blue-chip Dow Jones industrial average, which jumped 129.88 points Tuesday, was ahead another 162.20 points, or 1.61 percent, to 10,056.00.
The tech-heavy Nasdaq composite index, which climbed 58.20 points in the previous session, was ahead 64.34 points, or 3.17 percent, to 2,027.44.
The broader New York Stock Exchange composite index was ahead 7.77 to 588.93 while the Standard & Poor's 500 index was ahead 19.19 to 1,163.99.
The American Stock Exchange composite index was ahead 3.32 points to 827.54 while the Russell 2000 Index was ahead 9.23 to 477.07.
Big Board volume climbed to an estimated 728.20 million shares from 511.50 million shares changing hands during the same period Tuesday.
Analysts said stocks rallied on solid gains in all tech sectors as well as oil service, natural gas, airline, biotech and financial issues.
Technology stocks jumped on a rising perception, which has been fueled by comments by industry executives, that the slowdown in the technology sector has run its course, and that demand in key sectors is about to rebound.
Also fueling the advance was comments from brokers at Salomon Smith Barney who modestly raised earnings-per-share estimates on the S&P 500 in its first upward revision in almost two years.
Economist Steven Wieting upped his S&P 500 earnings per share forecast to $45.35 from $44.50 for 2001 and to $47.50 from $46.50 for 2002. The 2003 earnings per share estimate stands at $54.
Wieting said the move comes as the "scope and timing of the current recession becomes increasingly more discernable."
The economist had trimmed his estimates immediately following the Sept. 11 tragedies, adding that the cuts "apparently went a bit too far."
He believes economic growth will recover "quite rapidly" over the course of 2002.
"A synchronized global recovery in 2003 and 2004 could help U.S. earnings recover sharply, but earnings abroad in 2002 will still likely fall," the economist told clients.
He sees a "major reversal in relative earnings strength" towards cyclical industries in 2002 but still expects an overall decline in profits in the first half of next year. For most cyclical industries, in fact, earnings will simply be falling less in the first half of 2002 rather than actually growing.
Wieting expects defensive industries such as healthcare, select utilities, specific financials and consumer groups to post solid earnings in early 2002.
Meanwhile, on the economic front, the U.S. service sector unexpectedly expanded in November, as it shook off the lingering after effects of the Sept. 11 terrorist attacks, according to the National Association of Purchasing Management.
The group's much-watched non-manufacturing business activity index jumped 10.7 percentage points to 51.3 from 40.6 a month earlier. October's decline had been the biggest since the survey's beginning in July 1997.
Most economists on Wall Street were expecting the index of business other than manufacturing to improve to 42.7 during the month.
The non-manufacturing index is comprised mostly of services. Index readings above 50 indicate expansion of activity and prices in the non-manufacturing sector, while readings under 50 denote contraction.
"Keeping in mind that the NAPM indexes are indexes of change from one month to the next, it is not surprising that, following October's high rate of decrease in business activity in the aftermath of the events of September 11th, members experienced increased activity in November," said Ralph G. Kauffman, the survey's director.
The group said employment, a key focus for economists and Federal Reserve policy makers, improved to 44.3 from 43.5 in October, although payrolls still continued to contract.
The government on Friday will report on non-farm payrolls for the month of November, and most analysts are looking for more deterioration in the labor market.
The non-manufacturing report follows NAPM's report on manufacturing released on Monday. The November NAPM manufacturing index stood at 44.5, above economists' expectations of 42.6. The November reading followed a very weak 39.8 reported for overall business activity in October, and it signaled the factory sector is beginning to recover from the hit it took in the wake of Sept. 11.
Meanwhile, the Federal Reserve Bank of Chicago said the U.S. economy is in recession, as its National Activity Index dipped to minus 1.70 in October, pushing the benchmark three-month moving average below the key minus 1.50 mark and its lowest level since the last recession.
The three-month moving average of the Chicago Fed's National Activity Index plunged to minus 1.56 in October from minus 1.06 in September, even as the monthly reading inched up to minus 1.70 last month from September's minus 1.78.
The latest reading on the three-month average, considered the more reliable gauge since it smooths out monthly fluctuations, was its lowest since March 1991, when the U.S. economy began its climb out of its last recession.
In each of the five recessions since 1967, the year the index measures dates to, the 3-month average fell below minus 1.50.
"The negative October reading is continuing evidence that national economic growth was substantially below trend and the U.S. economy is in recession," the regional Fed bank said.
It was the 16th consecutive month that the 3-month average was below zero, which the Chicago Fed said suggested economic activity has been growing below trend for more than a year.
The Chicago Fed index is based on 85 economic indicators that cover areas including production, income, employment, consumption, housing and manufacturing. Fifty-seven of the 85 indicators showed below-average growth in October, the Chicago Fed said.
Readings above zero mean the economy is running above trend, while a negative reading means the economy is running below trend.
Meanwhile, U.S. Treasury prices fell sharply, knocked down after the survey of non-manufacturing activity for the economy arrived strongly above market expectations.
The 10-year bond dropped 1 21/32 to 101. Its yield, which moves in the opposite direction of its price, jumped to 4.87 percent from 4.66 percent late Tuesday.
In Europe, stock prices ended sharply higher in fairly active trading in London, Frankfurt and Paris, lifted by strength in the oil patch. The London International Stock Exchange's blue-chip FTSE-100 index jumped 124.2 points, or 2.38 percent, to 5,336.3. The German DAX index climbed 210.41 points, or 4.20 percent, to 5,224.40 and the French CAC-40 index rallied 148.31 points, or 3.27 percent, to 4,677.55.
Experts said stocks rose sharply led by oil stocks after Russia said it would cut 150,000 barrels of production a day.
Brent crude for January delivery rose almost a $1 a barrel after the decision on London's International Petroleum Exchange.
Russia's decision to increase its output reduction from 50,000 barrels announced last month could be enough to trigger OPEC's 1.5 million barrel cut, analysts noted. OPEC promised the cut if non-cartel members slashed output by 500,000 barrels.
Earlier in Asia, prices on the Tokyo Stock Exchange ended sharply higher in moderate trading as several policymakers suggested the government may consider injecting taxpayers' money into major banks' capital bases to ease growing credit fears. Japan's blue-chip Nikkei Average of 225 selective issues, which added 82.03 points Tuesday, jumped 261.16 points, or 2.50 percent, to 10,713.81.
Analysts said stocks were lifted after Ruling Liberal Democratic Party Secretary-General Taku Yamasaki said in a speech it is worth considering more public funds for banks if they are needed to secure market trust in financial institutions.
"It is very important for financial institutions to maintain and secure trust. Therefore the issue of capital injections is something to consider," he said.
LDP policy chief Taro Aso said the government needs to pump public funds into banks in danger of failing and dump the current management of such institutions.
Despite the hopes inspired by the policymakers, traders still expect the Nikkei to continue seesawing in the recent range of 10,000-11,000 over the near term.
Aso also proposed postponing by two years the planned April termination of the blanket protection on bank deposits. Full guarantees are slated to end in March, after which deposits will only be guaranteed up to 10 million yen -- about $80,000.
A postponement would help remove pressure on some banks as depositors would be less nervous about investing with them. However, many market experts were against the idea, because it would slow necessary structural reform to Japan's financial system.
Elsewhere in Asia, prices also ended sharply higher in moderate trading on the Hong Kong Stock Exchange, supported by strength in telecom and property issues. The blue-chip Hang Seng Index jumped 251.16 points, or 2.20 percent, to 11,678.40.
The property sector drew active buying following better than expected response to the government's land auction the previous day.
Prices also ended sharply higher in moderate trading on the South Korean Stock Exchange, lifted by strength in chip stocks. The key Kospi composite index jumped 38.41 points, or 5.91 percent, to 688.31.
Investors rushed to buy chip stocks thinking a rise in contract chip price would boost the companies' revenue.
Prices on the Taiwan Stock Exchange ended near a 6-month high as technology shares remained bullish. The Weighted Index rose 158.13 points, or 3.32 percent, to 4,924.56 -- its highest level since June 21.
Elsewhere around the region, prices on the Australian Stock Exchange ended higher with market sentiment lifted by a better-than-expected GDP report and a rate cut. The blue-chip All Ordinaries Index rose 23.10 points, or 0.71 percent, to 3,286.30.
Australia's economy grew 1.1 percent in the third quarter, helped by upbeat consumers and businesses spending. The figure beat economists' forecast of growth of 0.9 percent.
Earlier in the day, the Reserve Bank of Australia cut key interest rates by a quarter point to 4.25 percent, marking the sixth interest rate cut this year.
