US stocks: Shares buoyed by banks and data

NEW YORK - US stocks rose on Friday, ending the week higher after a two-week rout, as banking shares gained on brokers' upgrades and economic reports raised no new worries about the outlook for interest rates.

The Nasdaq returned to positive territory for the year, recouping losses from more than a week ago, when investors bailed out of equities on worries that rising interest rates would hurt global economic growth.

Brokerage upgrades of Merrill Lynch & Co. and Goldman Sachs Group Inc. shares drove the broad market advance, lifting the stocks of other banks and financial services companies.

"Financials are 30 per cent of the S&P, so when you get a group like that, that's moving in the right way, it tends to bring a lot of the other stocks with it," said Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets, which is based in Cleveland, Ohio.

"There wasn't any economic data that really shocked anybody," he added.

The Dow Jones industrial average rose 67.56 points, or 0.60 per cent, to end at 11,278.61. The Standard & Poor's 500 Index gained 7.28 points, or 0.57 per cent, to finish at 1,280.16. The Nasdaq Composite Index advanced 12.13 points, or 0.55 per cent, to close at 2,210.37.

For the week, the Dow rose 1.21 per cent, the S&P 500 added 1.04 per cent and the Nasdaq gained 0.75 per cent.

Mild inflation

Before the market opened, a government report showed the core personal consumption expenditure price index -- the Federal Reserve's favored gauge of inflation -- rose 0.2 per cent in April, matching economists' forecasts. It did not add to concerns about interest rates, traders said.

US consumer sentiment fell in May, according to a University of Michigan survey, but it was close to economists' expectations.

"Inflation numbers have been reasonable and some of the excesses have come out of the system, with the commodity correction over the last few weeks," said Tim Smalls, head of US stock trading at Execution LLC in Greenwich, Connecticut.

Bank stocks rally

Shares of Merrill Lynch gained 1.8 per cent, or US$1.31, to close at US$72.79 on the New York Stock Exchange after Wachovia raised its rating on the investment bank's stock to "outperform" from "market perform," noting the company's efforts to improve profitability. Shares of Goldman Sachs shot up 3.8 per cent, or US$5.62, to US$152.94 and gave the S&P 500 its second-biggest lift after UBS upgraded the investment bank's stock to a "buy" rating.

An S&P index of financial companies and banks rose 0.8 per cent.

Among the Dow's major advancers were rate-sensitive bank and insurance shares, including financial services provider Citigroup Inc., up 1 per cent, or 50 cents, at US$49.57, and the world's biggest insurer, American International Group Inc., up 0.9 per cent, or 56 cents, at US$61.47.

Citigroup also was the S&P 500's top gainer, while Bank of America Corp. ranked third, with its stock up almost 1 per cent, or 47 cents, at US$49.38.

GM and Celgene gain

Shares of General Motors Corp. rose 0.7 per cent, or 18 cents, to US$28.08 after Prudential raised its rating on the stock to "overweight." Deal news boosted shares of steel companies, such as United States Steel Corp.. whose stock gained 3.8 per cent, or US$2.47, to end at US$67.47 on the NYSE. On Friday, France's Arcelor said it planned to merge with Russia's Severstal.

On Nasdaq, Celgene Corp. added 2.5 per cent, or US$1.02, to US$41.46 after winning US approval to promote its drug Thalomid for multiple myeloma, a cancer of the white blood cells.

Shares of Joy Global Inc. jumped 6.7 per cent, or US$3.30, to US$52.70 on the Nasdaq after Harris Nesbitt raised both its rating on the mining company's stock and its price target.

Stock investors shrugged off reports that gunfire was heard at a US Capitol building garage. Late Friday afternoon, the US Capital police said the sounds thought to be gunshots were probably noises made by construction workers.

Trading volume was light before the Memorial Day holiday weekend and the US bond market closed early. US financial markets will be closed on Monday for the holiday, with trading set to resume on Tuesday.

Trading was moderate on the NYSE, with only about 1.34 billion shares changing hands, below last year's daily average of 1.61 billion, while on Nasdaq, about 1.57 billion shares traded, below last year's daily average of 1.80 billion.

Advancing stocks outnumbered declining ones by a ratio of about 5 to 2 on the NYSE and by about 3 to 2 on Nasdaq.

- REUTERS