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US stocks up as profit growth seen staying strong

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CIOL Bureau
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NEW YORK: U.S. stocks rose on Friday on light volume, led by financial services and traditional manufacturing companies, as some investors bet that rising borrowing costs may trim but will not slash corporate profit growth.



The Federal Reserve is widely expected to hike U.S. interest rates by half a percentage point next Tuesday, but economic figures released in the past two days have boosted hopes that the campaign of increases may be close to an end. There have been five quarter-point hikes since June last year.



Dell Computer Corp.'s report of higher-than-expected earnings and bullish comments from Wall Street analysts also helped to push shares higher. But volume was light, continuing a two-week trend of slow activity, and as a result traders cautioned against making too much of the market's moves.



"All the news is out ahead of the Fed meeting," said Adam Weisman, managing director at Wit SoundView. "And that's probably why we've seen light volume the whole time."



Based on early and unofficial closing figures, the blue-chip Dow Jones industrial average gained 63.40 points, or 0.60 percent, to 10,609.37, off earlier highs but still building on its 178-point advance on Thursday.



Among the biggest gainers in the Dow were auto giant General Motors Corp. , which rose 3-1/2 to 85-13/16 and industrial, media and financial services conglomerate General Electric Co. , which added 1-7/16 to 52-5/16.



The technology-dominated Nasdaq composite index rose 29.49 points, or 0.84 percent, to 3,529.07 but ended well off its intraday high of 3,619.69 and hardly made a dent in the 432 points lost earlier in the week.



Broader market measures also held gains, with the Standard & Poor's 500 index up 13.15 points, or 0.93 percent, at 1,420.96.



Among Friday's top technology movers, Dell Computer Corp. climbed 5-3/16 to 49-7/8 after the world's No. 2 personal computer maker reported first-quarter earnings that topped estimates.



"This is a nice oversold, short-covering rally," said Tony Dwyer, chief market strategist at Kirlin Holdings.



But Dwyer noted Friday's light trading volume.



"That's why instead of being a new bull market starting, this is just an oversold bounce from the downtrend," Dwyer said. "The sharpest rallies occur in bear markets and right now, everybody is like a deer caught in the headlights.



"They've sold what they want to sell and they're too nervous to buy. So the trading desks, more aggressive hedge funds and day-trading firms are dominating the activity, which creates low volume and a lot of volatility," he said. The latest set of economic data sparked Friday's early buying.



A report that wholesale prices experienced their sharpest drop in more than a year in April helped strengthen the view that the Federal Reserve may slow its campaign of interest-rate increases. The figures came a day after a report that retail sales slackened in the same month.



Analysts said the central bank was still expected to raise borrowing costs by half a percentage point Tuesday, but it could relax its anti-inflation policy in the future if more benign inflation numbers come out.



Before the market opened, the Labour Department reported that the Producer Price Index, a gauge of inflationary pressures at the wholesale level, dropped 0.3 percent last month, its biggest decline since February 1999. Economists polled by Reuters had forecast a decline of 0.2 percent.



But, when volatile food and energy prices were stripped out, April's core PPI registered an increase of 0.1 percent, as expected.



(C) Reuters Limited 2000.

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