Blue chips extend rally

Blue chip stocks extended their rally to a second session in New York today, but tech stocks slipped when investors sold shares to lock in profits.

The Dow Jones industrials achieved their second straight triple-digit gain after the government released better-than-expected reports on home sales and manufacturing.

The Dow closed up 155.30, or 2%, at 7,997.12. On Wednesday, the blue chips rose 158.69, bringing their two-day gain to nearly 314 points.

The broader markets were mixed. The Nasdaq composite closed down 0.68, or 0.1%, at 1,221.61. The Standard & Poor’s 500 index rose 15.29, or 1.8%, to 854.95.

Analysts had expected Wednesday’s rally to be short-lived because of investor concerns about third-quarter earnings, the financial impact of a potential war in Iraq and the brittle economic recovery.

But the Commerce Department reported today that orders to US factories for durable goods such as cars and machinery fell by 0.6% in August. While the report confirmed sluggishness in the manufacturing sector, it beat the expectations of analysts, who forecast orders would fall by more than 2%.

Other government reports showed that sales of new homes climbed 996,000 in August, representing a record 1.9% increase from July, and that new claims for unemployment benefits fell by 24,000 to 406,000. Both of these reports beat analysts’ expectations.

Tech stocks rose in early trading, but gave up their gains mainly because of profit-taking, said analysts.

Nortel dropped 7 cents to 57 cents. Rival Cisco was down 60 cents to 11.36.

Bed, Bath & Beyond rose 83 cents to 34.51 after the home-furnishings company reported higher second-quarter earnings.

The struggling airline sector received a boost after United Airlines’ unions said they would allow the carrier to cut labour costs by 5 billion over the next five years – a development in negotiations intended to keep the US’s No 2 airline out of bankruptcy court.

United parent UAL rose more than 33%, or 73 cents to 2.94 and American Airlines gained 66 cents to 4.86, a rise of nearly 16%.

Advancing issues outnumbered decliners by a 5 to 2 ratio on the NYSE. Volume totalled 1.6 billion shares, compared with 1.64 billion traded at the same point on Wednesday.

The Russell 2000 index, which tracks smaller company stocks, gained 5.55 points, or 1.5%, to 370.69.