US stocks soar

US stocks rallied today, boosted by encouraging news on jobless claims and earnings from Yahoo and Aetna.

The Dow Jones industrials soared 248 points a day after dropping to a five-year low.

Analysts said a rebound was expected after Wednesday’s steep declines, but doubted it would last given uncertainties such as war with Iraq. Indeed, the Dow lurched lower in early trading before posting solid gains.

The Dow Jones industrial average climbed 247.68, or 3.4%, to close at 7,533.95, after losing as much as 89 points earlier in the day. The gain more than offset Wednesday’s 215-point decline, which pushed blue chips to their lowest close since October 1997.

The broader market also finished sharply higher. The Nasdaq composite index rose 49.38, or 4.4%, to 1,163.49, having reached a fresh six-year low in the previous session. The Standard & Poor’s 500 index gained 27.17, or 3.5%, to 803.93.

The Labour Department reported today that new jobless claims dropped unexpectedly by a seasonally adjusted 40,000 to 384,000, the lowest level in nearly two months. Analysts were expecting claims to rise.

While the report offered investors some hope of an improving job market, Labour Department analyst Thomas Stengle cautioned against reading too much into the decline, saying it may partly reflect difficulties adjusting for seasonal factors.

Meanwhile, Yahoo rose 2.29 to 12.27 after the Internet company reported third-quarter profit that beat expectations and raised its revenue predictions for the full year. The news lifted other tech stocks including Intel, which gained 72 cents to 14.18.

And Aetna climbed 5.11 to 36.80 after the health insurer said it expected earnings for the third quarter and the rest of 2002 to be higher than analysts’ estimates.

The positive news helped offset disappointing September retail figures, which pressured blue chip stocks in early trading.

Retailers today said warm weather and a cool economy hurt autumn sales, prompting merchants such as Federated and Kohl’s to reduce their earnings outlook for the rest of the year. Shares of Federated rose 1.49 to 28.10, but Kohl’s declined 5 to 49.45.

Analysts said while a recent spate of heavy selling has made stocks attractive to bargain hunters, more steep declines were possible. They said the market could be pressured in the coming weeks as more earnings reports are released.

“It’s been hard for the market to put together a couple of good days in a row,” said Jack Caffrey, equities strategist for JP Morgan Private Bank. “But when we do start going up, I think you can be looking at a fairly powerful upward move.”

Brown said although unimaginable earlier in the year, the Dow could fall below the 7,000 mark.

“I would put it at maybe a 50-50 chance,” he said. “I see the market right now as fairly valued. It’s possible we may need to get into the dirt-cheap category before the market starts picking up again.”

Advancing issues outnumbered decliners 9 to 5 on the New York Stock Exchange. Volume was moderate.

The Russell 2000 index, which tracks smaller company stocks, rose 9.12, or 2.8%, to 336.16.