Economy hopes help Dow advance

Wall Street extended its advance into a sixth straight week today after a brokerage upgrade of IBM raised investor expectations of a rebounding economy. The Nasdaq composite reached an 18-month high.

“What’s driving things today is you’re continuing to see upgrades and better earnings out of technology from companies such as IBM,” said Russ Koesterich, US equity strategist at State Street Corp. in Boston.

“You’ve got a lot of people who missed the early part of the rally back in March and April who are playing catchup,” he added. “That’s helped by the fact that we’ve had unambivalently good economic numbers with the exception of the labour front.”

The Nasdaq gained 30.41, or 1.6%, to 1,888.65, following a weekly advance of 2.6%. It was the highest closing level since March 12, 2002, when the tech-focused index stood at 1,897.12.

The blue chips also finished higher. The Dow Jones industrial average closed up 82.95, or 0.9%, at 9,586.29. Last week, the blue chips gained 0.9% to post their fifth straight winning week despite an 84-point loss Friday on a weak employment report.

And the Standard & Poor’s 500 index rose 10.25, or 1%, to 1,031.64, having risen 1.3% last week.

Today’s close represented a fresh 14-month high it was the best close since June 18, 2002.

International Business Machines Corp. climbed 2.15 dollars to 89.10 dollars after Credit Suisse First Boston upgraded the computer company’s stock rating to “outperform” from ”neutral.”

Stocks have climbed in recent weeks on growing investor expectations of a strong economic recovery. But analysts caution that the market might be due for pullbacks after advancing so quickly, particularly when companies begin issuing earnings warnings later this month.

Indeed, stocks retreated Friday on a Labour Department report that companies slashed payrolls by 93,000, underscoring fears that tepid employment could undermine the economic recovery. Today’s upgrades of IBM and other companies, however, helped soothe concerns of a slowing rebound.

“One of two things will stop the market rally – further evidence the labour market is either flat or deteriorating,” Koesterich said. The other risk, he said, was a continued rise in interest rates that could dampen consumer spending.

Ed Peters, chief investment officer at PanAgora Asset Management Inc., agreed.

“I’m a little concerned about the recent runup. The market is up a lot,” he said. “We still haven’t seen the kind of growth, especially with bond yields where they are now, to justify a much further advance at this point.”

RF Micro Devices Inc. surged 1.45 dollars to 10.46 dollars after the technology company raised its fiscal second-quarter outlook, citing improved products and cost-cutting.

Financial companies Goldman Sachs & Co. and Lehman Brothers Holdings Inc. also got a lift after Merrill Lynch & Co. raised third-quarter estimates on the firms. Goldman increased 39 cents to 91.35 dollars, while Lehman rose 32 cents to 68.08 dollars.

Decliners included Wal-Mart Stores Inc., which fell 30 cents to 58.59 dollars, after the discounter said same-store sales in the first week of September met its expectations Sanford C. Bernstein & Co., however, cut the company’s stock rating to “market perform” from “outperform.”

Advancing issues outnumbered decliners about 5 to 2 on the New York Stock Exchange. Volume was moderate.

The Russell 2000 index, the barometer of smaller company stocks, rose 8.26, or 1.6%, to 517.13.

Overseas, Japan’s Nikkei stock average finished 0.3% higher today. In Europe, France’s CAC-40 rose 0.5%, Britain’s FTSE 100 gained 0.8% and Germany’s DAX index advanced 0.9%.