u.s. stocks rise for a third day

U.S. Stocks Rise for a Third Day; Apple, Raw Materials Gain
April 5 (Bloomberg) --

U.S. stocks rose for a third day, sending the Standard & Poor's 500 Index to its highest level since 2001, after a new report showed the economy's expansion hasn't been undermined by higher interest rates.

Investors were reassured as the Institute for Supply Management's monthly index of service industries, including banks, builders and retailers, surpassed economists' forecasts.

``What's driving the market higher is continued evidence that the economy is stronger than expected,'' said James Paulsen, who helps manage $175 billion as chief investment strategist at Wells Capital Management in Minneapolis. ``While people are waiting for rates to peak, they are missing out on a lot of rising stock prices.''

Shares of Apple Computer Inc. had their biggest gain in more than a year. The company introduced software to let its newest computers run Microsoft Corp.'s Windows XP operating system. Raw-material producers rose as copper and zinc prices set records, and oil stocks rallied amid higher energy prices.

The S&P 500 rose 5.63, or 0.4 percent, to 1311.56, the highest since May 2001. The Dow Jones Industrial Average gained 35.70, or 0.3 percent, to 11,239.55. The Nasdaq Composite Index increased 14.39, or 0.6 percent, to 2359.75.

The S&P 500 had retreated two weeks in a row on speculation that the Fed would keep raising interest rates to combat inflation. The central bank on March 28 pushed the benchmark rate a quarter-point higher for a 15th straight time and signaled that further increases may be ahead.

Service Industries

The Institute for Supply Management's index of non- manufacturing businesses including banks, builders and retailers, rose to 60.5 in March from 60.1 in February. Economists expected a reading of 59 in a Bloomberg News survey. Readings above 50 indicate expansion. The prices-paid component of the report, a measure of inflation, dropped to 60.5 from 64.8.

The yield on the benchmark 10-year Treasury fell 2 basis points, or 0.02 percentage point, to 4.85 percent, according to bond broker Cantor Fitzgerald LP, as investors evaluated the services report.

Comments from Kansas City Fed President Thomas Hoenig late yesterday bolstered confidence that policy makers may soon stop raising rates. ``We're very close to where we need to be'' and the benchmark rate is at the ``upper end'' of a neutral range, said Hoenig.

``The biggest fear in the market is when will the Fed stop,'' said Joseph Saluzzi, a trader at Themis Trading LLC in Chatham, New Jersey. The services report ``was pretty good where it didn't signal that the Fed is going to continue raising rates but it also showed the economy is strong.''

Seven stocks rose for every four that fell on the New York Stock Exchange. Some 1.6 billion shares changed hands on the Big Board, 3.6 percent less than the three-month daily average.

Apple

Apple jumped $6.04, or 9.9 percent, to $67.21 its best performance since November 2004 and the second-biggest gain in the S&P 500 today. The maker of Macintosh computers said the software, called Boot Camp, will let its newest computers, which use Intel Corp. chips, run Microsoft's Windows XP programs. Microsoft increased 10 cents to $27.74.

A measure of computer-related shares was the top contributor to the S&P 500's gain among 10 industry groups, adding 1 percent.

Raw Materials Shares Gain

Shares of raw-material producers jumped 1.1 percent. Strikers at Grupo Mexico SA have shut the country's No. 2 copper mine at a time when inventories have plunged to their lowest in more than a month.

The DB Commodity Index Tracking Fund, which tracks the Deutsche Bank Liquid Commodity Index, jumped 0.6 percent.

Alcoa Inc. advanced 81 cents, or 2.6 percent, to $31.67 for the top rally in the Dow average. The world's biggest aluminum maker will earn $2.16 per share this year, Credit Suisse analysts including David Gagliano said. That's up 41 cents from a previous estimate as prices for metals will continue to rise this year amid supply constraints, the analysts said in a note.

Crude for May delivery increased 1.3 percent to $67.07 a barrel in New York after a greater-than-expected decline in gasoline inventories. That helped push energy shares up 1.4 percent for the best gain among the 10 S&P 500 groups.

ConocoPhillips, the third-largest U.S. oil company, increased $1.41 to $66.56. Valero Energy Corp., the No. 1 U.S. refiner, gained $2.66 to $62.50.

St. Jude

St. Jude Medical Inc. led health-care shares lower after the No. 3 heart-device maker said first-quarter profit missed its forecast. Earnings were as much as 36 cents a share, including 3 cents in stock-compensation expense. In January, the company predicted profit of up to 43 cents, excluding 3 cents to 4 cents for stock compensation. The shares lost $5.05, or 12 percent, to $36.25 for the worst performance in the S&P 500.

An index of heath-care stocks dropped 0.4 percent. Medtronic Inc., the world's biggest maker of electronic heart devices, slipped 82 cents to $50.58.

Bausch & Lomb Inc., the maker of contact lenses and other eye-care products, fell $2.39 to $58.02. Bear Stearns & Co. analyst Milton Hsu cut the stock to ``peerperform'' from ``outperform,'' citing uncertainty about accounting issues, difficulty expanding earnings and ``headline'' risk from problems with its ReNu eye solution.

Tenet Healthcare

Tenet Healthcare Corp. jumped $1.12, or 14 percent, to $9.02 for the biggest gain in the S&P 500. The second mistrial declared by a U.S. Federal District Judge in San Diego could ``set the stage for a settlement with the Federal government,'' Prudential Equity Group analyst David Shove wrote. He raised the stock to ``overweight'' from ``neutral.''

Yesterday, a U.S. judge declared a mistrial in a criminal case accusing a unit of Tenet of paying San Diego doctors to spur referrals to a company hospital.

Career Education Corp. rose $5.04 to $41.70. The second- largest U.S. chain of for-profit colleges said the Securities and Exchange Commission staff will recommend ending a probe into claims the company overstated enrollment and revenue.

Career Education spokeswoman Lynne Baker and SEC spokesman Mike Gonzalez declined to comment.

Sears Holdings Corp. climbed $6.19 to $137.87. The No. 1 U.S. department-store chain said it will repurchase $500 million in shares, boosting its share buyback program by 50 percent.

PMC-Sierra Inc. added to the brisk pace of corporate takeovers, rising on news it will buy semiconductor maker Passave Inc. PMC-Sierra, which makes chips for telephone switches and routers, agreed to buy Passave for $300 million in stock in an acquisition expected to close this month. PMC shares rallied 99 cents to $13.25.

Dow Jones

Dow Jones & Co. shares slumped $1.26, or 3.2 percent, to $37.85, the most in almost nine months. Merrill Lynch & Co. cut its U.S. newspaper industry advertising sales forecast for 2006 and 2007. Dow Jones, publisher of the Wall Street Journal, was lowered to ``sell'' from ``neutral'' by Merrill analyst Lauren Rich Fine, who said in a note to investors that the company's second-half 2006 advertising revenue growth may slow.

S&P 500 shares, called Spiders, climbed 45 cents to $131.01. Nasdaq-100 tracking shares, known by their QQQQ symbol, added 40 cents to $42.61.

S&P 500 futures expiring in June advanced 4.30 to 1319 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures jumped 15.75 to 1747.25.

The Russell 2000 Index, a benchmark for companies with a median market value of $645 million, rose 0.5 percent to 766.26. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, rallied 59.65, or 0.5 percent, to 13,262.75. Based on the changes in the Wilshire, the value of stocks increased by $74.6 billion.