NEW YORK - US stocks rallied on Tuesday, with the Dow closing at its highest level in 3 1/2 years, boosted by a rebound in beaten-down drugmaker Pfizer Inc., while tech stocks got a lift from a broker upgrade of Intel Corp.
Dow component Intel shot up 3.5 per cent after Lehman Brothers raised its investment rating on the stock to "overweight" from "underweight," citing expectations for a solid fourth quarter and a strong pipeline of products.
Meanwhile, Pfizer gained nearly 3 per cent, after a study of Alzheimer's patients eased investors' fears that US regulators will force Pfizer to withdraw its arthritis drug Celebrex. On Friday, Pfizer's stock slid 11 per cent after a cancer-prevention study showed that large doses of the drug increased the risk of heart attack.
The Dow Jones industrial average was up 97.83 points, or 0.92 per cent, at 10,759.43, its highest close since June 2001. The Standard & Poor's 500 Index was up 10.78 points, or 0.90 per cent, to close back above the 1,200 level at 1,205.43. Last week, the S&P 500 closed above 1,200 for the first time in more than three years.
The Nasdaq Composite Index was up 23.06 points, or 1.08 per cent, to finish at 2,150.91.
Trading was active, with 1.48 billion shares changing hands on the New York Stock Exchange, just above the 1.4 billion daily average for last year. About 1.97 billion shares were traded on Nasdaq, above the 1.69 billion daily average last year.
Advancers outnumbered decliners on the NYSE by about 12 to 5, and 5 to 3 on Nasdaq.
"We've seen a relatively strong day today -- continuing the trend that we've seen in the fourth quarter," said John Forelli, senior vice president and portfolio manager at Independence Investments LLC.
"My belief is that for the first nine months of the year, the market basically did nothing," Forelli said, "and we're playing a lot of catch-up now in the fourth quarter that should have happened earlier this year."
Some dealers pointed to seasonal buying. Stocks typically gain in late December in a so-called "Santa rally" falling within the last five days of the year and the first two in January.
"We've got a seasonal bias going into the end of the year and into the first week of January, which should play itself out to the upside," said John Hughes, managing director at Epiphany Equity Research.
IAC/InterActive Corp. also boosted the Nasdaq, jumping nearly 6 per cent, or US$1.53, to US$27.41 after saying it will spin off its online travel service Expedia.com -- turning itself into a diversified interactive commerce company.
"The InterActive news is important -- it shows that companies see some value within themselves," Hughes said. "We've had a lot of merger activity over the last few weeks, which is an encouraging sign."
And Cablevision Systems Corp. soared 13.3 per cent, or US$2.95 to US$25.06. Smith Barney raised its rating on the stock to "buy" from "hold," citing the media company's decision to suspend the spin-off of its Rainbow Media unit.
The Philadelphia Stock Exchange semiconductor index, a widely followed benchmark for chip stocks, rose 1.2 per cent, helped by Intel's upgrade. Intel closed up 79 cents at US$23.48.
Pfizer rose 68 cents to US$24.97.
Transport stocks advanced, with the Dow Jones railroad index up 4.37 per cent at 268.22, its highest close since at least February 2000, after Union Pacific Corp., the nation's largest railroad, increased its fourth-quarter earnings forecast. Its shares climbed 5.5 per cent, or US$3.42, to US$65.67.
Investment banks Morgan Stanley and Bear Stearns Cos. Inc. reported better-than-expected earnings. Morgan Stanley rose 1.6 per cent, or 85 cents to US$54.50, reversing its earlier decline to a session low of US$52.84 after it posted disappointing revenue. Bear Stearns fell 1.7 per cent, or US$1.80 to US$102.70, which analysts attributed to profit taking following the stock's recent run-up.
Oil had little influence on the session's trading, with US crude for February delivery ending close to unchanged, down 2 cents at US$45.76 a barrel.
- REUTERS
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