US stocks: Markets rise, Google upgrade lifts techs

NEW YORK - US stocks rallied for a second day today, lifted by gains in tech shares and optimism the Federal Reserve is nearing the end of its cycle of interest-rate increases.

Shares of Google, the world's most-used Web search engine, rose to a record high after Bear Stearns & Co. raised its rating on the stock, according to MarketWatch. The brokerage also raised its price target on Google to US$550 from US$360.

Google shares advanced 2.3 per cent to US$445.24 after hitting US$448.96, a record high.

Stocks extended gains from yesterday afternoon's burst with the release of minutes of the Fed's last policy meeting, which suggested the central bank was nearly done raising interest rates. The prospect of higher US rates had clouded the outlook for economic growth and improving corporate profits.

"The Fed was pretty much behind the gains in stocks yesterday and today," said Tony Dwyer, chief equity strategist at FTN Financial. \

"The minute the market realised we might be coming to the end of the rate-hike cycle, that's when we started to see stocks rallying."

The Dow Jones industrial average was up 32.74 points, or 0.30 per cent, at 10,880.15. The Standard & Poor's 500 Index was up 4.66 points, or 0.37 per cent, at 1,273.46. The technology-laced Nasdaq Composite Index was up 19.72 points, or 0.88 per cent, at 2,263.46.

Along with an end of interest rate hikes, investors expect to see more capital spending in 2006 compared with consumer spending, which should benefit technology stocks, such as Cisco Systems Inc., said Mark Bronzo, managing director at Gartmore Separate Accounts LLC.

"Coming into the new year, a lot of people are encouraged about business spending," Bronzo said.

Shares of Cisco rose 2.3 per cent to US$17.85 while Intel Corp. shares gained 1.3 per cent to US$25.90.

The Dow's biggest percentage gainer was drug maker Pfizer Inc., which jumped 3.24 per cent to US$24.55. Mutual funds bought the stock after selling the shares at the end of 2005 to avoid having the poor performer in their holdings at year's end, said Shaojing Tong, an analyst at Mehta Partners. Pfizer lost 13.2 per cent last year.

Speculation about a possible takeover lifted shares of BMC Software Inc., traders said. The business software company surged 9.8 per cent to US$23.07, the biggest percentage gainer on the NYSE.

On the downside, ratings downgrades dampened enthusiasm for financial and home improvement companies. Citigroup Inc., the largest US bank was downgraded by Banc of America Securities. Citigroup shares fell 1.8 per cent to US$48.38, one of the biggest drags on the Dow. Wells Fargo & Co., which was also cut by Banc of America, fell 1.16 per cent to US$63.06.

J.P. Morgan cut its rating on Lowe's Cos. Inc., MarketWatch reported on its website. Shares of Lowe's fell 1.24 per cent to US$66.24, while blue-chip rival Home Depot Inc. lost 2.2 per cent to US$40.48.

Volume was heavy on the New York Stock Exchange with 1.83 billion shares trading hands, above last year's daily average of 1.61 billion. On Nasdaq, about 1.93 billion shares were traded.

About three shares rose on the NYSE for every one that fell, while on Nasdaq, gainers outnumbered decliners by a ratio of 5 to 3.

- REUTERS