Stocks rallied as investors shifted money into growth cyclicals such as financials and techs after another better-than-expected economic report.
"We're seeing a major shift out of commodities into financials, consumer-discretionary and techs," said Steve Neimeth, portfolio manager at AIG SunAmerica. The market is also seeing "many investors targeting underperforming groups year-to-date, which will benefit from an economic recovery."
The Dow industrials pushed past the key 13000 mark a few times during the session, and the S&P 500 index held above 1400. The Nasdaq made the strongest advance, helped by gains in techs.
Among 10 key S&P sector indexes, financials jumped 3.6 percent, consumer discretionary increased 3.3 percent and both telecom and IT logged increases of 2.7 percent.
The biggest gainers on the Dow were: American Express , Home Depot , Intel , Bank of Americaand Citigroup .
The Dow had initially opened lower as a rise in jobless claims rattled a few cages ahead of tomorrow's jobs report and ExxonMobil's $10.9 billion quarterly profit was -- wait for it -- a disappointment.
Exxon Mobil, the biggest drag on the Dow, reported its net income rose 17 percentto $10.9 billion, or $2.03 per share, up from $9.3 billion, or $1.62 per share, a year ago. But analysts had expected that, given record oil prices, the company would surpass its own record of an $11.7 billion profit earned in the fourth quarter of 2007. The culprit, it seems, was margins at the company's refining operations. Record prices of refined products such as gasoline, while a menace to consumers, failed to keep pace with the rapid increase in crude prices.
Crude oildropped below $111 a barrel, while gold fell to a multi-month low around $850 a troy ounce as the dollar hit a one-month high against the euro.
After a better-than-expected GDP report on Thursday, the Institute for Supply Management followed up with a solid reading on U.S. manufacturing activity.
The ISM said its manufacturing index held steady at 48.6 in April, though it remained below 50, which indicates contraction. Prices paid increased.
"The economic numbers haven't looked that bad to tell you the truth," Alan Lancz, president of Alan B. Lancz & Associates in Toledo, told Reuters. "There are a lot of shorts out there who were expecting disappointing numbers ... This is putting pressure on the shorts."
A separate report from the Commerce Department showed construction spending dropped 1.1 percent in March after a 0.4 percent increase in February.
Initial jobless claims rose by 35,000, more than expected, last week and the number of workers remaining on jobless benefits hit a four-year high. However, the four-week moving average of new claims fell to 363,750 from a revised 370,250, the Labor Department reported.
Personal spending in March rose 0.4 percent, twice as much as expected, the Commerce Department reported. Income climbed 0.3 percent, just below the 0.4 percent expected. The Fed's favorite inflation gauge, personal consumption expenditures excluding food and energy, rose 0.2 percent, better than the 0.1 percent expected.
Shares of Adobe Systems rose after the maker of Photoshop and Flash software maker said it expects quarterly revenue to come at the high end of its expected range and backed its projection of 13 percent revenue growthfor the full year ahead of its annual meeting later today.
Among other notable gainers in tech land were Intel, Google, Apple, Yahoo and Research In Motion.
Meanwhile, Microsoft's board met, but failed to come to a consensus about what to do concerning its bid for Yahoo. The software giant could make a hostile bid, sweeten its offer or just walk away altogether, the Wall Street Journal reported.
Home Depot was the biggest gainer on the Dow after the home-improvement retailer announced plans to close 15 underperforming U.S. storesand put a lid on opening future stores for a while. Home Depot said it expects a charge of about $586 million related to this move. Even excluding this charge, Home Depot expects a 24-percent drop in earnings for the year.
U.S. auto makers reported dismal April sales, hit hard by gasoline prices. General Motors said its sales fell nearly 23 percent from a year earlier and its inventory narrowed by about 200,00 vehicles amid a strike at a key supplier. Ford's U.S. sales skidded 19 percent.
Airline stocks continued to benefit from consolidation speculation. Among today's big winners were AMR's American and Continental . For the week, the five airlines at the center of most of the merger speculation are up anywhere from 11 percent (Continental) to 31 percent (Northwest).
Starbucks said after the bell Wednesday that it would likely earn less this yearthan the year before.
Burger King Holdings, the second largest fast-food chain, posted a gain in quarterly profit that amounted to 30 cents per share, ahead of the analysts estimate of 27 cents a share.
Shares of Pioneer Southwest Energy Partners, a spinoff of Pioneer Natural Resources that buys oil and gas properties in Texas and southwest New Mexico, rosein their debut on the Big Board. The stock priced at $19 after the closing bell yesterday. (Is the IPO Market Simmering Again?)
THURSDAY: Monthly auto sales; ISM manufacturing index; construction spending
FRIDAY: April jobs report; factory orders; earnings from Chevron, Viacom
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