NEW YORK -- U.S. stocks yesterday posted their biggest gains in more than a week as technology shares rebounded and insurance issues gained amid speculation that Aetna Life & Casualty Co. will spin off its property-casualty insurance unit.
Investors rewarded shares of semiconductor, computer and software companies, believing those companies will post the biggest earnings gains for the third quarter. The rally came a day after the stocks were sent into a tailspin as concern spread that a technology-products glut would drag down profits.
The Dow Jones industrial average rose 25.29, to 4,787.64, its biggest gain since a 25.65-point leap Sept. 20. The 30-stock average, which registered a record high of 4,801.80 two weeks ago, rose for only the fourth time in 11 sessions. Gains in Caterpillar Inc., Eastman Kodak Co. and Philip Morris Cos. offset drops in McDonald's Corp., Procter & Gamble Co. and Coca-Cola Co.
The broader Standard & Poor's 500 index rose 4.83, to 585.87, its biggest rise since its 4.84-point advance on Sept. 14. The index closed at a record high of 586.77 Sept. 20. Shares of software, semiconductor, computer and insurance companies rose, while health care, beverage and drug issues fell.
Aetna's shares rose $2.375, to a 52-week high of $74.375, on spinoff speculation about its troubled property-casualty insurance unit, following in the footsteps of AT&T; Corp. and ITT ++ Corp. recently. Aetna declined to comment on the speculation, which was spurred by a report by an analyst at one of Aetna's biggest shareholders, Sanford C. Bernstein & Co.
Among other insurance stocks, American International Group Inc. rose $2.125, to $86.50; Allstate Corp. spurted $1.375, to $35.625; Loews Corp. rallied $4.50, to $145.50; and Cigna Corp. surged $6.125, to $105.875.
About two stocks rose for every one that fell on the New York Stock Exchange, where 367.8 million shares changed hands. The three-month daily average volume is 341 million shares.
The Nasdaq composite index rallied 20.51, to 1,047.05. Among technology issues, shares of Intel Corp. rose $2.5625, to $61.875; Microsoft Corp. rose $2.875, to $91.50; Applied Materials Inc. jumped $5.875, to $104.625; and Autodesk Inc. spurted $1.75, to $44.875.
Among broad market indexes, the Russell 2000 index of small capitalization stocks rose 2.61, to 308.46; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, dropped jumped 50.24, to 5,807.69; the Amex market value index gained 3.63, to 544.28; and the S&P; 400 mid-cap index rose 2.73, to 215.92.
Yesterday's most active stocks in U.S. composite trading were Intel, AT&T;, Micron Technology Inc., Microsoft and Checkfree Corp.
Checkfree's shares rose $3.50, to $21.50. The home banking software developer's initial public offering of 6.5 million shares yesterday was priced at $18.
The Pacific Stock Exchange technology index of 100 stocks rallied 6.2, to 206.87, its biggest gain since rising 6.24 points Sept. 5. On Wednesday, the index dropped 1.9 points after slumping as much as 7.74 points.
Shares of food, beverage and drug shares retreated after a report showed that the economy may be on stronger footing than recently thought.
Among the biggest losers, Procter & Gamble slid 62.5 cents, to $77; Coca-Cola slid $1.375, to 68.75; Merck & Co. weakened 50 cents, to $56.375; Abbott Laboratories dropped 37.5 cents, to $42.75; Kellogg Co. dropped 62.5 cents, to $72.375; and General Mills gave up $1, to $55.75.
The divergence could be seen in two widely watched indexes. The Morgan Stanley index of 30 cyclical stocks rallied to 4.08, to 348.45.
The biggest gainer in the cyclical index was Hewlett-Packard Co., whose shares rallied $2.875, to $85.625. The company introduced new models of its consumer computers and unveiled a longer-lasting battery for its high-end portable machines.