NEW YORK -- U.S. stocks rallied yesterday after Broderbund Software Inc. and 3Com Corp. posted better-than-expected earnings, suggesting that this quarter's profits will come in on target.
A string of profit warnings the past two weeks from companies such as Apple Computer Inc. and Charles Schwab Corp. had led investors to reassess whether profit growth is stumbling.
The Dow Jones industrial average jumped 37.21 to close at 5,096.53. So far this week, the 30-stock average is down 1.65 percent. Advancing stocks were led by United Technologies, which added almost 10 points to the Dow as it climbed $3.25 to $95.875.
United Technologies surged after Oppenheimer & Co. raised its opinion to "outperform," saying it may buy back some of its stock or make an acquisition that will boost profits.
The Standard & Poor's 500 index climbed 4.55 to 610.49, recapturing most of Wednesday's 5.99-point drop. Drug, shoe, retail, communications equipment and construction companies posted the biggest percentage gains.
The Wilshire 5,000 index vaulted 42.40 to 5,985.45; the Russell 2,000 index of small-company shares advanced 1.84 to 310.67; the Amex market value index rose 2.99 points to 537.49; the NYSE composite index rose to 325.61, up 2 points; and the S&P; midcap index increased 1.67 to 214.12.
Computer equipment and software shares rose after encouraging earnings reports from Broderbund and 3Com.
Broderbund, a maker of educational software, said that fiscal first-quarter earnings rose to 73 cents a share from 57 cents a year ago, 2 cents higher than analysts' estimates. Broderbund's shares rallied $6.625 to $60.50.
3Com, a maker of computer networking products, said profit from operations rose to 37 cents a share in its fiscal second quarter, up from net income of 27 cents a year ago. 3Com's stock rose #2.50 to $44.125.
IBM rose $1.50 to $90.875; Hewlett-Packard Co. gained 62.5 cents to $83.75; Sun Microsystems Inc. gained 87.5 cents to $47; and Informix Corp. climbed $4 to $29.75.
Informix said it will buy a company whose technology makes it easier to offer shopping and entertainment over the Internet computer network.
Netscape Communications Corp. soared $10.75 to $141.75. Products made by Netscape, a software company that helps consumers browse the Internet and helps companies display graphics there, were selected by a unit of AMR Corp. to build an electronic travel service scheduled to debut next March.
Shares of UAL Corp. plunged $17.875 to $180.125 on concern that the company's earnings won't meet expectations, after CS First Boston Corp. lowered its recommendation to "hold" from "buy." UAL's slump sent the Dow Jones transportation average down 47.71 to 1,960.67, a 2.38 percent decline.
Other big losers among airline stocks were AMR, the parent of American Airlines, which fell $2.375 to $73.75 amid news of a plane crash in Colombia, the first involving a Boeing 757. Boeing Co. fell $1.25 to $76.75.
Drug shares climbed, led by Centocor Inc., after the company said it cut short a trial of its heart drug ReoPro because the drug worked better than expected. Centocor's shares rose $6.875 to $32.125, and helped drive shares of Eli Lilly & Co. up $4 to $55.50. Lilly is a marketing partner of Centocor.
Among other gainers, Merck rose $1.875 to $65; Pfizer Inc. rose 62.5 cents to $62.125; and Schering-Plough gained $1.125 to $54.875.
Optimism that the budget impasse in Washington will be resolved helped boost stocks. "Going back to the table helps," said Richard Ciardullo, head trader at Liberty Investment Management.