NEW YORK - U.S. stocks rallied yesterday after a report showed manufacturing growth slowed, boosting optimism that the Federal Reserve is almost finished raising interest rates.
Microsoft rose after Goldman, Sachs & Co. analyst Rick Sherlund said the stock "might be able to recover some lost ground" after a judge's final ruling in the government's antitrust case against the No. 1 software maker.
Financial stocks, including Citigroup Inc., climbed on the prospect of an end to the central bank's string of rate increases.
"I have no crystal ball, but I personally think we are near the peak" of rate increases, said Buck Newsome, managing director at Cincinnati-based Cambridge Financial Group Inc., which oversees $500 million in assets. "And I think any increase up to a half a point has already been factored in" to stock prices.
The Nasdaq soared 181.59, or 5.3 percent, to 3,582.50, wiping out Wednesday's 1.7 percent decline. The index had its seventh-best session only two days after recording its biggest-ever gain, 7.9 percent. Yesterday also marked the index's fifth-biggest point gain.
The Standard & Poor's 500 index rose 28.21, or 2 percent, to 1,448.81. The Dow Jones industrial average gained 129.87, or 1.2 percent, to 10,652.20, with Hewlett-Packard Co. accounting for three-fifths of the advance.
Elsewhere on the broad market, the Russell 2000 index, a benchmark of small-cap stocks, rose 16.29 to 492.47; the Wilshire 5000 index jumped 315.15 to 13,368.11; the American Stock Exchange composite index advanced 7.48 to 912.45; the New York Stock Exchange composite index climbed 7.86 to 651.46; and the S&P; 400 mid-cap index added 14.45 to 489.62.
The Sun-Bloomberg Maryland Stock Index, a price-weighted list of companies with operations in the region, gained 8.49 to 234.27, led by Ciena Corp., up $10.50 to $130.1875, and MedImmune Inc., which rose $8.625 to $164.
Technology stocks led yesterday's advance, as investors bought companies whose shares have fallen the most as rates have risen.
Cisco, which has dropped 24 percent from its March 27 high, gained $4 to $60.9375 and was the most active stock. The biggest computer networking equipment maker, which sold for as much as 186 times profit in March, now sells for 126 times earnings.
Database software maker Oracle, which trades for 82 times earnings, down from $161 in March, rose $6 to $77.875. JDS Uniphase Corp., down 33 percent from its high March 7, rose $10.25 to $98.25. It sells for 345 times earnings, down from 714 in March.
"There are a lot of investors who see stocks like Cisco as cheap relative to where they were," said Jake Dollarhide, a portfolio manager at Fredric Russell Investment Management Co. in Tulsa, Okla., which oversees $50 million.
Microsoft rose $2 to $64.5625 after Sherlund's comments. A federal judge is expected to order the breakup of the company this month, Sherlund said in a research note, while most features of the remedy will likely be delayed while Microsoft appeals.
Financial stocks gained on expectations that if interest rates are close to a peak, bank and insurance company profits will have more room to rise. Citigroup advanced $1.125 to $63.3125, Merrill Lynch & Co. climbed $5.375 to $104, and American International Group Inc. rose $4.6875 to $117.25.
More than two stocks rose for every one that fell on the NYSE. About 960 million shares traded on the Big Board, about 8 percent below the three-month daily average.
The Nasdaq has surged 11.8 percent this week, putting the index on track for its biggest weekly gain. The index's best week came in the week that ended April 20, when it surged 9.7 percent. For the year, the Nasdaq is down 12 percent.