U.S. Stocks Rise Toward Strong Weekly Gains, Dismal October

NEW YORK (MarketWatch) -- U.S. stocks advanced Friday, on track for solid weekly gains but the worst month in decades, as investors bypassed generally bleak economic data to focus on improvement in the troubled credit markets.

"Investor sentiment has improved thanks to the steps taken by the Federal Reserve and Treasury Department to add liquidity to the system. These moves have unfrozen the credit markets and they have brought some level of normalcy to the commercial paper market," said Robert Pavlik, chief investment officer at Oaktree Asset Management.

Up and down during the morning, the financial- and telecommunication-services sectors helped lift stocks solidly higher by midday, then extended the rise as the day progressed.

The Dow Jones Industrial Average was recently ahead 216.88 points at 9,397.57, with all but one of its 30 components trading higher.

The blue-chip index was on track for a 13.4% monthly decline, while up 12.2% for the week.

The Dow's financial components helped in pacing the rise, with J.P. Morgan Chase & Co. up about 6.4%.

General Motors Corp. proved the blue-chip index's sole decliner, down 4.5%,

The S&P 500 Index also shed declines, rising 29.72 points to 984.25, while the Nasdaq Composite Index climbed 43.02 points to 1,742.54.

"For the risk adverse investor, I continue to recommend staying somewhat defensive by sticking with the health care and consumer staple sectors. Within these two areas I would recommend Johnson & Johnson , Celgene Corp. Procter & Gamble Co. , Colgate-Palmolive Co. and CVS Caremark Corp. .

Telecommunications services, consumer discretionary and financials led gains among the S&P's 10 industry groups.

Among the energy sector's biggest decliners, Rowan Companies Inc. fell 10.6%.

Trading light

Volume on the New York Stock Exchange topped 788 million, with advancers ahead of decliners more than 3 to 1. On the Nasdaq, just 654 million shares were exchanged, with advancers topping decliners nearly 3 to 1.

Among a slew of economic reports, the Commerce Department said U.S. consumer spending in September tallied its largest drop in four years. .

A separate report had U.S. consumer sentiment falling in October from the month before to reach a record monthly decline, according to the University of Michigan/Reuters index. .

Also, the Chicago Purchasing Managers reported the Chicago Business Barometer plummeted to 37.8 in October, its lowest level since May 2001.

"Investors have enthusiasm that we've shrugged off the credit debacle, there is very little forced selling and the economy is terrible, but investors don't care," said Jack Ablin, chief investment officer of Harris Private Bank.

"Spending was terrible, the Chicago Purchasing Managers was a problem, but it looks like, who cares? Investors are throwing caution to the wind," Ablin added.

On the New York Mercantile Exchange, crude futures gained $1.85 to end at $67.81 a barrel, up 2.8%.

Active issues

On the earnings front, oil giant and Dow industrials component Chevron Corp. fell almost 1% after reporting third-quarter income rose 114% to $7.9 billion.

Washington Post Co. said its third-quarter profit fell sharply to $10.3 million from $72.5 million.

Electronics Arts Inc. tumbled 17.6% after posted a wider loss late Thursday and reduced its annual forecast, while saying it would lay off 6% of its workforce. .

Shares of Sun Microsystems Inc. also fell, down 12.5%, after the software firm reported a $1.68 billion quarterly loss.

Overseas, the Bank of Japan defied expectations a bit, cutting rates to 0.3% from 0.5%, rather than the 25 basis-point cut many expected. .

The Nikkei 225 dropped 5% in Tokyo. .

In London, a profit warning from telecoms group BT Group sent the U.K. firm down around 20%. The FTSE 100 turned 0.6% higher in afernoon trade

U.S. stocks closed with strong gains Thursday amid indications of furthering easing in troubled credit markets. The Dow Jones Industrial Average rose 189 points, the S&P 500 rose 24 points and the Nasdaq Composite added 41 points.

But over the course of October, the S&P 500 has lost 18% of its value, its worst month since 1987. .

By Kate Gibson