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Optimism returns after promising gains

For one week at least, Wall Street faced down oil fears, political uncertainty and a slowing economy to register gains - ending a dreary month on a hopeful note.

While the gains were modest, four successive positive sessions through yesterday were enough for some market participants to suggest that the correction that began in February might have reached its trough -a notion that faces a strenuous test on Friday when the July jobs report is released.

At mid-session yesterday, the S&P 500 was up 0.1 per cent to 1,100.93 - a 1.4 per cent gain for the week. The Dow Jones Industrial Average eased 0.1 per cent to 10,122.89 - up 1.6 per cent during a week in which the blue-chip average recovered from two trips into sub-10,000 terrain. The Nasdaq Composite rose 0.4 per cent to 1,889.37, up 2.2 per cent for the week.

"This market has been in a stalemate - locked into a trading range," said Duncan Richardson, manager of the Eaton Vance Tax-Managed Growth fund. "There's this backdrop of high anxiety, yet paradoxically it's also boring."

Mr Richardson said the push and pull between record-high earnings and uncertainty over politics, the economy, terrorism and oil had many market watchers in extreme camps. "I've never seen a year where you can make such a reasonable case for wildly divergent outcomes." Nonetheless, the manager said: "Count me as a bull", believing US equities, especially higher-quality fare, looked attractive.

On Monday, the market measures declined, leaving the S&P 500 and the Nasdaq at lows for the year. Buoyed by strong earnings reports from Verizon, Pulte Homes and others, stocks notched a broad-based rally on Tuesday. An oil-price scare over the impasse between Yukos and the Russian government has stocks retesting lows at midday on Wednesday, but stocks rallied that afternoon on word of a resolution on the Yukos affair and did not look back.

The markets yesterday notched modest gains in the face of weaker than expected GDP figures and a product delay from Intel. The economy grew at a 3 per cent clip in the second quarter, below the 3.7 per cent forecast and a decline from the 4.5 per cent GDP growth in the first quarter. The numbers are the latest signal that the economy slowed significantly in June, adding more fuel to the debate about whether the slowdown was a blip or a reversal in the economic recovery. While consumer spending was weak amid rising energy prices, signs of improved corporate spending were the silver lining in the report.

Some economists say the slowdown is very real but not cause for immediate alarm. "Our indicators clearly say that the June softness was not a pause that refreshes - they turned down in a very convincing way," said Lakshman Achuthan, managing director of the Economic Cycle Research Institute.

"Yes, profits are going to slow and job growth will slow - they may even disappoint - but the economy is still going to grow. A recession is not in the cards at this point."

Wall Street focused heavily on the strong batch of earnings reports released this week. Gilead Sciences climbed 9.7 per cent yesterday to $65.29 as the drug company's earnings crushed expectations. The stock gained 12.5 per cent for the week.

KLA-Tencor rose 6.6 per cent to $41.38 - gaining 6.7 per cent for the week - as the chip-equipment company posted strong results.

Intel shares edged up 0.1 per cent yesterday, showing resilience in the face of a product delay of its Pentium 4 chip. The shares gained 7.1 per cent for the week.

Other big-name tech companies registered gains for the week as well: Cisco rose 1 per cent to $21.14 and Microsoft rose 2.3 per cent to $28.68.

ExxonMobil posted strong earnings, and its shares rose 1.9 per cent for the week to $46.19. Verizon shares climbed 8.6 per cent on the week to $38.37, in spite of a pullback yesterday, after strong earnings; it and SBC Communications, up 4.9 per cent to $25.28, were leaders in the Dow 30.

It was not all gravy, however. DaimlerChrysler edged up slightly to $44.68 and GM eased 0.2 per cent to $42.83 by mid-session.