NEW YORK (CNN/Money) - Good news from technology stocks on a "triple-witching" Friday and feel-good optimism over an economic recovery sparked a modest Santa Claus rally that kept the Dow Jones industrial average above 10,000 on the last day of a full trading week this year.
"The market's in a Christmas type of mode where things will go well between now and the end of the year," Peter Mancuso, NYSE specialist with the Performance Specialist group, told CNNfn's Market Sweep.
"We probably won't have any more economic factors per se as far as earnings go. There's just a pretty good feeling pervading the markets right now."
Market watchers also attributed Friday's positive bias to a somewhat optimistic picture from a bevy of economic updates out this week, including Friday's stronger-than-expected consumer sentiment numbers, Thursday's improvement in unemployment and Tuesday's housing-starts numbers.
"We're beginning to come out of a recession. It's now a matter of just how meaningfully the economy can recover over the next quarter or two," said Alan Ackerman, market strategist with Fahnestock & Co.
The Dow Jones industrials gained 50.16 points, or 0.5 percent, to 10,035.34, while the Nasdaq composite gained 27.29 points, or 1.42 percent, to 1,945.83. In the broader market, the Standard & Poor's 500 index gained 4.96, or 0.44 percent, to 1,144.89.
For the week, it was a mixed performance for the indexes. The Dow rose 2.3 percent, while the Nasdaq shed 0.4 percent. The S&P 500 gained 1.9 percent.
The morning's economic data reflected stronger consumer sentiment as the year came to a close. The University of Michigan said its final reading of consumer confidence rose to 88.8 in December, topping expectations, from 83.9 in November.
The gain came during a month when the stock market stabilized after its two-month run-up and the Taliban lost their grip on Afghanistan.
Friday was a "triple-witching" session, the quarterly expiration of futures, index options, and individual stock options on the same day. Many traders opt to close out of these positions ahead of the actual expiration date, resulting in a often volatile trading session.
Overseas, Asian markets closed lower Friday, with dips posted in Hong Kong, Taiwan and South Korea. European bourses recovered from three consecutive sessions of losses Friday, led higher by gains in the energy sector.
Treasury prices edged lower, with the 10-year Treasury yield rising to 5.08 percent. The dollar continued to gain against the yen and edged higher versus the euro. Light crude oil futures rose 40 cents to $19.62 a barrel in New York.
Market breadth was positive on heavy volume. On the Nasdaq, advancers beat decliners 11-to-7 as 2.1 billion shares traded. On the New York Stock Exchange, advancers stayed ahead of decliners 2-to-1 as 1.6 billion shares changed hands.
U.S. markets will be closed next week on Christmas Day.
Economic digest
The final reading on the gross domestic product -- the broadest measure of the nation's economy -- fell 1.3 percent in the third quarter, signaling further contraction, the government reported Friday. The previous reading had put the decline at 1.1 percent.
Separately, the government said personal income fell 0.1 percent in November, surprising economists who expected a slight gain. But the 0.7 percent drop in personal spending was not as steep as forecast.
But investors are likely to carry around lingering disappointment over a ditched and controversial economic stimulus package as Congress adjourned for a winter break. Senate Republicans failed to get a House-passed bill to the floor for a vote Thursday afternoon, placing the legislation on the shelf for the rest of the year.
Techs are the newsmakers
Software, networking and chip stocks fueled Nasdaq's momentum a day after tech stocks dragged the indexes lower, kicked off by a warning from Juniper Networks (JNPR: up $1.16 to $20.01, Research, Estimates).
Network gear supplier Nortel Networks (NT: up $0.77 to $7.13, Research, Estimates) said it expects to post a narrower-than-expected fourth-quarter loss that includes a $630 million restructuring charge. Nortel's news buoyed other names in the sector including Ciena (CIEN: up $0.42 to $14.43, Research, Estimates), Juniper (JNPR: up $1.16 to $20.01, Research, Estimates), and Tellabs (TLAB: up $1.11 to $14.97, Research, Estimates).
The AMEX Networking Index (NWX.X: Research, Estimates) gained 7.98, or 2.67 percent, to 307.15.
Research in Motion (RIMM: up $2.74 to $22.49, Research, Estimates), the maker of the popular BlackBerry wireless device, cut revenue and earnings targets for the fiscal fourth quarter but maintained its guidance for fiscal 2003.
Some positive forward guidance came from the chip sector. Integrated Circuit System (CST: Research, Estimates) raised its fiscal second-quarter revenue projections, citing strong demand for personal computer and game market components. Specialty chipmaker Cirrus Logic (CRUS: up $1.11 to $12.46, Research, Estimates) said fiscal third-quarter revenue may come in at the top end of guidance on strength in digital entertainment.
The Philadelphia Semiconductor Index (SOX.X: Research, Estimates) rose 14.30, or 2.82 percent, to 521.90.
Manufacturing software company Manugistics Group (MANU: up $3.63 to $19.47, Research, Estimates) Thursday posted a fiscal third-quarter loss as revenue fell amid an economic slump, but it said business had stabilized in its current quarter.
Software maker Liberate Technologies (LBRT: up $0.72 to $10.47, Research, Estimates) logged a smaller-than-expected second-quarter loss of 6 cents a share and boosted its sales forecast for next year to between $85 million and $86 million.
Ariba (ARBA: up $0.47 to $5.37, Research, Estimates), the B2B software maker, initiated an alliance with International Business Machines (IBM: down $0.70 to $122.00, Research, Estimates) that will offer Ariba's purchasing software as a paid-for service over the Internet.
Athletic apparel maker Nike (NKE: up $2.51 to $56.30, Research, Estimates) sprinted past analysts' forecasts and year-ago results, reporting second-quarter earnings of $129 million, or 48 cents a share.
Delta Air Lines (DAL: up $1.11 to $28.97, Research, Estimates), the No. 3 U.S. airline, said it expects to report a larger-than-expected fourth-quarter loss of $500 million, excluding charges, as it continues to absorb the effect on its earnings from the Sept. 11 attacks. The air carrier's warning comes in the wake of a UBS Warburg analyst note on the airline sector, stating that the firm expects most U.S. airline stocks can rise 80 percent to 200 percent over the next two years.
Drugmaker ArQule (ARQL: up $3.74 to $15.95, Research, Estimates) bounced higher after the company announced it has extended a drug development accord with Pfizer (PFE: down $0.40 to $41.00, Research, Estimates) that could bring ArQule revenue of up to $345 million over the next seven years.
Among the Dow components, Honeywell (HON: up $0.27 to $32.70, Research, Estimates) said it will take a $540 million charge to settle litigation and cover the cost of cancellation of a regional passenger jet, but the company said it still should hit its earlier earnings guidance for the fourth quarter.
Citigroup (C: up $0.44 to $50.15, Research, Estimates) reportedly is mounting a bid as a "stalking horse," or a leading contender for Enron's (ENE: up $0.11 to $0.53, Research, Estimates) energy trading business, according to a Wall Street Journal report. A bankruptcy court auction of the unit is set for Jan. 10.
But construction equipment maker Caterpillar (CAT: up $0.85 to $51.45, Research, Estimates) raised a red flag, announcing plans to cut more than 900 jobs by June 30.
Crisis in Argentina
Wall Street also paid close attention to the serious political and economic crisis in Argentina this week, where President Fernando De la Rua resigned after two days of rioting and chaos in the streets precipitated by the country's worst economic crisis.
But the U.S. markets had little to fear from a contagion effect.
"Argentina is an unfortunate situation for Latin America, but it was pretty well anticipated in the U.S. Also, much of the debt that is held in Argentina is held by European banks. So investors were braced for what's happening there," David Horner, senior financial strategist with Merrill Lynch, told CNNfn's Market Sweep.
Next week's economic data
Economic reports on tap for next week include November durable goods orders, expected to have declined 5.5 percent, extending a 12.8 percent decline from the previous month, according to economist surveyed by Briefing.com.
Consumer confidence is expected to have come in little changed in December in the Conference Board report also due Friday. Existing home sales are expected to have fallen to an annual rate of 5.10 million in November from 5.17 million in the prior month. New home sales, meanwhile, are forecast to have declined to an annual rate of 868,000 last month from 888,000. 
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