NEW YORK (CNNfn) - The Nasdaq composite index rose for the fifth time in six sessions Thursday amid optimism that the semiconductor business, sluggish during the last year, will improve in the months ahead.
Chip stocks rallied after a bullish outlook from the Semiconductor Industry Association gave investors reason to look past the recent bad news to a time of recovery.
"We are ending what we think is the worst part of the cycle," said Christopher Chaney, who covers the industry for A.G. Edwards. "The second half of the third quarter and fourth quarter will be better."
Still, the troubling news on the economy, which has helped send stocks lower over the last 15 months, continued. Claims for jobless benefits rose last week while sales at many of the nation's retailers weakened in May.
A second day of losses for financial stocks and a big decline in Philip Morris kept the Dow Jones industrial average from bigger gains.
But the market's most actively traded stock, Intel, rose more than 4 percent. After the close of trading, the world's biggest chipmaker said its financial results for the current quarter will come in close to expectations.
Details from a conference call with analysts should emerge later Thursday.
"The big deal is this: What's Intel going to say about the second half of the year?" Jack Geraghty, who covers the company for Gerard Klauer Mattison, told CNNfn's Market Call. "I think it's going to be positive."
Investors also seemed positive. With the exception of Wednesday, stocks have gained every day since last Thursday.
The Nasdaq gained 46.27 points, or 2.1 percent, to 2,264.00 while the Dow industrials rose 20.63, or 0.2 percent, to 11,090.87. The S&P 500 gained 6.93, or 0.5 percent, to 1,276.96.
More stocks rose than fell. Advancing issues on the New York Stock Exchange topped declining ones 1,568 to 1,485 as 1 billion shares changed hands. Nasdaq winners beat losers 2,100 to 1,657 as 1.6 billion shares traded. The dollar edged lower against the euro and was little changed versus the yen. Treasury securities fell.
Chips are up
Intel (INTC: up $1.32 to $31.14, Research, Estimates) was scheduled to brief investors late Thursday on business conditions for the current quarter, which ends this month.
Wall Street's expectations are low. Analysts surveyed by First Call forecast that the chipmaker will earn 11 cents per share, down 78 percent from year-ago figures.
"(Intel) may focus investor attention on the likelihood of a pickup in Q3 (the third quarter)," A.G Edwards' Chaney said.
Hopes for a pickup got support from the Semiconductor Industry Association, which forecast chip sales rising 20 percent next year.
Wall Street, focused on the future, appears more worried about missing any gains if profits improve.
Cypress Semiconductor (CY: up $2.02 to $25.14, Research, Estimates), Chartered Semiconductor (CHRT: up $1.10 to $29.60, Research, Estimates), and Altera (ALTR: up $2.77 to $29.03, Research, Estimates), which have all issued discouraging outlooks in recent weeks, drew buyers.
The latest warning came from Broadcom (BRCM: up $4.67 to $40.24, Research, Estimates), but even that had a silver lining. The communications chipmaker, after saying late Wednesday that second-quarter sales will fall short of forecasts, told analysts it sees signs of a sales recovery later this year.
Chaney said the industry is working through the bloated chip inventories that piled up as demand fell. He also expects rising orders ahead of the back-to-school and Christmas shopping periods, when many people buy new computers.
But financial stocks fell. Wells Fargo (WFC: down $0.18 to $47.66, Research, Estimates) said it will take $1.1 billion in charges against its second-quarter earnings, mostly due to investment losses.
The news came one day after J.P. Morgan Chase (JPM: down $1.21 to $45.63, Research, Estimates), Bank One (ONE: down $0.69 to $38.27, Research, Estimates), and money manager Neuberger Berman (NEU: up $0.21 to $75.40, Research, Estimates) all announced disappointments.
Dow financial services components American Express (AXP: down $0.72 to $41.16, Research, Estimates) and Citigroup (C: down $0.43 to $51.43, Research, Estimates) fell.
Sales for many retailers fell in May, including J.C. Penney (JCP: down $0.16 to $22.76, Research, Estimates), whose sales at stores open at least a year dipped 1.3 percent, and Gap (GPS: up $0.61 to $32.00, Research, Estimates), which posted a 10 percent drop in same-store sales. At Federated Department Stores (FD: down $1.90 to $43.00, Research, Estimates), which runs Macy's and Bloomingdale's, sales dropped 3.3 percent and the company warned that it could miss earnings estimates.
"They were destined to be disappointing," Larry Wachtel, market analyst at Prudential Securities, told CNNfn's The Money Gang. "One, the weather was against you and we have a cautious consumer."
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Philip Morris (MO: down $1.48 to $48.52, Research, Estimates) fell 3 percent after a Los Angeles jury ordered the tobacco to pay more than $3 billion to a 56-year-old man who claims the company didn't warn him about the risk of smoking. The company, whose shares had been close to their 52-week high of $53.88, said it will appeal the decision.
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Stock investors have made money this spring. The Dow industrials have gained 18 percent since late March, while the Nasdaq is up 38 percent from its early April low.
Credit the Federal Reserve. The central bank cut interest rates five times this year, cheapening borrowing costs and helping the market look past discouraging economic news.
"We're hoping by the fourth quarter (that) we see some pickup in the economy," John Forelli, senior vice president at Independence Investment Advisors, told CNNfn's Before Hours. "In the meantime we've got to brace ourselves for some bad news."
More evidence pointing to a soft economy emerged Thursday. The number of Americans filing for first-time jobless claims rose 13,000 to 439,000. The gains to the highest level in nearly nine years are the latest sign of weakness in the job market. 
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