Wall St rises on tech bid; best week since March '03

By Ellis Mnyandu

NEW YORK (Reuters) - Stocks rose on Friday, capping Wall Street's best week in almost five years, after Microsoft Corp's (MSFT.O: Quote, Profile, Research, Stock Buzz) $44.6 billion bid for Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz) overshadowed news that employers cut payrolls for the first time since 2003.

Microsoft, in its biggest-ever takeover deal, offered a 62 percent premium for the Internet media company, boosting optimism about share valuations and buoying the overall market even as shrinking payrolls in January provided the clearest sign yet that the economy is close to recession.

Yahoo shares led advancers on both the S&P 500 and the Nasdaq, with a gain of nearly 48 percent, pulling its shares closer to Microsoft's $31-per-share offer.

Yahoo shares ended at $28.38 on the Nasdaq.

Shares of metal producers and miners contributed to the Wall Street rally after China teamed up with Alcoa (AA.N: Quote, Profile, Research, Stock Buzz) to buy a $14 billion stake in Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), the world's No. 2 miner by market value. The S&P materials index rose 2.21 percent.

"It seems to me the real driving news was the unexpected Microsoft bid for Yahoo. In general, it seemed to spark a little enthusiasm on the back of yesterday's nice rally," said Eric Kuby, chief investment officer at NorthStar Investment Management Corp in Chicago.

The proposed takeover "shows that maybe equity prices just got too low and now you're seeing a little bit of courage from people who have been on the sidelines," he added.

For the regular session, the Dow Jones industrial average .DJI finished up 92.83 points, or 0.73 percent, to 12,743.19. The Standard & Poor's 500 Index .SPX gained 16.87 points, or 1.22 percent, to 1,395.42. The Nasdaq Composite Index .IXIC shot up 23.50 points, or 0.98 percent, to 2,413.36.