Bonds News

CORRECTED - US STOCKS-Market climbs on Microsoft, Countrywide

(Corrects to show Moody’s cut ratings on some collateralized debt obligations, not AMBAC shares in final 2 paragraphs)

NEW YORK, Oct 26 (Reuters) - U.S. stocks rose on Friday after a higher profit forecast by Microsoft Corp. MSFT.O lifted all three major indexes, and an upbeat outlook by lender Countrywide Financial Corp. CFC.N stemmed fears of financial-sector losses.

Microsoft lifted its full-year forecasts late on Thursday and reported quarterly profit that beat analysts’ expectations, sending shares of the world’s largest software maker up as much as 12.6 percent.

Countrywide, the largest U.S. mortgage lender, said the housing slump led to a $1.2 billion third-quarter loss, but it forecast a profit in the fourth quarter as it slashes jobs. For details, see [ID:nL26142482]

“Microsoft earnings have provided a halo effect for the market,” said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co., in Lake Oswego, Oregon. “The financials remain under pressure, but have gotten a little relief after Countrywide said it expects to return to profitability.”

The Dow Jones industrial average .DJI was up 71.53 points, or 0.52 percent, at 13,743.45. The Standard & Poor's 500 Index .SPX was up 11.86 points, or 0.78 percent, at 1,526.26. The Nasdaq Composite Index .IXIC was up 35.48 points, or 1.29 percent, at 2,786.34.

Crude was up 26 cents at $90.72 a barrel on the New York Mercantile Exchange. Earlier, in electronic trading, oil reached a record high of $92.22, bumping up energy stocks.

Schlumberger SLB.N was up 1.7 percent at $99.77 and Occidental Petroleum OXY.N was up 2.9 percent at $71.05.

Shares of Microsoft jumped 9.2 percent to $34.93 on Nasdaq. Earlier, the stock hit $36.03, its highest since July 2001.

Countrywide’s stock shot up 17.1 percent to $15.29 on the New York Stock Exchange.

Shares of Merrill Lynch & Co. Inc. MER.N jumped 4.5 percent to $63.65 after reports that Chief Executive Stan O'Neal may be on the way out. Merrill's board is considering BlackRock Inc BLK.N Chief Executive Larry Fink and NYSE Euronext NYX.N CEO John Thain as possible replacements for O'Neal, according to people familiar with the situation.

CNBC television said O’Neal has told friends he expects to be ousted. On Wednesday, Merrill reported huge write-downs for bad investments related to risky subprime mortgages.

The New York Times reported on Friday that O'Neal met with Wachovia Corp. WB.N, the fourth-largest U.S. bank, about a merger. [ID:nL26620794].

Shares of coal miners shot up after Massey Energy Co. MEE.N forecast increased shipments at higher prices. The stock was up 7.3 percent at $31.00.

On the downside, shares of mortgage insurers plunged after Moody’s Investors Service cut ratings on collateralized debt obligations backed by residential mortgages.

AMBAC Financial Group Inc ABK.N lost 6.5 percent to $41.09 and MBIA MBI.N fell 1.8 percent to $46.13.