The recession in the United States "could be losing steam", and a recovery might now begin in the first half of 2002, according to the Conference Board, a US research firm which compiles key economic data to forecast how the economy is behaving.
The board's index of leading economic indicators rose for a second straight month in November. The increase of 0.5 per cent is the largest since a 0.6 per cent increase in May.
The positive economic data helped push the Dow Jones - after a brief lapse - over the psychologically-important 10,000 mark, which it reached last week for the first time since before September 11th.
However, negative news from the technology sector drove the Nasdaq down below its important waterline of 2,000 again. Technology stocks were hit by a series of grim earnings reports.
The second-biggest memory chipmaker, Micron Technology, reported a larger-than-expected loss and said sales fell 73 per cent due to plunging prices and over-capacity.
Motorola, the world's number two mobile-phone maker, said it would cut another 9,400 jobs because of lower predicted revenue next year.
The world's biggest aluminium producer, Alcoa, warned that fourth-quarter earnings were likely to miss Wall Street's estimates due to losses from insolvent customers and restructuring.
Hopes of an economic recovery were bolstered, however, by strong earnings forecasts from General Electric and Pfizer, which helped send the Dow Jones sharply up for the second day in a row. Investors were also encouraged by the strength of the Conference Board forecast.
The leading economic index has risen in four of the past six months, which suggests that "the recession could be losing steam", the board said in a statement. If monthly gains continue to be seen in the index, "an economic recovery in the first half of next year may be possible".
On Tuesday, the International Monetary Fund predicted that the US economy would return to growth in the second half of 2002.
Conference Board economist Mr Michael Fort warned, however, that "despite the gains in the last two months, more declines may be in store in the near future."
Six of the 10 components that make up the leading indicators index were positive in November, led by initial jobless claims, the interest rate spread and stock prices.
Stocks fluctuated wildly at one point yesterday after President George W Bush said he had worked out a plan with on an economic stimulus package and Senate Democratic majority leader Mr Tom Daschle contradicted him, warning that differences remained.
Figures for the US trade deficit widened 54.8 per cent in October, the government said yesterday, as foreign insurers' payouts slumped after being inflated by the September 11th terrorist attacks.
It was the steepest change since June 1993. The combined US deficit in trade of goods and services expanded to $29.4 billion in October from $19 billion in September, the Commerce Department said.
