US stocks rose sharply on Friday in heavy trading as software company PeopleSoft Inc and chip-related stocks boosted the Nasdaq and Standard & Poor's 500 indexes to their highest closes in about three months.
Shares of PeopleSoft rose more than 15 percent after its board decided to remove Craig Conway as president and chief executive, citing "a loss of confidence" in Conway.
Rival Oracle Corp, which has made a hostile bid for PeopleSoft, climbed 5 percent.
Analysts said the dismissal of the PeopleSoft CEO increased the chances that Oracle's take-over effort would succeed.
The Dow Jones industrial average closed up 112.38 points, or 1.11 percent, at 10,192.65. The Standard & Poor's 500 Index ended up 16.92 points, or 1.52 percent, at 1,131.50. The technology-laced Nasdaq Composite Index ended up 45.36 points, or 2.39 percent, at 1,942.20.
For the week, the Dow ended up 1.45 percent, while the S&P advanced 1.93 percent and Nasdaq rose 3.34 percent. All three indexes turned in their highest weekly percentage gain in six weeks.
Stocks also benefited from economic data on Friday.
US factory growth stayed strong in September while construction spending the prior month hit a record high for a seventh straight month.
"The big news today, among other things, is that the manufacturing sector of the US economy continues to expand - that's good news for stocks and bad news for bonds," said Hugh Johnson, chief investment officer at First Albany Corp.
"When you see the stock market up and the bond market down, it usually means investors are becoming more optimistic about the economy."
General Motors Corp, the world's largest automaker, posted a 20 percent rise in US vehicle sales for September, boosted by incentives. GM shares rose 1.5 percent to $43.14.
Shares of PeopleSoft rose $2.98 to $22.83, while Oracle climbed 62 cents to $11.90.
It was the Nasdaq's highest close since July 9, and the S&P's highest close since June 30.
Trading on the first day of the quarter was heavy, with 1.6 billion shares changing hands on the New York Stock Exchange and about 1.8 billion shares trading on Nasdaq. Both were higher than their daily average last year.
On the New York Stock Exchange, stocks on the rise outnumbered declining stocks by about 3 to 1. More than two stocks advanced for every one that declined on Nasdaq.
Oil prices remained high amid concerns of potential supply disruptions in Nigeria. US crude oil futures ended at $50.12 a barrel, the first time ever they settled above $50.
Semiconductor-related stocks helped the Nasdaq rally after JP Morgan raised investment ratings on chip equipment makers Novellus Systems Inc, Applied Materials Inc and Teradyne Inc.
Novellus Systems climbed 5 percent, or $1.36, to $28, Applied Materials rose 4.9 percent, or 81 cents, to $17.30 and Teradyne rose 7 percent or 96 cents to $14.36.
The first presidential debate on Thursday night in Miami between President George W. Bush and Sen. John Kerry also appeared to calm markets, said Johnson.
"Although the perception is clear that Kerry won the debate last night - it's still the case that the financial markets collectively are betting Bush will win and preserve the 15 percent tax on capital gains and dividends," said Johnson.
Cytec Industries Inc fell about 7 percent to $45.61 after saying it will buy the chemicals division of Belgian drugs company UCB.
Cyberonics Inc fell 7.8 percent to $18.85 after medical device maker Advanced Neuromodulation Systems Inc said it withdrew its offer to acquire Cyberonics.
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