* Stocks gain on credit thaw optimism
* Financials lead the way, JPMorgan gains 6 pct
* Consumers cut spending for first time in two years
* Dow up 0.4 pct, S&P up 0.5 pct, Nasdaq up 0.5 pct
(Updates to midday)
By Leah Schnurr
NEW YORK, Oct 31 (Reuters) - U.S. stocks rose on Friday as
financial shares gained on optimism over further signs of
thawing in the credit markets, but the Dow remained on track
to log its worst month in a decade after being battered by
worries of a deepening slowdown.
The interbank cost of borrowing dollars overnight
continued to ease on Friday, following the Federal Reserve's
interest-rate cut earlier this week, fueling hopes that global
efforts to bolster confidence in credit markets are taking
hold.
"Everybody on the trading floor is just happy that October
is almost over," said Michael James, senior trader at regional
investment bank Wedbush Morgan in Los Angeles.
"The continued easing of the credit markets, seen with
three-month Libor moving down, is giving some confidence to
the banks, like JP Morgan and Wells Fargo."
Dow component JPMorgan Chase <JPM.N> led the blue-chip
average higher, rising 5.7 percent to $39.75, while an S&P
index of financial stocks <.GSPF> gained 2.4 percent.
Pension funds bought stocks to rebalance their portfolios,
also lending support to the market, traders noted.
The Dow Jones industrial average <> rose 39.42 points,
or 0.43 percent, to 9,220.11. The Standard & Poor's 500 Index
<.SPX> added 4.99 points, or 0.52 percent, to 959.08. The
Nasdaq Composite Index <> was up 8.17 points, or 0.48
percent, at 1,706.69.
But economic data that showed U.S. consumers are
tightening their belts provided more evidence of a deep
slowdown, though the market appeared to shrug it off.
U.S. consumers cut their monthly spending for the first
time in two years during September, according to a U.S.
Commerce Department report. For details, see [].
On Nasdaq, video game publisher Electronic Arts Inc
<ERTS.O> tumbled 15.8 percent to $23.35 after it chopped its
full-year profit forecast due to slowing demand.
Chevron Corp <CVX.N> reported quarterly profit that beat
expectations, but its stock price was hurt by a drop in oil
prices. Chevron was off 0.8 percent at $73.58, while U.S.
front-month crude oil <CLc1> was down 34 cents at $65.62 a
barrel in midday trading.
In other economic news, an index of consumer sentiment
suffered its steepest monthly drop on record, according to the
Reuters/University of Michigan Surveys of Consumers' final
reading for October.
And the Chicago Purchasing Management Index showed that
business activity in the Midwest came to a halt in October as
production and new orders plummeted.
Federal Reserve Chairman Ben Bernanke is due to speak on
mortgage finance at about 2 p.m. EDT on Friday.
(Editing by Jan Paschal)
