* 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 1.6 pct, S&P up 1.5 pct, Nasdaq up 1.3 pct
(Updates to close)
By Leah Schnurr
NEW YORK, Oct 31 (Reuters) - U.S. stocks ended one of
their worst months on record, but signs of further thawing in
credit markets lifted battered shares on Friday.
Hammered by worries over the extent of the damage the
credit crunch has inflicted on the global economy, the Dow
Jones industrial average logged its biggest monthly decline in
a decade, while the S&P 500 had its worst month since the
October 1987 market crash.
Financial shares, led by a gain of almost 10 percent in
JPMorgan Chase <JPM.N>, lifted Wall Street as the interest
rate that banks charge each other for short-term loans
continued to ease.
The decrease in overnight interbank borrowing costs
prompted hopes that global efforts to bolster confidence in
credit markets are taking hold following the Federal Reserve's
interest-rate cut earlier this week and spurred investors to
search for bargains.
"It seems like you have some continued mild improvement in
the credit markets and that seems to be buoying hopes but
people should know, conditions may have improved, but they're
improving slowly," said Chip Hanlon, president of Delta Global
Advisors Inc, in Huntington Beach, California.
The Dow Jones industrial average <> gained 144.32
points, or 1.57 percent, to 9,325.01. The Standard & Poor's
500 Index <.SPX> rose 14.66 points, or 1.54 percent, to
968.75. The Nasdaq Composite Index <> climbed 22.43
points, or 1.32 percent, to 1,720.95.
Friday's rally resulted in stocks clocking in a higher
finish for two sessions in a row -- the first consecutive
gains in over a month.
For the week, the Dow gained 11.3 percent, its best
one-week percentage gain since October 1974. The S&P 500 rose
10.5 percent, its best weekly percentage gain since at least
January 1980. The Nasdaq advanced 10.9 percent, its best
weekly percentage gain since April 2001.
October, though, was a different story. The Dow lost 14.06
percent, its worst one-month percentage drop since August
1998, while the S&P 500 lost 16.83 percent, its worst
one-month percentage slide since October 1987.
Pension funds bought stocks to rebalance their portfolios,
also lending support to the market, traders noted.
JPMorgan said it is making changes to about $110 billion
in mortgages and is temporarily halting foreclosures while it
alters the loans. For details, see [] The bank's
stock, a Dow component, shot up 9.7 percent, or $3.63, to
$41.25 on the New York Stock Exchange.
Among other financial shares, Morgan Stanley <MS.N> rose
8.6 percent to $17.47., while the S&P Financial Index <.GSPF>
gained 5.5 percent.
But economic data on Friday that showed U.S. consumers are
tightening their belts offered 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. [].
On Nasdaq, video game publisher Electronic Arts Inc
<ERTS.O> shed 17.9 percent to $22.78 after it chopped its
full-year profit forecast due to slowing demand.
After trading on both the up and down side of Friday's
ledger, Chevron Corp <CVX.N> ended up 0.6 percent at $74.60 on
the NYSE after it reported quarterly profit that beat
expectations. The price of oil, which had slipped earlier and
pressured the stock, also rebounded. U.S. crude <CLc1> gained
$1.85 to settle at $67.81 a barrel on the New York Mercantile
Exchange, but recorded its biggest monthly drop ever. In
October, the price of NYMEX crude fell a record 32.62
percent.
Shares of Express Scripts Inc <ESRX.O> jumped 5.3 percent
to $60.61 on Nasdaq after the pharmacy benefit manager
reported quarterly profit that beat expectations after
Thursday's closing bell.
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.
Trading was moderate on the New York Stock Exchange, with
about 1.57 billion shares changing hands, below last year's
estimated daily average of roughly 1.90 billion, while on
Nasdaq, about 2.50 billion shares traded, above last year's
daily average of 2.17 billion.
Advancing stocks outnumbered declining ones on both the
NYSE and the Nasdaq by a ratio of nearly 3 to 1.
(Editing by Jan Paschal)
