NEW YORK (CNNfn) - U.S. stocks rose for the first time in five sessions Friday after economic reports signaled that the hard-hit manufacturing sector may finally have bottomed.
But the gains didn't save stocks from a bleak August, a month when hundreds of profit warnings and thousands of job cuts dashed hopes for a quick economic recovery. The three major indexes capped the month with their worst weekly performance since March.
With four months left in the year, the Dow Jones industrial average needs to rise 8.4 percent just to break even in 2001, while the Nasdaq composite index requires a 37 percent surge to wipe out its losses for the year.
A broader index, the Standard & Poor's 500, has to rally 16.5 percent during the next four months to keep from falling for a second straight year. Historians take note: The index's last two-year drop came in 1973 and 1974.
"I'd say this is the most nervous summer I can remember," Donald Luskin, CEO of the Luskin Report, told CNNfn's Market Call.
All three indexes fell to their lowest levels of the year in March and April, but rose through the end of May. That was as far as they'd go; the Dow, Nasdaq and S&P fell steadily all summer.
September brings hurdles. A historically weak month for stocks, the last four weeks of the third quarter is also when companies up the pace of negative earnings pre-announcements.
Already, Sun Microsystems, Dell Computer and Advanced Micro Devices joined more than 300 companies in warning that third-quarter results will fall short.
And since 1981, the S&P 500 has fallen 0.36 percent in September, on average, making it the market's worst month of the year. The best month, December, has averaged a 2.3 percent gain.
In Friday's action, stocks began rising after the government said factory orders rose 0.1 percent in July. Economists expected a decline. Separately, the Chicago Purchasing Managers Index for August rose to 43.5 percent, also above expectations, and a sign that the hard-hit manufacturing business may be turning.
"Every turning point has to start somewhere, and the evidence on the industrial sector is becoming overwhelming," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
The Nasdaq composite index rose 13.75 points, or 0.8 percent, to 1,804.43, narrowing its weekly loss to 5.8 percent and its monthly decline to 11 percent.
The Dow Jones industrial average gained 30.17 points, or 0.3 percent, to 9,949.75, falling 4.5 percent on the week and 5.4 percent in August.
And the Standard & Poor's 500 rose 4.55 points, or 0.4 percent, to 1,133.58, declining 4.3 percent on the week and 6.4 percent on the month.
The weekly declines were the worst for the three averages since the week ended March 16.
More stocks rose than fell. Nasdaq advancers topped decliners 1,991 to 1,563 as more than 1.2 billion shares changed hands. On the New York Stock Exchange, advancers beat decliners 1,693 to 1,364 as more than 905 million shares traded. In other markets, Treasury securities edged lower. The dollar rose versus the euro and fell against the yen.
Small bounce
The day was not without disappointments. Novellus Systems (NVLS: down $2.42 to $44.31, Research, Estimates), which makes semiconductor equipment, said its third-quarter bookings and shipments would be on the low end of prior forecasts. Merrill Lynch cut profit forecasts for Novellus.
Applied Materials (AMAT: down $0.01 to $43.09, Research, Estimates), the biggest maker of chip equipment, also fell.
The losses come two days after Sun Microsystems (SUNW: up $0.38 to $11.45, Research, Estimates) said it would not earn the third-quarter profit that Wall Street expected.
Sun shares tumbled more than 20 percent Thursday, a day when the Dow industrials fell below 10,000 for the first time in nearly five months.
Still Charles Payne, head analyst at Wall Street Strategies, is encouraged by the high level of investor negativity, which – though counterintuitive – often signals a bottom.
"I still see reason to be optimistic," Payne said.
He's also heartened by the Federal Reserve's interest-rate cut campaign. Central bankers lowered borrowing costs seven times this year to keep the economy from recession. The fed funds rate for overnight bank lending stands at its lowest levels since early 1994.
Economically sensitive stocks led the Dow higher Friday. Gainers included General Motors (GM: up $0.54 to $54.75, Research, Estimates), Alcoa (AA: up $0.63 to $38.12, Research, Estimates), and American Express (AA: up $0.63 to $38.12, Research, Estimates).
In other economic data, the University of Michigan said its index of consumer sentiment fell to 91.5 in August from 92.4 in July. Earlier this week, a widely watched gauge of confidence from the Conference Board also fell.
The declines in consumer sentiment come during a month of falling stock prices and rising layoffs. Ford Motor Co., Charles Schwab and Corning all trimmed payrolls this month to cut costs amid slowing demand.
The day's gains, the first in five sessions, brought plenty of skepticism.
"A rally in a bear market," Peter Mancuso, NYSE trader at Performance Specialist Group, told CNNfn's Market Call.
Three of the Nasdaq's four biggest all-time percentage gains occurred in 2001, a year when the index has fallen 27 percent. The Dow is off 7.7 percent on the year, while the S&P 500 is off 14 percent.
The losses come during a year when overall profits at America's largest companies are expected to fall for the first time in a decade. But next year could bring relief.
Analysts surveyed by First Call expected earnings among S&P 500 companies to rise 9 percent during the first quarter of 2002.
Next week brings only four days of trading. U.S. markets are closed Monday for Labor Day.
Bulls may take comfort in this: The year's worst levels have so far held. The Dow's lowest close of the year, 9,389.48, came on March 22 while the Nasdaq finished as low as 1,638.80 on April 4.
The indexes went on to rise through May, with the Nasdaq heading above 2,300 and Dow rising beyond 11,300.
But the gains never continued, and the summer rally that some analysts called for never came. 
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