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US industry earnings raise hope for recovery

Demand in emerging markets boosted profit at big U.S. industrial companies like Caterpillar, which gets almost two-thirds of its revenue outside its home market, while highlighting the extent to which businesses rather than consumer spending are leading the recovery. 3M Co. (MMM.N) and Danaher Corp. (DHR.N), were on a long list of companies raising 2010 earnings forecasts.

That helped reverse sentiment among investors, who recently have fretted about a double-dip recession and tepid sales growth. Shares of most industrial companies jumped on Thursday, as did the market. The Standard & Poor's 500 index of large companies rose 2.25 percent.

"Overall, this is producing a fairly heartening picture," said Ali Naqvi, founder of Naqvi Van Ness Asset Management in New York. "It's dangerous to take a negative view from this round of earnings so far."

Global industrial giants have invested heavily to expand in India, China and other developing economies that are building infrastructure. Their results highlight a disconnect between slow-growing developed economies and much faster recovery in emerging markets, whose recessions have been typically shallower and shorter.

Thursday brought reminders that the recession has not fully released its grip, however.

U.S. jobless claims rose more than expected; an index of leading indicators hinted at slow growth ahead; the supply of unsold U.S. homes rose, and Federal Reserve Chairman Ben Bernanke told Congress the U.S. economy still needed "a reasonable degree" of stimulus. (Reuters)