THE US saw a strong recovery earlier this week with the Dow Jones industrial average rising 245 points on Monday, its largest one-day rise since April.

This spilled over to our markets, with investors appearing more inclined to invest in old economy stocks.

They seem to be choosing the safer option with the prospect of steady earnings growth, rather than the risky technology sector, currently dogged by various profit warnings.

The banking sector has been boosted this week following a rally from their US counterparts and also various broker upgrades.

Alliance and Leicester announced cost-cutting plans, but would spend £130 million as part of this restructuring programme to help boost revenues and its share price.

Its shares saw a good rise. Royal Bank of Scotland also rose strongly with Merrill Lynch saying it is the best placed domestic bank in terms of strategy.

The pharmaceuticals were in the spotlight this week with two of the major players, Smithkline Beecham and Glaxo Wellcome reporting their results.

Both announced increases in pretax profits and sales, with Smithkline's sales being driven by its diabetes drug Avandia.

However, a US consumer group called for the US Food and Drug Administration to ban Lotronex, Glaxo's treatment for irritable bowel syndrome.

This was following various complaints of it having bad side effects. Both sets of shares retreated as a result of this.

The two giants have also finally committed themselves to merging their businesses by the end of the year.

Among the telecoms, MCI Worldcom, the US telecoms and data services issued a profit warning

This dented our telecoms again, which had been showing signs of recovery.

However, Telewest Communications, the cable operator, has continued to rise on renewed bid speculation.

Rival operator ntl is thought to be keen on a merger as it is currently after a London listing.

Also, large Telewest shareholders, such as Microsoft, are pushing for some kind of activity to occur in the near future.

Finally, in the retail sector, Matalan, the discount retailer continues to oppose the trend of flagging retailers.

It reported a rise of 72pc in pretax profits to £35 million and a 33pc rise in comparable sales. Its shares surged 8pc to a record high of 703p.

It attributes its success to out of town sites with low rents, bulk ordering and its membership system, where it targets its customers directly and constantly.