Blue-chip stocks climbed yesterday as investors gambled that interest rate and tax cuts will spur an economic recovery next year, but technology shares slipped on a dim sales outlook from JDS Uniphase Corp.

Investors expect the US government's tax cut and interest-rate cuts by the Federal Reserve will revive the sluggish economy and fuel corporate profit growth, money managers said.

"We've had tax stimulus, the biggest interest-rate cuts in a long time and an 18-month bear market," said Joseph Williams, a portfolio manager with Commerce Trust Co, which oversees $10 billion. "If we're looking out a year, I think things are going to be much better." Defence stocks were in focus as the US government prepared to pick either Lockheed Martin or Boeing to build its next-generation fighter jet in a programme that could be worth more than $200 billion. Lockheed rose $1.02 to $49.92, while Boeing jumped $1.78 to $37.68. UTX, which makes engines for both companies, rallied $2.54 to $57.01.