Stocks cap best week in 4 months mixed; Dow up 7% for the week

Investors are betting that a resurgent rally will continue.

Stocks closed out their best week in four months Friday on a flat note as investors look to another flood of corporate earnings reports next week to provide more signs that the economy is healing.

"We had a big run-up earlier in the week and I think people would just as soon go into the weekend without any major disruptions in their exposures," said Jeff Buetow, managing partner at Innealta Portfolio Advisors. "I think people want the market to go up."

All three major U.S. stock indexes recorded their best week since mid-March, as both the Dow and the S&P 500 snapped four-week losing streaks. This week's gains marked the resumption of the rally from March 9, when the S&P 500 hit a 12-year closing low.

For the week, the Dow rose 7.3%, the S&P 500 gained 7% and the Nasdaq climbed 7.4%.

Solid results from Goldman Sachs Group and Intel spurred buying early in the week. But not all the results Friday were strong, holding the market in place.

On Friday, Bank of America and Citigroup became the latest banks to report big profits but also weakness in their loan portfolios. General Electric beat earnings forecasts, but its revenue came up short.

"The important thing is these earnings results, while not all entirely positive, are beginning to show some signs of stabilization," said Tom Kersting, an analyst at Edward Jones.

The Dow Jones industrials rose 32.12, or 0.4%, to 8,743.94. The broader Standard & Poor's 500 index slipped 0.36, or less than 0.1%, to 940.38, while the Nasdaq composite index rose 1.58, or 0.1%, to 1,886.61.

The number of stocks that fell narrowly outpaced those that rose on the New York Stock Exchange, where trading volume came to 1.3 billion shares compared with 1.2 billion traded Thursday.

Financial stocks mostly fell, weighing on the broader market. Investors have been encouraged by strong profits from large banks, but there are still signs that the recession's grip hasn't eased as much as hoped, such as higher loan defaults.

BofA, which has struggled more than some of its peers from loan losses, beat Wall Street estimates just as Goldman Sachs and JPMorgan Chase did earlier in the week. However its profit fell from a year earlier as losses from delinquent loans continued to climb. BofA fell 28 cents, or 2.1%, to $12.89.

Citigroup, another troubled bank, surprised Wall Street with a $3 billion profit instead of the big loss analysts had expected, but results were boosted by the sale of a majority stake in its Smith Barney brokerage. Its shares fell a penny to $3.02.

One exception was CIT Group, whose shares jumped 29 cents to 70 cents, on speculation that the troubled lender might be able to avoid bankruptcy. Its shares had tumbled 75% on Thursday after negotiations with federal regulators about a possible rescue fell through.

GE's shares dropped 6% after the conglomerate said its earnings fell 49% on losses at its financial unit and weakness in industrial businesses. The profits topped forecasts, but revenue came in $3 billion below estimates. The stock lost 75 cents to $11.65.

The reports followed mixed results from Google and IBM late Thursday.


Homebuilders' shares climbed after an upbeat reading on the housing market. Construction of new homes and apartments jumped 3.6% in June to the highest level in seven months, beating economists' estimates. Building permits climbed 8.7%, also beating forecasts.

Shares of Hovnanian Enterprises rose 8 cents, or 3.3%, to $2.53, while DR Horton rose 26 cents, or 2.7%, to $9.90.

The market's moves were jagged this week, with modest gains coming after big surges. Influential banking analyst Meredith Whitney got the market off to a roaring start on Monday after raising her view on Goldman, stoking hopes that financial companies would show more signs of healing.

But the market's response to Goldman's actual report the following day was somewhat subdued amid mixed economic data. Strong earnings and an upbeat forecast from Intel pulled more investors into the market on Wednesday, and hope for more good earnings from the technology sector stirred buying again on Thursday.

This week's upward move has temporarily halted a decline that began in mid-June as investors worried the 40% jump in stocks this spring was overdone. Analysts said it was a healthy sign that the market was taking a breather on Friday.

"I think it's very constructive that we're taking a pause here and not heading back down," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research.

Sparks said it's too early to say whether this week will be representative of the rest of earnings season. Next week's large batch of reports includes Dow components Caterpillar, DuPont and Merck.

Bond prices fell. The yield on the benchmark 10-year Treasury note rose to 3.66% from 3.58% late Thursday.

Oil prices rose $1.51 to $63.53 a barrel. The dollar was mixed, while gold prices rose.

The Russell 2000 index of smaller companies fell 2.80, or 0.5%, to 519.22.

Overseas, Britain's FTSE 100 gained 0.6%, Germany's DAX index rose 0.4%, and France's CAC-40 added 0.6%. Japan's Nikkei stock average rose 0.6%.