Stocks close strong week with big advance
NEW YORK -- Stocks topped off a strong week with a big rally Friday, after results from companies like Citigroup and Google helped ease investor anxiety about the health of corporate profits. All the major indexes posted gains of more than 4% for the week.
Investors have been worried that recent data indicate a slowing economy, which would cut into profit growth at some of the nation's biggest companies. But, results so far have shown that earnings, for the most part, are meeting or beating expectations.
Citigroup, the nation's biggest bank, encouraged investors with results that didn't contain any big surprises. The New York-based bank reported a loss of $5.1 billion during the first quarter because of poor bets on mortgages and leveraged loans, but the loss was half the $10 billion recorded for the preceding quarter.
Google helped boost investor sentiment, as well as the tech-heavy Nasdaq composite index, by reporting first-quarter earnings and revenue growth that handily topped analysts' predictions.
"This is the first week of earnings reports, and the marquee companies in general have been able to report good earnings, and the banks have been able to raise capital, and the market is responding to that," said Subodh Kumar, global investment strategist at Subodh Kumar & Assoc. in Toronto.
The Dow Jones industrial average jumped 228.87, or 1.81%, to 12,849.36.
Broader stock indicators also showed sizable advances. The Standard & Poor's 500 index increased 24.77, or 1.81%, to 1,390.33, and the Nasdaq rose 61.14, or 2.61%, to 2,402.97.
Advancing issues outnumbered decliners by more than 3 to 1 on the New York Stock Exchange, where volume came to 1.48 billion shares compared with 1.23 billion shares traded Thursday.
The gains come at the end of a big week for stocks. After a quiet start to the week, the major indexes surged more than 2% Wednesday after JPMorgan Chase, Intel and Coca-Cola reported better-than-expected profits. Stocks then finished mixed Thursday, largely holding their gains. For the week, the Dow rose 4.25%, the S&P 500 gained 4.31% and the Nasdaq jumped 4.92%.
Bond prices rose after initially declining when stocks rallied. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.71% from 3.73% late Thursday.
And investors appeared unfazed by the latest spike in energy prices. Oil jumped to $117 a barrel for the first time when a militant group in Nigeria said it sabotaged a major oil pipeline.
Light, sweet crude for May delivery rose to a new trading record of $117 in after-hours electronic trading Friday, after settling up $1.83 at a record $116.69 a barrel on the New York Mercantile Exchange. It was the fifth day in a row crude prices set records.
Meanwhile, a survey of gas stations by AAA and the Oil Price Information Service found that the national average price of regular gas rose 2.7 cents overnight to a record $3.445 a gallon.
Gold prices fell, while the dollar was mixed against other major currencies.
Kumar contends that while investors appear upbeat following the stronger-than-expected quarterly reports, Wall Street will likely still bounce around for some time as it tries to get a read on the fate of the economy.
"The market is trying to find a bottom and that's why you're seeing these volatile days," he said. "I think before one can say that the markets are ready to make a sustained move upward, you have to look at the negative side," he said, pointing to high prices for oil and food.
He also emphasized that it was still early in the earnings-reporting period.
Doug Roberts, chief investment strategist at Channel Capital Research, also believes the market is engaged in the sometimes messy process of establishing a base.
"My sense is, at least short term, we've reached some kind of a bottom," he said. "There was just so much pessimism built into everything."
Unease did appear to dissipate. Wall Street's "fear index" — the Chicago Board Options Exchange's volatility index — declined 1.2% Friday.
On a day with little economic news, corporate reports peeled away some of Wall Street's worries.
Citigroup closed up $1.08, or 4.5%, to $25.11, while Google surged $89.87, or 20%, to $539.41 after the companies issued their reports.
Heavy equipment maker Caterpillar rose $6.69, or 8.5%, to $85.28 after reporting that demand for its global mining and energy products drove first-quarter earnings up a better-than-expected 13%. The company also affirmed its 2008 forecast.
The Russell 2000 index of smaller companies rose 13.07, or 1.9%, to 721.07.
Overseas, Japan's Nikkei stock average rose 0.58%. Britain's FTSE 100 finished up 1.27%, Germany's DAX index rose 2.41%, and France's CAC-40 rose 2.05%.