Stocks cap strong week with mixed finish

Stocks cap strong week with mixed finish

July 18th, 2009 by Associated Press in Local - Breaking News


AP Business Writers

NEW YORK - Investors are betting that the stock market has restarted its spring rally.

Stocks ended little changed Friday but held onto an enormous gain for the week. Investors are looking to another flood of corporate earnings reports next week to provide more signs that the economy is healing.

The Dow Jones industrials and the Standard & Poor's 500 index posted their best weekly performance since early March, when the market's spring rally began. Major stock indexes rose about 7 percent for the week.

"The earnings are better than expected and the economic news is not horrifically bad," said Jeff Buetow, managing partner at Innealta Portfolio Advisors. "I think people want the market to go up."

Solid results from Goldman Sachs Group Inc. and Intel Corp. spurred buying early in the week. But not all the results Friday were strong, so the market barely budged.

Bank of America Corp. and Citigroup Inc. became the latest banks to report big profits but also weakness in their loan portfolios. General Electric Co. 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 week's upward move has, at least for now, halted a slide that began in mid-June as investors worried the 40 percent 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 Inc., DuPont and Merck & Co.

The Dow Jones industrials rose 32.12, or 0.4 percent, to 8,743.94. The blue chips rose 7.3 percent for the week, the first weekly gain after a month of losses. It was the best percentage gain since the week ended March 13 and the 597-point jump was the biggest point gain since late November.

On Friday, the broader Standard & Poor's 500 index slipped 0.36, or less than 0.1 percent, to 940.38, while the Nasdaq composite index rose 1.58, or 0.1 percent, to 1,886.61.

The number of stocks that fell narrowly outpaced those that rose on the New York Stock Exchange, where consolidated trading volume came to 5 billion shares, flat with 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 & Co. 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 percent, 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 Inc., 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 percent on Thursday after negotiations with federal regulators about a possible rescue fell through.

GE's shares dropped 6 percent after the conglomerate said its earnings fell 49 percent 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 Inc. and IBM Corp. late Thursday.

Ken Kamen, president of Mercadien Asset Management in Hamilton, N.J., warned that investors' higher expectations could make it harder for the next batch of corporate results to impress investors.

"A lot of exuberance is being figured into the earnings coming out in the next couple of weeks," he said.

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

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

Bond prices fell. The yield on the benchmark 10-year Treasury note rose to 3.65 percent from 3.58 percent late Thursday.

Oil prices rose $1.54 to settle at $63.56 a barrel. The dollar was mixed, while gold prices rose.

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

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


The Dow Jones industrial average closed the week up 597.42, or 7.3 percent, at 8,743.94. The Standard & Poor's 500 index rose 61.25, 7 percent, to 940.38. The Nasdaq composite index rose 130.58, or 7.4 percent, to 1,886.61.

The Russell 2000 index, which tracks the performance of small company stocks, rose 38.24, or 8 percent, for the week to 519.22.

The Dow Jones U.S. Total Stock Market Index - which measures nearly all U.S.-based companies - ended at 9,634.87, up 634.58, or 7.1 percent, for the week. A year ago, the index was at 12,850.50.