Stocks finished higher Friday as bullish earnings news offset a spike in oil prices and a soft reading on consumer sentiment.
The Dow Jones industrial average rose 39.97 points, or 0.39%, to 10,284.46. The broader Standard & Poor's 500 index was up 5.05 points, or 0.45%, to 1,128.55. The Nasdaq composite index added 6.01 points, or 0.32%, to 1,910.09, held back by weakness in telecom equipment shares on news from Qualcomm (QCOM).
The October NYMEX crude oil contract jumped above $45 per Sbarrel as the governmment reported that Hurricane Ivan shut down 5.15 million barrels per day of crude production in the Gulf of Mexico.
Looking to next week, the main event is Tuesday's Federal Reserve policy meeting. Most economists expect the Fed to raise interest rates by a quarter percentage point. "Watch what the Fed says Tuesday, not what it does," says Action Economics.
The tone of the policy statement is of maximum importance for market direction, says Action Economics. "While some are speculating the FOMC will hint at an even more tempered trajectory, we don't expect any significant changes to the policy language," it says. Look for the Fed to reiterate the current stance of policy remains accommodative, and that they can remove accommodation at a "measured" pace, says Action Economics.
Otherwise, the economic data flow is not too heavy, and includes housing starts and building permits on Tuesday; weekly jobless claims and leading indicators on Thursday; and durable good orders and existing home sales on Friday.
The economic highlight for Friday was the preliminary September consumer sentiment index, which fell to 95.8 from August's level of 95.9. High energy prices and terror fears all continue to contribute to the recent volatility in recent months and keep the survey range-bound, according to Standard & Poor's economists.
Among sectors on the move Friday, oil stocks surged as crude oil prices rose.
Helping lift blue chips was Ford Motor (F), which raised its third-quarter earnings per share guidance from a range of breakeven to 5 cents to a range of 10 cents to 15 cents, excluding items. As a result, it now sees $1.90 to $2.00 2004 EPS. The auto maker cited strong performance in auto sector.
In the tech sector, Qualcomm (QCOM) shares fell 4% after the company raised guidance, but may alter how it accounts for royalties. The stock had reached three-and-one-half-year high on Monday.
MKS Instruments (MKSI) sees lower-than-expected revenues of $135 million to $140 million and EPS (GAAP basis) of 17 cents to 21 cents for the third quarter. It cited weak orders for semiconductor equipment and order push outs.
3Com (COMS) reported a first-quarer loss of 9 cents (GAAP) per share, vs. 29 cents loss a year ago, on flat revenue. It expects second-quarter revenues of $170 million to 180 million and about 38% gross margin. The company is no longer targeting enterprise revenue of $800 million to $850 million in fiscal year 2005.
Texas Instruments (TXN) set a $1-billion stock buyback. The company plans to increase its quarterly dividend by more than 17%. S&P says the news is positive, but kept its hold recommendation on the stock.
In other corporate news, Citigroup (C) shares finished lower after the Financial Services Agency of Japan determined that there were fundamental problems in Citibank Japan's internal controls and governance structure. The Private Bank unit is required to discontinue all banking operations by Sept. 30.
After Thursday's windfall gains, the bond market retreated on Friday as bulls moved to the sidelines ahead of the weekend and next week's Federal Open Market Committee meeting, despite weaker than expected consumer sentiment data, says Action Economics. The yield on the 10-year note rose to 4.13% from roughly 4.07%.
Prices had surged Thursday after softer than expected CPI and Philly Fed data increased market speculation that the FOMC will suggest a softer policy trajectory at Tuesday's meeting, says Action Economics.
European stock markets finished higher on Friday. London's Financial Times-Stock Exchange 100 index was up 34.5 points, or 0.76%, to 4,591. Big Food Group was sharply higher after the company said it is in talks to be acquired.
Germany's DAX index rose 24.42 points, or 0.62%, to 3,988.07 as Eurozone July industrial production rose 0.4%, less than the 0.5% expected, but well up from the 0.2% June decline.
In Paris, the CAC 40 index gained 34.54 points, or 0.94%, to 3,726.22. BNP Paribas was up as UBS raised its rating on French banks to "overweight" from "neutral."
In Asia, the markets finished mixed on Friday. Japan's Nikkei 225 index lost 56.87 points, or 0.51%, to finish at 11,082.49. Tech stocks extended losses, with Sony sinking 1.56% on earnings concerns after Sony President Kunitake Ando said he does not expect a sharp recovery in profitability in its home electronics business during the peak October-December quarter. Insurers fell on concerns over mounting insurance costs due to damages incurred from recent series of typhoons and hurricanes.
In Hong Kong, the Hang Seng index rose 15.09 points, or 0.11%, to 13,224.93, with techs and utilities stocks posting gains while properties slip. China plays gained on hopes of more positive market policies to prop up stock markets, according to Standard & Poor's MarketScope.