Stocks jumped on Friday as oil prices plunged to below $50 per barrel. Investors also weighed a larger-than-expected drop in consumer confidence and readings that eased concerns about inflation. Portfolio rebalancing prior to month-end contributed to gains and drove volume higher, according to Standard & Poor's MarketScope.
The Dow Jones industrial average finished higher by 122.14 points, or 1.21%, to 10,192.51. The broader Standard & Poor's 500 index was up 13.63 points, or 1.19%, to 1,156.85. The Nasdaq composite index gained 17.47 points, or 0.92%, to 1,921.65.
In the energy markets, June West Texas Intermediate crude oil settled down $2.05 to $49.72 per barrel. "A combination of slowing U.S. growth and three-year highs in crude stockpiles have led to the most recent sell-off, with traders now anticipating a test of the $45 level in the coming days," says economic research outfit Action Economics.
Next week's main event is the Federal Reserve Open Market Committee (FOMC) meeting on Tuesday. Economists expect the Fed to hike rates by a quarter point, bringing the key fed funds rate to 3%.
The key economic release will be Friday's employment report for April. Economists forecast 175,000 non-farm jobs were added in the month, and the unemployment rate to remain at 5.2%.
Other economic releases next week include the Institute for Supply Management's national manufacturing survey and construction spending on Monday, factory orders on Tuesday, auto sales on Wednesday, and the ISM services survey, productivity, unit labor costs, and weekly jobless claims on Thursday.
Earnings reports also continue to flow in next week, from companies such as Avon Products (AVP), Electronic Arts (ERTS), Tyco (TYC), Time Warner (TWX), Gillette (G), and more.
Among stocks on the move Friday, Sun Microsystems (SUNW) shares rose after BusinessWeek reported that CEO Scott McNealy is considering taking Sun private with the help of Silver Lake Partners. The idea is to shrink Sun by selling assets, and its bolster core hardware, software, and service businesses with an eye on going public again, according to BusinessWeek. Jonathan Schwartz, president and chief operating officer of the company, rejected the report, according to news reports.
Morgan Stanley (MWD) shares rose after CNBC reported that the company will hold an impromptu board meeting on Saturday.
On the earnings front, Microsoft (MSFT) posted third-quarter earnings per share of 23 cents, vs. 12 cents a year ago, on $9.62 billion revenue (its revenue came in a bit softer than analysts expected). The software giant sees fiscal year 2006 EPS of $1.26 to $1.30 (excluding stock-based compensation expense). S&P raised its estimates and reiterated a strong buy opinion on the stock.
One of Friday's big losers was MicroStrategy (MSTR), after the business software maker reported first-quarter revenue growth that was weaker than expected.
Agricultural stocks got crushed on reports that Archer-Daniels-Midland (ADM) results were weaker than expected. ADM cited a decline in its corn and oilseed-processing businesses.
Other companies on Friday's earnings calendar were Anadarko Petroleum (APC), ChevronTexaco (CVX), Cardinal Health (CAH), and ITT Industries (ITT).
A few economic reports that were released Friday helped ease inflation concerns. The personal consumption expenditures (PCE) index -- which is watched closely by the Federal Reserve -- rose 0.6%, with core prices up 1.7% year-over-year. The first-quarter employment cost index (ECI) rose 0.7%, well below the median forecast of 1%, as wages and benefits were surprisingly tame.
In another report, U.S. personal income rose 0.5% in March.
However, the University of Michigan's release of final April consumer sentiment came in weaker than expected, dipping to 87.7. It was 88.7 in the preliminary report and 92.6 in March. Sentiment has been on the decline since December's 97.1 print, notes Action Economics, as continued declines on Wall Street and high gas prices take their toll on the consumer.
The Chicago purchasing managers' index fell to 65.6 in April after surging more than 6 points to 69.2 in March, according to news wires. The employment index retreated to 62.3 from 66.0. Prices paid fell to 66.1 from 68.2. New orders dipped to 71.0 from 76.7. The data were a little better than expected.
Treasury prices fell Friday, despite worries about an economic slowdown. Some initial asset allocation into bonds and out of stocks was reported on the back of President Bush's press conference Thursday night, when he advocated a bond investment option in the personal retirement accounts, but crude oil later plunged and helped reverse the allocation trade. Treasuries yields finished at session highs after NYMEX crude closed below $50 per barrel for the first time in months. The 10-year note yield rose slightly to 4.20%.
In the currencies market, the U.S. dollar was weaker after China said it plans to move gradually toward full convertibility of the yuan, reports Standard & Poor's MarketScope.
European stock markets finished higher on Friday. London's Financial Times-Stock Exchange 100 index was up 11.5 points, or 0.24%, to 4,801.7. Tate & Lyle was higher after UBS boosted the stock to neutral from reduce. Vodafone rose after the company revealed it has bought back 17 million shares.
Germany's DAX index gained 6.74 points, or 0.16%, to 4,184.84 despite a report showing European business confidence sank. Volkswagen and DaimlerChrysler were a bit higher on upbeat outlooks. Bayer gained after the company said first-quarter earnings rose 56%.
In Paris, the CAC 40 index added 0.26 point to 3,911.71. Alcatel and Cap Gemini were higher on positive analyst comments.
Asian markets finished mixed on Friday. In Japan, the markets were closed for Greenery Day.
In Hong Kong, the Hang Seng index edged down 0.45 point to close at 13,908.97. Oil giant Sinopec fell 1.61% following the release of the company's first-quarter net profit. China Unicom inched down 0.79% after the mobile carrier reported a 26% year-over-year fall in first-quarter net profit.