U.S. stock indexes closed higher Friday, as analyst upgrades of Procter & Gamble (PG), SanDisk (SNDK) and other issues helped the market score a second straight week of gains.
Earlier, indexes seesawed as investors adjusted their portfolios with an eye on the expiration of futures and options.
On Friday, the 30-stock Dow Jones industrial average finished higher by 36.28 points, or 0.37%, at 9,820.20. The broad Standard & Poor's 500-stock index rose 2.81 points, or 0.26%, to 1,068.30. The tech-heavy Nasdaq composite index added 6.11 points, or 0.29%, to 2,132.86.
On the New York Stock Exchange, 18 stocks were higher in price for every 13 that declined. Breadth on the Nasdaq was 14-13 positive. Trading was active.
Treasuries were lower. The dollar index was higher. Gold and rude oil futures retreated.
The main event for the markets next week will be the Federal Reserve's two-day policy meeting, beginning on Tuesday and concluding with the Fed's policy statement at 2:15 p.m. ET on Wednesday. Analysts expect the Fed to sound a bit more upbeat about the economic outlook compared to its August statement, when it said economic activity was "leveling out." In fact, recently renominated Fed Chairman Ben Bernanke noted on Sept. 15 that the recession is "very likely over" at this point.
Indeed, the markets are now looking for clues as to when policymakers will begin to slow their rate of such purchases in advance of ending the programs outright. Barclay's Capital, which sees 5% first-quarter 2010 GDP growth, believes the FOMC will tighten credit sooner than many thought. Also next week, investors will receive updates on the housing sector. The pace of existing home sales is expected to extend its string of gains to five months in August, to a 5.35 million unit annual pace. New home sales are also expected to make it five increases in a row, rising to a 0.433 million unit rate in August.
Durable goods orders are expected to inch up 0.5% in August following a hefty 5.1% surge in July. The labor market still lags, however, with jobless claims expected to hold steady at 546,000.
Also, the G20 meets in Pittsburgh next Thursday and Friday to discuss stimulus exit strategies, market reform and regulation.
Bank stocks were mixed in Friday's session following a Wall Street Journal report policies that set the pay for tens of thousands of bank employees nationwide would require approval from the Federal Reserve as part of a far-reaching proposal to rein in risk-taking at financial institutions. The Fed's plan would, for the first time, inject government regulators deep into compensation decisions traditionally reserved for the banks' corporate boards and executives. The SEC ruled that credit agencies will have to disclose more of their ratings history, and creators of financial products will have to share data with all credit raters. The SEC took aim at the credit rating industry, blamed for fueling the financial crisis by assigning and maintaining high ratings on toxic mortgage-backed securities, according to a Reuters report Friday. SEC Chairman Mary Schapiro said the industry needs to be subjected to stronger regulation because investors frequently consider ratings in making investment decisions. "That reliance did not serve them well over the last several years," she said.
The agency voted to seek comment on whether credit agencies should be categorized as "experts" under securities law, and thus subject to tougher standards of liability. The SEC said it is not proposing such a move yet, but wants feedback on its potential impact. Further, the SEC proposed to require banks to disclose all preliminary ratings they receive from credit agencies in an attempt to stop banks from shopping for the best credit rating for their products.
Reuters also reported Friday that U.S. securities regulators proposed a ban on flash orders that stock exchanges send to a select group of traders fractions of a second before revealing them publicly. The SEC is seeking to end the practice criticized for giving an unfair advantage to some market participants who have lightning-fast computer trading software.
In company news Friday, Palm Inc. (PALM) reported first-quarter non-GAAP earnings per share (EPS) of $0.10, vs. a $0.12 loss one year earlier, despite a 1.6% revenue decline. Results reflected the scale of the launch of Palm Pre with Sprint at the beginning of the first quarter and the subsequent launch of Palm Pre with Bell Mobility in Canada. Due to the timing and scale of expected product launches in the second quarter vs. those which took place in the first, and lower expected demand for legacy products, Palm expects second-quarter non-GAAP adjusted revenues of $240 million-$270 million. It sees fiscal 2010 adjusted revenues of $1.6 billion-$1.8 billion. The company plans to offer about 16 million shares.
Citigroup reportedly upgraded its rating on shares of Procter & Gamble (PG) to buy from hold.
JP Morgan reportedly upgraded its opinion on the homebuilding industry to positive from negative. Specifically, the firm upgraded Toll Brothers (TOL) and KB Home (KBH) to overweight from neutral. JPMorgan cut its rating on M.D.C. Holdings (MDC) to underweight from overweight.
Aircraft leasing outfit Genesis Lease (GLS) agreed to be acquired by AerCap holdings (AER) in a $1.75 billion deal. Terms: one AerCap ordinary share for each Genesis share held.