U.S. stocks closed higher Friday, scoring a second consecutive weekly advance, as stronger-than-expected earnings news from media giant Walt Disney Co. and retailers Abercrombie & Fitch (ANF) and J.C. Penney (JCP) helped to reassure investors' faith in the economy.
Consumer discretionary issues were among the session's top performers, even though the latest University of Michigan survey showed a decline in consumer sentiment in November.
Additional support for the stock market, as well as gold futures, came from a weaker dollar.
On Friday, the 30-stock Dow Jones industrial average finished higher by 73.00 points, or 0.72%, at 10,270.47. The broad Standard & Poor's 500-stock index was up 6.24 points, or 0.57%, at 1,093.48. The tech-heavy Nasdaq composite index gained 18.86 points, or 0.88%, to 2,167.88.
On the New York Stock Exchange, 22 stocks were higher in price for every eight that declined. Breadth on the Nasdaq was 18-9 positive. Trading volume was relatively low.
Treasuries rose. Crude oil futures fell.
Traders were awaiting Monday's U.S. October retail sales report for guidance after the decline in the Michigan Consumer Sentiment index.
Other key reports next week: the Empire State index for November and business inventories for September on Monday; the October producer price index (PPI) and industrial production reports on Tuesday; the October consumer price index (CPI) and housing starts releases on Wednesday; and weekly initial jobless claims, the index of leading economic indicators for October, and the November Philadelphia Fed index on Thursday.
In economic news Friday, U.S. consumer sentiment dropped to 66.0 in the preliminary November report from the University of Michigan, compared to a 70.6 in October. The index has declined from this year's high at 73.5 in September, though it's still better than last November's 55.3. The current conditions index fell to 69.6 from October's 73.7 (57.5 last November) The future economic outlook index declined to 63.7 from 68.6 in October (and 53.9 last year).
The U.S. trade deficit widened 18.2% to $36.5 billion in in September, worse than expected, from a revised $30.8 billion shortfall in August (from a $30.7 billion deficit). The 18% increase in the deficit is the biggest in ten years. Excluding petroleum, the deficit widened to $15.9 billion compared to an August deficit of $14.3 billion previously. Imports rebounded a strong 5.8% following a 0.4% drop in August. Exports rose 2.9% following a modest 0.2% increase in August.
U.S. import prices rose 0.7% in October, while export prices rebounded 0.3%. The 0.1% gain in September import prices was revised up to 0.2% from 0.1%, but August's 1.6% gain was bumped down to 1.5%. Excluding petroleum, import prices were up 0.7% after a 0.4% increase in September. Export prices for September were revised to -0.2% from -0.3%. Excluding agriculture, export prices rose 0.3% from a revised 0.1% increase in September (was unchanged previously). On Friday, Disney posted fourth-quarter EPS of 46 cents, vs. 44 cents EPS (excluding items) one year earlier on a 4% revenue rise. Wall Street was looking for EPS of 41 cents.
Abercrombie & Fitch reported third-quarter EPS of 44 cents, vs. 72 cents EPS one year earlier, on 22% lower same-store sales and 15% lower total sales. Abercrombie reported 30 cents non-GAAP EPS for the third quarter. Wall Street was looking for 20 cents.
J.C. Penney posted third-quarter adjusted EPS from continuing operations of 30 cents, vs. 46 cents EPS one year earlier, on 4.6% lower same-store sales and 3.2% lower total sales. Wall Street was looking for 11 cents EPS. Penney sees fourth-quarter same-store sales down 4%-6%, total sales down 3%-5%, and EPS of 70 cents to 85 cents. Based on better than expected year-to-date results and fourth-quarter guidance, it now sees fiscal 2010 same-store sales down 6.5%-7.0%, EPS of 93 cents to $1.08.
Nordstrom (JWN) reported third-quarter EPS of 38 cents, vs. 33 cents EPS one year earlier, on 1.2% lower same-store sales and 3.5% higher total sales. Third-quarter EPS were one cent below the Wall Street consensus view, but the company said its third-quarter performance exceeded internal sales and EPS plans. Nordstrom raised its fiscal 2010 EPS view to $1.83-$1.88 from $1.50-$1.65, on 6%-7% lower same-store sales.
British Airways agreed to a $7 billion merger with Spanish carrier Iberia Lineas Aereas de Espana SA, ending more than a year of talks on a tie-up aimed at fighting a slump in travel and closing the gap with competitors. Under the all-share deal, British Airways investors will own about 55% of the business, to be led by Willie Walsh, the U.K. carrier's chief executive, the companies said. The merger won't be completed until late 2010 and can be called off by Iberia if BA fails to resolve pension-deficit issues.
Neil Barofsky, the special inspector general for the $700 billion U.S. financial-industry bailout, said the program will "almost certainly" result in a loss to taxpayers. "We need to temper or be realistic about our expectations, a dollar-for-dollar return is just highly unrealistic," he said at the Bloomberg Washington Summit. "It's almost certainly going to be a loss." Barofsky, who has been charged by Congress with policing the Troubled Asset Relief Program, also said he's conducting 65 investigations of possible fraud.
Barofsky also said he is working on a review of how the government exercises its rights as a shareholder in the auto companies, Citigroup (C) and other firms in which it holds large stakes. Barofsky said his office is set to release an audit next week that looks at whether AIG (AIG) paid more than necessary to banks including Goldman Sachs Group (GS) after the insurer's bailout. Lawmakers, frustrated with the cost of an AIG bailout that has expanded three times, have asked why about $50 billion was paid after the initial September rescue to banks that bought credit-default swaps from the firm.
The European Union's statistics office said the gross domestic product in the economy of the 16 nations using the euro rose 0.4% from the second quarter, when it fell 0.2%. Economists had forecast the economy to grow 0.5%, according to the median of 34 estimates in a Bloomberg survey. Europe's economy is gathering strength after governments stepped up stimulus measures and the European Central Bank injected billions of euros into markets to encourage lending.