Stocks Finish with Gains

Next week brings earnings from EDS, ExxonMobil and Gillette and data on home sales and consumer confidence

Stocks finished Friday's session modestly higher. Better-than-expected earnings and guidance from Microsoft (MSFT ) lifted the tech sector, while blue-chips rebounded late in the session.

The Dow Jones industrial average finished up 11.64 points, or 0.11%, to 10,472.84. The broader Standard & Poor's 500-stock index gained 0.67 point, or 0.06%, to 1,140.60. The tech-heavy Nasdaq composite index added 16.86 points, or 0.83%, to 2,049.77.

Wall Street continues to seek balance between good earnings news and the prospect of interest-rate hikes. "Ultimately the bulls are going to win," says Michael Farr, president and chief investment officer at Farr, Miller & Washington. With 273 of the S&P 500 companies having already reported earnings, and 213 of those companies beating Street expectations, with another 30 meeting targets, "the fundamentals will drive prices higher and prevail sooner or later."

An update on U.S. durable goods orders topped economic news Friday. Orders for March rose a whopping 3.4%, with February revised up to 3.8%. Excluding transport, orders gained 3.3% in March, while orders excluding defense climbed 3.8%.

March durable goods inventories rose just 0.1%. Combined with a 3.2% rise in shipments, the stock/shipments ratio is down to 1.36, the lowest on record. That is likely to set up fresh demand for durable inventories early in the second quarter, which will in turn generate demand for parts and materials, according to economic research firm Informa Global Markets.

In earnings news, software giant Microsoft posted fiscal third-quarter earnings per share of 12 cents, vs. 20 cents, as legal fees and a stock-based compensation expense offset a 17% revenue rise. The company sees its fourth quarter earnings at 23 cents, on revenue of as much as $9 billion, with a fiscal 2005 EPS of $1.16 to $1.18 on revenue as high as $38.2 billion. S&P kept its buy rating of Microsoft shares. The shares rose 5.9%.

Amgen (AMGN ) was 2.5% higher after reporting first-quarter EPS of 52 cents, vs. 37 cents (GAAP) on 33% higher total revenue. S&P reiterated its buy rating of Amgen shares. (AMZN ) posted strong first-quarter EPS of 26 cents, vs. a loss of 10-cents on a 41% sales rise, but its gross margins disappointed. The online retailer sees second quarter sales between $1.34 billion and $1.44 billion, and 2004 sales as high as $6.85 billion. Piper Jaffray downgraded the stock to underperform from market perform. Amazon stock dipped 5.6%.

Corning (GLW ) announced first-quarter EPS of 4 cents per share (including after-tax charges of 4 cents per share) GAAP, vs. a loss of 17 cents, on a 13% sales rise to $844 million. The company expects second quarter earnings as high as 9 cents (non-GAAP) on sales of $900 million to $950 million. The shares jumped 18% higher in heavy volume.

Ericsson (ERICY ) was off by 8.2% after posting lower first-quarter earnings despite an 8.5% sales rise. The company estimates that the global mobile systems market in 2004, measured in U.S. dollars, will show slight to moderate growth from 2003 vs. a previous forecast for slight growth.

Shares of Xerox (XRX ) were 10% lower after the company posted first-quarter EPS of 25 cents, vs. a 10-cent loss on a 1.9% revenue rise. Xerox notes that its first quarter 2004 EPS included a gain of 8 cents from the sale of its position in ContentGuard, and sees consistent progress in the second quarter. S&P reiterated its hold rating, citing a lackluster end-market climate.

AT&T Wireless (AWE ) posted a first-quarter loss of 2 cents per share, vs. a 5-cent loss, as higher expenses and lower operating income offset a 3.2% revenue rise. The company says that in light of its pending Cingular deal, which both companies hope to close before the year-end, it will not provide new 2004 guidance. The shares were higher.

The earnings calendar next week includes releases from Pitney Bowes (PBI ), and Electronic Data Systems (EDS ) on Monday. Hilton Hotels (HLT ) and Dynegy (DYN ) report on Wednesday. Thursday's schedule is busy, including the likes of ExxonMobil (XOM ), Duke Energy (DUK ), and The Gillette Company (G ), while Friday's lineup includes Cigna (CI ).

Next week's economic calendar includes new home sales data for March on Monday, followed by March existing home sales and a read of consumer confidence for April on Tuesday. On Thursday, investors will get an advance report of first quarter GDP, and initial jobless claims for the week ended Apr. 24. Friday brings the Chicago PMI release for April.

Treasury Market

Treasuries finished solidly lower in price Friday afternoon, lifting the 10-year yield to a new five-month high. The huge gain in durable goods set in motion some pretty hefty selling, reports Informa.

Friday's schedule included plenty of speeches by Federal Reserve officials. "However, the word from the Fed is now very tightly scripted, so surprises are unlikely," says Informa. The research outfit says that traders may take profits on curve-flattening trades.

In foreign exchange, the euro was trading at $1.189, the pound sterling was at $1.76, and the dollar was worth 108.95 yen.

World Markets

European stock markets finished higher Friday. Blue-chip indexes in London and Paris hit new multi-month highs before a bout of mild profit taking pared gains, reports Informa.

London's Financial Times-Stock Exchange 100 index added just 2.1 points, or 0.05%, to 4,573.9, as March retail sales rose 6.4%, above expectations of 5.6% and slightly lower from last month's 6.5% reading. The preliminary first quarter GDP showed that British economic growth slowed to 0.6% from 0.9% in the fourth quarter, but rose 3.0% year-over-year, compared with 2.7% seen in the same period in 2003.

In Paris, the CAC 40 index edged up 25.8 points, or 0.68%, to 3,811.43, as traders showed little reaction to a report that the French consumer price index rose 0.4% in April.

Germany's DAX index added 44.47 points, or 1.1%, to 4,103.62, on indications that U.S. markets will open higher with help from Microsoft's better-than-expected results. Shares of DaimlerChrysler were surging in heavy trading after the company scrapped its plans to help bail out its Japanese affiliate, Mitsubishi Motors.

Asian markets finished the week with solid gains. In Japan, the Nikkei 225 index added 140.56 points, or 1.17%, to close at 12,120.66, led by gains in tech names following rises in U.S. peers, with Fujitsu shares adding 9.16%.

In Hong Kong, the Hang Seng index added 216.24 points, or 1.78%, to close at 12,383.94. Airline Cathay Pacific fell 1.3% on SARS concerns after two suspected cases were reported in mainland China.