Stocks Drift amid Caterpillar, Google

The Dow again closed above 12,000 despite Caterpillar's reduced full-year forecast. Earnings from Google, Merck, and 3M topped analyst estimates

Stocks finished a choppy session narrowly mixed Friday, as the Dow recovered from its weakest levels to notch its second-ever close above 12,000. A disappointing outlook from Caterpillar (CAT) was in focus amid some solid earnings reports, options expirations, and a quiet economic calendar.

On Friday, the Dow Jones industrial average slipped 9.36 points, or 0.08%, to 12,002.37. The broader Standard & Poor's 500 index rose 1.64 points, or 0.12%, to 1,368.6. The tech-heavy Nasdaq composite nudged higher 1.36 points, or 0.06%, to 2,342.3.

The Dow's recent climb has investors feeling more upbeat about the market, some analysts say. "Bullish sentiment is beginning to reach into upper levels of ranges but exorbitant levels have not yet been reached," says Roger Volz, chief techinical analyst at Swiss American Securities. "The Street will be calling for a breather after the recent run."

Investors were sifting through earnings news Friday. Caterpillar (CAT) was sharply lower after the heavy-equipment maker posted a 15% increase in third-quarter earnings but lowered its full-year forecast.

On the upside, Google (GOOG) was higher as the Internet search giant said its third-quarter profit nearly doubled on surprisingly strong revenue. Citigroup raised its price estimate for the shares by 9.1% to $600.

Drugmaker Merck (MRK) was up after the drugmaker reported a 34% drop in third-quarter profit on flat sales, beating Street expectations.

Fellow Dow component 3M (MMM) was also higher as the maker of Scotch tape reported a 6.4% gain in third-quarter profit, topping analyst estimates.

Meanwhile, SanDisk (SNDK) was off sharply as the flash-memory products maker said its third-quarter profit fell 4% amid rising expenses.

Elsewhere, chip-technology outfit Rambus (RMBS) said it expects to take a charge of more than $200 million due to improper accounting of stock options.

Another busy slate of earnings next week kicks off with Ford F and AT&T on Monday. Other companies reporting next week include General Motors (GM), Exxon Mobil (XOM), Microsoft (MSFT), and Chevron (CVX).

The economic calendar was relatively quiet Friday. Next week holds another busy slate, with the Federal Reserve's policy meeting, third-quarter results for gross domestic product, and new and existing September home sales.

In the energy markets, November West Texas Intermediate crude futures fell $1.68 to $56.82 a barrel, amid skepticism over whether OPEC will abide by its recent output cut.

European markets finished mixed. In London, the FTSE-100 index edged down 0.8 points, or 0.01%, to 6,155.2. Germany's DAX index rose 25.4 points, or 0.41%, to 6,202.82. In Paris, the CAC 40 index added 15.61 points, or 0.29%, to 5,375.35.

Asian markets ended higher. In Japan, the Nikkei 225 index gained 100.27 points, or 0.61%, to 16,551.63. In Hong Kong, the Hang Seng index advanced 126.58 points, or 0.7%, to 18,113.55. Korea's Kospi index climbed 10.18 points, or 0.75%, to 1,364.24.

Treasury Market

Treasuries drifted amid a lack of economic news. The 10-year note was little changed 100-23/32 for a yield of 4.78%, while the 30-year bond edged up in price to 93-25/32 for a yield of 4.9%. Option trade combined with strategic action ahead of next week's Fed meeting were impacting trading, says Action Economics.

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