U.S. stocks closed broadly higher, posting the best weekly gain in nearly two months, following tame inflation news.
"The market has so much upward momentum right now," said Darin Richards, chief investment officer at AKT Wealth Advisors. "I don't think I see anything right now that would really derail this market substantially."
The Dow Jones Industrial Average rose 85 points, or 0.6%, closing with a weekly gain of 1.6%. The S&P 500 saw similar gains on Friday and rose 1.7% for the week. The Nasdaq Composite gained 1.1% on Friday and also outperformed on a weekly basis, rising 2.1% on strength in semiconductor stocks.
The core Consumer Price Index, or CPI, came in below expectations and confirmed Thursday's tame PPI report.
"The markets have been a little bit concerned that we might see a Fed on hold or, worse yet, a Fed tightening," said Alec Young, equity market strategist at Standard & Poor's. "So more benign inflation data is just what the doctor ordered."
The 10-Year Treasury yield fell sharply on the CPI release. Earlier this week, inflation concerns pushed yields on the benchmark note to a five-year high of 5.25%.
"Bond yields are coming down and that increases the odds that we can continue to see a lot of M&A," said Young. "That has been a big driver of the rally year-to-date."
All but one economic sector tracked by S&P closed higher on Friday with utilities, energy and materials all ending with gains of 1% or more. Telecom was the day's sole laggard. Breadth was positive with advancing shares outpaced decliners by about four to one on the NYSE.
The energy sector posted the best weekly performance, gaining 4.6%, in lockstep with a sharp rise in crude prices. Utilities were not far behind with a weekly rise of 3.5%, while industrials and materials each gained 2.0%.
On Friday, shares of Penn National Gaming surged after the casino operator agreed to be acquired by Fortress Investment Group and Centerbridge Partners in a deal worth $8.9 billion, or $67 a share.
Semiconductor giant Intel closed at a new 52-week high after Goldman Sachs upgraded the stock to "buy" from "neutral. Goldman said it believes Intel rival Advanced Micro Devices will move to an outsource model, which should give Intel a big boost.
Monsanto was also a winner after the agricultural products group raised its full-year guidance. The company attributed the improved results to a strong ending to the U.S. corn planting season, strong results in its herbicide business and a better-than-expected tax rate.
Bank of America said it would drop its lawsuit againstABN Amro, regarding the sale of ABN's U.S. unit LaSalle, saying it would wait for a Dutch Supreme Court ruling.
New York light sweet crude futures closed at $68.00 a barrel, up, rising 0.5%. Crude oil prices gained 5.0% this week, closing at its highest level in more than nine months.
The Consumer Price Index rose 0.7%, but the core rate, which excludes volatile food and energy prices, rose a modest 0.1%, better than expected, according to the Labor Department. The core CPI for May was expected to rise 0.4%, up from a 0.2% gain in April.
In other economic news, manufacturing activity in the New York area moved to its highest level in a year, while the University of Michigan said consumer sentiment fell to its lowest level in 10 months.
European Stocks Close Firmly Higher
European stocks closed higher Friday as tame inflation data in the U.S. and fresh merger and acquisition news lifted investor sentiment in a volatile week for the major indexes.
The London FTSE-100, Paris CAC-40 and Frankfurt DAX all finished higher.
Shares in J Sainsbury rose on reports Qatar-backed investment fund Delta (Two) upped its stake in the U.K. supermarket chain to 25%, edging closing to the level requiring a formal takeover offer.
Shares in Publicis Groupe rose after the French advertising company agreed to buy a 49% stake in digital media company Business Interactif.
On the political front, French citizens prepare to vote in second round parliamentary elections on Sunday, where French President Nicolas Sarkozy is expected to win at least 400 out of a possible 577 seats for the UMP political party.