Stocks Pare Losses as Confidence Soars

Stocks pared their losses Friday after economic reports showed consumer confidence soared to its highest level since before the fall downturn began and that manufacturing is showing signs of improvement.

Stocks had started off the day lower after some gloomy earnings reports.

Major continental European markets were closed Friday for the May Day holiday, while the UK, which will shut for a bank holiday on Monday, was barely lower.

Stocks ended flat Thursday after President Obama said Chrysler will file for bankruptcy protection, quashing earlier gains.

Consumer confidence soared in April to its highest level since the September failure of Lehman Brothers, according to the Reuters/University of Michigan final reading for April. It also marked the first year-over-year increase in the indicator since July 2007.

Adding to the hope-stirring economic news, the Institute for Supply Management reported its gauge of the manufacturing index jumped to 47.2 in April. That still indicates the sector is in contraction mode, but it pushes it closer to 50; anything above 50 indicates expansion in the sector.

"This is definitely a good start for the second quarter," Norbert J. Ore, chair of ISM survey committee said in a statement. Still, he said, the sector isn't out of the woods yet. "While this is a big step forward, there is still a large gap that must be closed before manufacturing begins to grow once again. The Customers' Inventories Index indicates that channels are paring inventories to acceptable levels after reporting inventories as 'too high' for eight consecutive months."

In earnings news, MasterCard shares fell 10 percent after the credit-card maker beat estimates but said 2009 revenue will miss its target amid a drop in consumer credit-card use.

Hartford Investment Group reported a first-quarter loss of $1.21 billion or $3.77 a share, worse than expectations of $3.05 a share. The fourth biggest U.S. insurer said it was closing most of its operations in Britain, Ireland and Germany as part of a pullback from Europe.

U.S. oil titan Chevron reported its earnings tumbled 64 percent, hit by the drop in oil prices.

On the plus side, DryShips posted earnings of 36 cents a share, nearly double the 19 cents that Wall Street expected.

Encouraging U.S. jobless claims figures on Thursday added to a sense of optimism that the U.S. economy is recovering.

Citadel Investment Group is reportedly expanding into investment banking and has hired three ex-Merrill Lynch executives to head up the new operation, according to a Reuters source late Thursday.

Citigroup shares opened higher after it became official on Friday that Sumitomo Mitsui Financial Group (SMFG) will buy Citigroup's Japanese brokerage and investment banking units for $5.9 billion.

Also in the banking sector, regulators could announce the stress test results of the 19 individual banks next week (possibly May 6) instead of just summary results, a source told Reuters.

Meanwhile, Mexico began shutting down its businesses in an effort to slow the spread of a new swine flu strain as more cases were found in the United States and officials urged increased worldwide precautions against a possible pandemic.

The World Health Organization Friday said the number of officially confirmed cases of the new flu was 331 in 11 countries, including 10 deaths.

In the U.S., Johnson & Johnson said it was ramping up production of its Purell hand sanitizer.

Health officials have encouraged the use of alcohol-based sanitizers as a way of preventing the spread of swine flu.

Still to Come:

FRIDAY: Auto sales; Fed's Geithner, Bullard speak; Reuters/Univ of Mich consumer confidence; ISM manufacturing index; factory orders; Earnings from Chevron, Clorox, MasterCard and Simon Property

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