Stocks rallied to a one-month high Friday, led by industrials, as the latest batch of earnings reports gave another shot of confidence to recovery hopes.
There was also some relief after the results from the EU bank stress tests came out.
The Dow Jones Industrial Average gained 102.32, or 1 percent, to close at 10,424.62, led by Verizon, General Electric and American Express.
For the week, the Dow finished up over 300 points, or 3.2 percent. Boeing had the most positive impact on the Dow this week, up 10 percent, while Johnson & Johnson was the weakest link, down over 3 percent.
The S&P 500 gained 3.6 percent and the Nasdaq advanced 4.2 percent for the week. The CBOE volatility index, widely considered the best gauge of fear in the market, lost more than 10 percent, closing out the week below 24.
Seven out of the 91 European banks failed the test, including HRE in Germany, as well as a Greece's Atebank and Spain's Banca Civica. Fewer banks failed than expected but there was some question about the methodology — that it went too easy on sovereign debt.
US-traded shares of European banks such as Barclay's, UBS, BNPParibas and Deutsche Bank were mixed, but Royal Bank of Scotland and Bank of Ireland jumped about 4 percent following the news.
Rochdale Securities analyst Dick Bove said stress tests don't work and the results of the stress tests are a net negative for Europe.
“You’re forcing banks to reduce their loans in order to meet this tier 1 capital guidelines, and in the process, you’re slowing down the economy," Bove told CNBC. “What the stress tests did was it lowered lending, reduced the growth in the economy and caused money supply to shrink.”
The euro finished slightly higher after see-sawing following the stress-test results.
Gold finished the week fairly flat at $1,187.80 an ounce. Oil dropped more than 3 percent this week, settling at $78.98 an ounce.
Verizon was the biggest gainer on the Dow, up 3.8 percent, after the telecom-services provider beat earnings expectations and said it was optimistic about its full-year results. But revenue fell as the firm continued to feel pinch of AT&T's exclusive contract with Apple for the iPhone.
Apple said the white version of the iPhone 4 will not be available until later this year. The company had originally said the white model would be available in late July.
Shares of General Electric rose 3.3 percent after the parent company of CNBC said its board approved a 20 percent dividend increaseand it extended its stock-repurchase plan.
GE's move also helped improve investor optimism and fueled the afternoon rally, with the Dow crossing the key 10,400 mark and the S&P finishing out the week above 1,100.
American Express rounded out the Dow's top three after two brokerages raised their ratings on the stock and one raised its price target, citing valuation.
McDonald's was at the bottom of the Dow pack today, down more than 2 percent, after the fast-food giant posted a profit that narrowly beat analyst estimates but the stock still fell as the numbers fell short of the inflated whisper numbers circulating around the Street.
But overall, the day's earnings reports were encouraging:
Ford shares jumped more than 5 percent after the auto maker swung to a profit, blowing past expectations, and said it expects to deliver even better results next year.
Rival General Motors is expected to file for an IPO during the week of August 16, just after reporting its quarterly results.
Microsoft beat analyst estimates with its after-the-bell report Thursday but the stock fell today. Goldman Sachs raised their price target on the tech giant to $32 from $31.
Amazon shares lost about 1 percent as the online retailer delivered earnings after the bell Thursday that fell short of estimates. In addition, at least three brokerages cut their price targets on Amazon.
Industrials were the best performers today after Honeywell and Ingersoll-Rand beat earnings expectations and raised their outlooks. Honeywell, which makes everything from thermostats to jet engines, got a boost from an increased demand for industrial and auto products.
Caterpillar , 3M and United Technologies reported similarly strong results earlier this week.
SanDisk shares tumbled more than 8 percent after the chip maker delivered a disappointing outlook and amid news that its co-founder and CEO Eli Harari will retire at the end of this year.
Genzyme shares rallied more than 17 percent following news that Sanofi-Aventis has informally approached the companyabout an acquisition.
Volume was average with nearly 1.2 billion shares changing hands on the New York Stock Exchange. Advancers outpaced decliners, roughly 4 to 1.
It was a big week for earnings and the overall impression was encouraging — most companies have topped expectations, though revenue hasn't been as robust as many analysts had hoped.
Next week is another busy week for earnings, with results due out from DuPont, BP, ExxonMobil, Chevron, Boeing, Visa and Merck, among others.
Plus, on the economic calendar, new-home sales, the Fed's beige book and the first look at second-quarter GDP.
On Tap For Next Week:
MONDAY: New home sales
TUESDAY: S&P/Case-Shiller home price index; business activity survey; consumer confidence survey; Chicago Fed Midwest manufacturing index; 2-yr note auction; Earnings from: BP, DuPont, Deutsche Bank, Aetna and Broadcom
WEDNESDAY: Weekly mortgage apps; advance report on durable goods; 5-yr note auction; Beige Book; Earnings from: Boeing, Comcast, ConocoPhillips, Sprint and Visa
THURSDAY: Weekly jobless claims; 7-yr note auction; Microsoft analyst meeting; Earnings from: AstraZeneca, ExxonMobil, Royal Dutch Shell, Kellogg, Motorola and Amgen
FRIDAY: First release of 2Q GDP; employment cost index; Chicago PMI; consumer sentiment; Earnings from: Chevron and Merck
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