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Stocks Turn Higher on Upbeat Economic News

Stocks turned modestly higher as investors took heart from upbeat economic news, although weak earnings pressured some sectors of the market.

The Dow Jones Industrial Average rose more than 35 points after fluctuating throughout the morning, and following a choppy session on Thursday.

Among Dow components, Merck and Home Depot rose, while Bank of America and 3M fell.

The S&P 500 and the tech-heavy Nasdaq both gained. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 16.

Among key S&P 500 sectors, utilities and healthcare gained, while tech was the only sector to fall.

In earnings news, Bank of America's earnings reported early Friday fell short of analyst expectations as mortgage-related losses took a bigger toll than anticipated. The bank earned 17 cents a share, below Wall Street estimates of 27 cents.

Bank of America's results come two days after rival JPMorgan Chase, the second largest U.S. bank, reported a drop in consumer lending and more than $1 billion in unexpected costs for servicing mortgages related to a settlement with bank regulators.

Meanwhile, the U.S. Securities and Exchange Commission is in talks to settle fraud allegations with major Wall Street Banks, including Bank of America and JPMorgan Chase, concerning mortgage securities that helped trigger the financial crisis, the Wall Street Journal reported on Friday, citing sources.

Fifth Third Bancorp , meanwhile, rose after Baird upgraded the regional bank to "outperform" from "neutral," and raised its price target slightly to $17 from $16.

Google sank, and dragged the tech sector down with it, after delivering disappointing quarterly results after the market closed on Thursday. Earnings beat expectations, but the search-engine giant's costs surged by 54 percentthanks to a record hiring process, company wide salary increases of 10 percent and increasing marketing and technology costs.

Investors are concerned Google’s new chief executive Larry Page is chasing revenue too aggressively and could take his eye off the bottom line, Reuters reported.

In the meantime, Citigroup downgraded Google to "hold" and cut the price target on the stock to $650 from $750. More than 10 brokerages also cut their prices targets for the company.

Merck rose after it ended a two-year dispute with Johnson & Johnson over Remicade, an inflammatory drug.

Oil prices turned higherFriday thanks to surging Chinese inflation, and a boost in U.S. consumer sentiment. London Brent crude traded just below $122 a barrel, while U.S. light crude fell below $108.

Meanwhile, gold soaredabove $1,478 an ounce amid news of growing inflation in China, and a weakening dollar .

In economic news, The Thomson Reuters/University of Michigan's preliminary April reading on consumer sentimentrose to 69.6 from 67.5 in March, despite rising gas prices. The result was better than the 68.5 median forecast from economists surveyed by Reuters.

The news was one more good piece of economic data for a day to counter disappointing earnings news from Bank of America and Google .

Also on the economic front, industrial production rose 0.8 percentin March from a 0.1 percent gain in February, while capacity utilization rose to 77.4 percent in March from 76.9 percent in February, the Federal Reserve reported on Friday.

Meanwhile the Consumer Price Index for March rose 0.5 percent, in line with February's gain, while core CPI rose 0.1 percent after gaining 0.2 percent the month before, the Labor Department said.

Core CPI, which was better than expectations for a 0.2 percent rise, shows inflation, not including food and energy prices, remains subdued.

The Empire State Index of manufacturing rose to 21.70 in April from 17.50 in March.

In China, consumer price inflation rose 5.4 percent in the year to March, China said on Friday, which is the fastest rate since July 2008. The market had expected Chinese inflation rose 5.2 percent.

In Europe, inflationclimbed higher than expected in March to 2.7 percent year-on-year. It is the fourth month in a row that inflation has been above the European Central Bank’s target of 2 percent. European shares were also weaker as peripheral country debt issues resurfaced.

On Tap This Week:

FRIDAY: Industrial production, consumer sentiment, credit card default rates reported; Evans speaks, Hoenig speaks, G24/International Monetary Affairs meeting.

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