Stocks lost a little steam in the final hour of trading as technology companies slid, although investors remained encouraged by several upbeat economic reports.
Among Dow components, Merck and DuPont gained, while Bank of America and Cisco fell.
The S&P 500 rose, while the tech-heavy Nasdaq struggled to stay in positive territory. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 16. During the session, The VIX touched its lowest level since July 2007.
Most key S&P 500 sectors advanced, led by utilities and healthcare. Technology was the only sector to decline.
A slew of economic reports on Friday that pointed to strength in manufacturing, rising consumer confidence, and subdued inflation, countered the bad news investors saw in some of the first key earnings reports out this week.
"I think the market is showing some resilience today," says Paul Brigandi, vice president, trading at Direxion Funds.
On Thursday the S&P 500 dipped below 1,300, but then began to turn around. "That strength continued to today," Brigandi said. But, he said, "it's a slow, steady climb upward" as much of the good news on the economy and earnings is already factored into stock prices.
Also, prices on Friday may be affected by the monthly expiration of stock futures and options.
Among the day's earnings, Bank of America shares slipped after the financial giant'sprofit fell short of analyst expectations as mortgage-related losses took a bigger toll than anticipated.
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.
Google shares tumbled, dragging the tech sector down with it, after the Internet giant's earnings beat expectations, but costs surged by 54 percent. 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.
Analysts weren't impressed with the results. Citigroup downgraded Google to "hold" and cut the price target on the stock to $650 from $750. And more than 10 other brokerages also cut their prices targets for the company.
Among other tech earnings, Infosys Technologies plunged almost 15 percent after India's No. 2 outsourcing company missed profit expectations as expenses, global uncertainty and a rising rupee squeezed margins.
Mattel gained even after the toy maker reported a 33 percent drop in earnings and saw a bigger-than-expected sales gain. Rival Hasbro was slightly higher despite reporting a 71 percent decline in earnings on Thursday.
Charles Schwab gained after the discount brokerage firm posted higher-than-expected earnings as rising stock markets fueled trading and fees from clients.
Next week will be one of the busiest week for earnings with a parade of Dow components in addition to several banks and tech companies slated to report results.
Among banks, the SEC 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.
Bank of America agreed to pay Assured Guaranty more than $1 billion to resolve disputes over mortgage securities. Other mortgage insurers surged following the news including MBIA and MGICInvestments on hopes that they may also get similar payouts from banks.
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.
Capital One Financial shares slipped even after the credit-card distributor said defaults fell to their lowest point in more than two years. Other institutions also reported a decline in charge-offs, including Discover Financialand American Express .
Apple also was weak on Friday as Cirrus Logic , a supplier, reported a charge and lower fourth-quarter margins as a result of manufacturing problems with an audio circuit. Cisco's shares also fell after Auriga downgraded the stock to "hold" from "buy," and cuts its price target to $19 a share from $23.
In health care, Merck rose after it ended a two-year dispute with Johnson & Johnson over Remicade, an inflammatory drug.
Starbucks edged higher after the coffee chain said it plans to have 1,500 stores in mainland China by 2015, nearly four times the current level.
Oil prices turned higherin the face of surging Chinese inflation and a boost in U.S. consumer sentiment. London Brent crude rose 1.19 percent on Friday to close at $123.45 a barrel. For the week, Brent fell 2.12 percent. U.S. light crude, meanwhile, rose 1.43 percent on Friday to close at $109.66, but it was down 2.78 percent for the week.
Meanwhile, gold soaredabove $1,478 an ounce amid a weakening dollar.
Chesapeake Energy announced plans to acquire Bronco Drilling for about $315 million, including debt, net working capital and outstanding warrants. Shares of Bronco jumped more than 5 percent.
"Today was a good day," said Phil Orlando, chief market strategist at Federated Investors, referring to the day's economic reports.
He pointed to strength inindustrial production and capacity utilizationas well as improvement in the Empire State manufacturing survey as confirmation the manufacturing sector is getting stronger. But earnings, Orlando said, have been pretty mixed.
"We're developing a thought that maybe we are sort of peaking at the margin level," he said.
That's because companies seem to be reporting strength in revenues, but weakness in earnings, which would indicate profit margins are being hurt. Orlando cites three reasons for the squeeze: a nine-year high in worker productivity, negative unit labor costs in the last two years, and a surge in nominal inflation, which includes food and energy prices.
The sustained strength in productivity means companies are at the point where they need to hire workers, and wage inflation, coming from such low levels, may start to build. Also a lot of companies haven't been able to pass along higher raw materials costs, which is eating into margins.
Yet Orlando cautions that with only a handful of key earnings reports out so far, it's too early to come to a conclusion. Still, investors are taking a cautious stance and favoring stocks in defensive sectors, like health care and utilities. Consumer staples have also done well this week.
"We're starting to get a bit of a flight to safety trade here," Orlando said. "More 'beta-sensitive' categories are a little soft."
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.
Also, 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.
Meanwhile 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 ECB's target of 2 percent. European shares were also weaker as peripheral country debt issues resurfaced.
European stocks ended slightly higher, but posted their first weekly loss in a month as investors took in profits amid the return euro zone debt worries.
On Tap Next Week:
MONDAY: Housing market index, Eli Lilly shareholders meeting, taxes due; earnings from Citigroup, Eli Lilly before-the-bell and Texas Instruments after-the-bell.
TUESDAY: Housing starts, Fifth Third shareholders meeting, Moody's shareholders meeting, BlackBerry Tablet launches; earnings from Goldman Sachs and Johnson & Johnson before-the-bell, and IBM, Intel, Yahoo after-the-bell.
WEDNESDAY: Weekly mortgage applications, existing home sales, oil inventories; earnings from Abbott Labs, AT&T, United Tech and Wells Fargo before-the-bell and AmEx, Amgen, Apple, Qualcomm, Yum Brands after-the-bell.
THURSDAY: Weekly jobless claims, Philadelphia Fed survey, leading indicators, money supply, Citgroup shareholders meeting; earnings from DuPont, GE, McDonald's, Morgan Stanley, Travelers and Verizon before-the-bell and Advanced Micro and Capital One after-the-bell.
FRIDAY: Good Friday—All markets closed, banks open.
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