Stocks closed higher as investors appeared more enthused about Microsoft's bid for Yahoo! than they were concerned about the latest signs of economic weakness.
The three major indexes each gained about 3-4 percent for the week, but the market still has a way to go to recover from January's rout: the Dow Jones Industrial Average is down about 4 percent for the year, while the Nasdaq and Standard & Poor's 500 are down 9 percent and 5 percent, respectively.
"I think there will be some choppiness going forward," said Charles Massimo, president and founder of CJM Fiscal Management, "but if we can get a couple of days in a row with no negative news -- no negative surprises -- then we have a chance at a sustainable rally."
Yahoo! shares shot up nearly 50 percent following news of a takeover bid from Microsoft that represents a 62 percent premiumto Yahoo's closing price on Jan. 31. Microsoft shares fell more than 6 percent, making it the biggest decliner on the Dow.
The deal sets up a battle of titans between Microsoft and Google for Internet supremacy. Google shares, not surprisingly, skidded following the announcement. After the closing bell Thursday, Google reported fourth-quarter earnings of $4.43 a share, excluding commissions paid to the company's advertising partners, and sales of $3.39 billion.
"If the Microsoft deal goes through," Massimo said, "that alone has the ability to pull the market to another level."
Elsewhere in the technology sector, the world's third-largest mobile phone maker Motorola , which has been losing market share to rival handset makers Nokia and Samsung Electronics, said it was considering a spinoff or sale of its mobile-phone division, which accounts for about half of revenue. Motorola shares rose more than 10 percent following a 28 percent drop in January.
Citigroup and Alcoa were among the biggest gainers on the Dow. Among other blue chips, General Electric advanced after the company said Friday that vice chairman Bob Wright will retire on May 1. Wright had been CEO of NBC before handing the reins to Jeff Zucker last February.
Investors shrugged off a mixed bag of economic news, with an unexpected 17,000-job drop in nonfarm payrolls, lower-than-expected consumer confidence and a positive manufacturing report.
Bond Insurers Advance on Bailout News
Shares of bond insurers had gained after CNBC reported that a consortium of international banks is banding togetherto try to help Ambac stave off credit downgrades that could be fatal to its ability to conduct business.
CNBC confirmed, however, that the move would not be an industrywide effort, and also learned that Moody's was prepared to downgrade Ambac, MBIA and others unless they raise capital levels significantly higher.
ExxonMobil breezed past Wall Street estimates with fourth-quarter earnings that were the best ever for a US company. The company said record oil prices boosted earnings to $11.66 billion, which at $2.13 a share were far higher than Street predictions of $1.95 and well above last year's number of $1.69.
Oil prices dropped for a second day, with the front-month crude contract dropping below $89, after Friday's pile on of grim economic data stoked concerns about a recession.
Gold fell $19.20 to $908.80 an ounce, after topping $941, just shy of an all-time record, before the jobs report, as the dollar's rebound against the euro spurred heavy selling. Gold prices surged more than 30 percent in 2007.
Medtronic shares advanced after the Minneapolis company said the FDA has approved its Endeavor drug-coated stent. The company plans to begin shipping the devices, which prop open clogged heart arteries, in the next 30 days. Rivals Johnson & Johnson and Boston Scientific had already received U.S. approval for their drug-coated stents.
Intuitive Surgical shares also surged after the company reported higher-than-expected fourth quarter results.
U.S. auto makers finished higher after reporting January sales figures. General Motors said sales rose 2.1 percent last month, while rival Ford posted a 4.1 percent drop and said that the economic environment would remain challenging.
Billionaire financier Carl Icahn has accumulated a large stake in retail giant J.C. Penney , the Wall Street Journal reported. The news gave a couple percent boost to the otherwise idling stock.