Stocks closed higher Friday following positive earnings guidance from a handful of big companies, pushing the major indexes up for the week.
Bullish quarterly earnings forecasts by both Merck and McDonald's lifted the Dow Jones Industrial Average, which ended up 0.4% for the week. The S&P 500 rose 0.6%, while the Nasdaq climbed 0.8%.
"The focus is on earnings," said Alec Young, market strategist at S&P Equity Research. "Everyone was talking about slowing earnings growth so I think investors are comforted by the fact that reports are coming in pretty well, there's some momentum gathering."
Merck shares surged 8.3% on Friday as upside earnings guidance trumped an FDA advisory panel's near-unanimous vote against approval of experimental painkiller Arcoxia.
McDonald's ended with the second best gain among Dow components, closing up 2.2%. The fast-food restaurant chain reported strong monthly sales and issued first-quarter earnings guidance above analysts' expectations.
Big Pharma Breakout
Drug stocks rose across the board as all 15 stocks in the Amex Pharmaceutical Index ended higher. Bristol-Myers Squibb and Schering-Plough each closed with gains above 2.7%, while shars of Pfizer also ended higher.
"Health care was range bound for some time so we're getting a little bit of a breakout here," said Mike Malone, trading analyst with Cowen and Company.
"It's an area that investors have been underweight due to lackluster fundamentals, so there is a lot of money that could move into that sector if fundamentals are poised to improve but it's too early to tell at this point."
Breadth was positive on Friday with gainers outnumbering decliners by about three to two on the NYSE, while nine out of the 10 sectors in the S&P 500 closed with gains. Utility stocks were the lone decliner with a loss of 0.2%.
Tech Rallies on Cisco
A rally in shares of Cisco Systems helped the tech sector reverse earlier weakness. A company executive said Friday afternoon that it's seeing strong product demand and is on track to meet sales targets, according to news reports.
Apple Computer shares ended down 2.1% after the company announced a delay in its new operating system, while Dell rose for the seventh straight session, up more than 2.8% on Friday and 7.9% for the week.
Financial stocks rose, posting the second biggest sector gain. Student loan company Sallie Mae rose on merger speculation.
Dow component General Electric said earnings for the first three months of the year came in at 44 cents a share on sales of $40.2 billion, in line with market expectations. The company also issued second-quarter and annual earnings guidance in line with expectations. GE is the parent of CNBC.
Mixed Economic Data
A favorable reading on wholesale inflation data released this morning was offset by an eight-month low in consumer sentiment.
"I think people were a little bit relieved by the PPI data, but the consumer sentiment sent everything back," said Rick Pendergraft, chief investment analyst for Investor's Daily Edge.
Treasury prices fell, sending yields higher.
New York light crude futures hovered around$64 a barrel as investors remain concerned with gasoline inventories ahead of the summer driving season.
European Stocks Close Higher, Asia Falls
European stock markets closed higher Friday, following a broadly negative Asian session, as earnings and merger and acquisition activity remained in focus.
The London FTSE-100, Paris CAC-40and Frankfurt DAX all closed higher.
British real-estate firm Countrywide agreed to an increased cash-and-share offer from U.S. private equity firm Apollo, which values the company at around $2.07 billion.
Asian stocks closed mostly lower as poor earnings forecasts and results from companies such as Samsung Electronics and Fast Retailing weighed on markets.
The Nikkei 225 Average fell 1%, dragged down by a loss in Fast Retailing after the company cut its full-year forecast. Sony rose on upbeat earnings expectations.
The Kospi edged lower in Seoul after industry heavyweight Samsung posted a smaller-than-expected operating profit, denting some of the recent optimism in the chip sector.
Hong Kong stocks dipped despite a climb in China Life Insurance, pulling the Hang Seng Index into negative territory.