Stocks closed with broad gains on Friday and the major markets finished at record levels following a week filled with positive earnings surprises.
"A lot of people thought this was supposed to be the quarter where earnings growth slowed down but most reports have been impressive," said Rick Pendergraft, chief investment analyst at Investor's Daily Edge, an investment newsletter. "With a few exceptions, earnings have been strong which has spurred things along."
The S&P 500 closed at a multi-year high, ending less than 3% away from the record close of 1527 set in March 2000. Meanwhile, the Dow Jones Industrial Average is just 40 points from breaching the psychological 13,000 milestone.
"We think the Dow could continue to climb because it did break out of a continuation pattern," said Louise Yamada, co-founder of Louise Yamada Technical Research. "13,000 was our first target and we have a higher target of 16,000 but it remains uncertain how long it'll take for us to get there."
The Nasdaq rose to a 6-year high on the strength of quarterly earnings from Google, but finished the week up just 1.4%, lagging gains of 2.8% in the Dow and 2.2% for the S&P 500.
A disappointing earnings report from Advanced Micro Devices on Thursday and Yahoo earlier in the week contributed to the tech-heavy index's relative weekly underperformance.
The Nasdaq is up 4.6% for the year, compared with year-to date gains of 4.7% for the S&P and 4% for the Dow.
The major indexes have now fully recovered from steep declines seen earlier this year. The Dow has climbed more than 900 points since bottoming at 12,050 on March 5, a gain of 7.5%. The S&P 500 and Nasdaq have seen similar rebounds, with respective gains of 8.0% and 7.9% since March 5.
"I think this week's move in the market is the story of global growth, not just for technology but across industries, and it's affecting the market in a positive way," said Michael Cuggino, president of Permanent Portfolio Funds. "The economy has been stronger than some have given it credit for and people are starting to realize that."
Earnings Uncertainty Fades
Google shares rose 2.3% after the online advertising company reported earnings well above analysts' estimates, citing strong ad sales and increased market share in search.
Buying was across the board on Friday with all 10 sectors in the S&P 500 closing higher. The energy sector was the day's best performing group following strong earnings from oil services outfit Schlumberger and crude's move above $64 a barrel.
"We have regrouped from where we were in February because the market is seeing answers in terms of the economy and corporate earnings," said David Doll, president of Kanaly Trust. "The market likes these answers for sure."
Caterpillar was a major contributor to the Dow's triple-digit advance after the construction equipment maker posted stronger-than-expected profits.
Art Cashin, director of floor operations at UBS, said the market was powered by "terrific earnings" on Friday.
"Everybody was looking for a contraction in earnings growth ... but things like Google and Caterpillar blew out on the upside," Cashin said. "If they can continue that next week, they can drive the bears into the sea."
Honeywell said first-quarter earnings jumped 21% as sales and profits rose across all of its segments. The conglomerate also boosted its 2007 revenue guidance. Honeywell reported net income of 66 cents a share, beating the 62 cents a share expected by analysts polled by Thomson Financial.
Indexes Confirm New Highs
Two other closely watched Dow indexes also made notable moves into uncharted territory. The Dow Jones Utility Average and the Dow Jones Transportation Average both confirmed the new high made by its blue chip counterpart.
The S&P MidCap Index also closed at a record and is up 8.8% since touching a recent bottom in early March.
New York light crude futures rose above $64 ahead of presidential elections in Nigeria, a member of OPEC. Futures contract expirations also added to trading volatility.
Treasury prices fell, sending yields higher.
Europe Closes Higher, Asia Rebounds
The London FTSE-100, Paris CAC-40 and Frankfurt DAX all finished higher as investors shrugged off a sharp sellof in China on Thursday.
Alliance Boots shares gained after Britain's largest drug retailer agreed to be acquired by a group of private equity investors for $21.2 billion.
The chairman of German industrial giant Siemens stepped down in what he called an effort to calm the waters amid allegations of corruption, sending shares higher. Another notable German firm, business software maker SAP, saw shares gain after the company reported quarterly sales above consensus estimates.
Tokyo's Nikkei 225 Average closed higher as Advantest and other exporters rebounded on a pullback in the yen. South Korea's Kospi Index recovered from a selloff, closing up amid gains for steelmaker Posco and other exporters. LG Electronics fell sharply, however, after the tech leader announced disappointing quarterly earnings.
China's Shanghai Composite Index rebounded from a 4.5% decline in the previous session.