Stocks advanced Friday, boosted by benign inflation data and an upgrade on Lehman Brothers.
"It seems to me as if people are quite keen to put a little money to work going into the end of the quarter," Tom Hougaard, chief market strategist at City Index, told "Worldwide Exchange."
All three indexes are up more than 3 percent in the past two weeks since news of the Bear Stearns bailout and extraordinary measures by the Federal Reserve were announced, but remained down for the quarter. The Dow Jones Industrial Average is down about 7 percent since Jan. 1, while the S&P 500 index is off more than 3 percent and the Nasdaq, which only recently emerged from bear-market territory, is off about 13 percent.
Tech stocks, which are down about 15 percent so far for the quarter, were some of the day's biggest gainers after RBC Capital raised its price target on BlackBerry maker Research In Motion .
Oracle bounced back from Thursday's 7-percent slide after the software maker reported disappointing software sales and said its customers have grown increasingly cautious.
Among other notable tech gainers was Apple . CNBC's Jim Cramer calls Apple the tech stock du jour, adding that it's down from its recent high above $200 a share, expectations are low and, most importantly, there's excitement around the stock.
Consumer confidence fell to a 16-year lowat the end of March, according to a report from the University of Michigan. The university's gauge of consumer sentiment fell to 69.5 from 70.5 in a midmonth reading and 70.8 at the end of February. A measure of expectations for the future also declined, but sentiment on current conditions edged higher.
Analysts pointed out that consumer confidence is clearly in recession mode, though spending isn't.
Consumer spending ticked up 0.1 percentin February, a weak reading but still better than the 0.1 percent decline expected. Income also beat expectations, rising 0.5 percent. The personal savings rate was 0.3 percent, down from January's 0.1 percent.
Showing just how tough things are at the mall, J.C. Penney this morning lowered its first-quarter earnings forecast, saying sales through the Easter holiday were "well below expectations." The department-store operator expects earnings of 50 cents a share for the quarter, down from its prior range of 75 to 80 cents a share.
Competition from lower-priced retailers like Wal-Mart spurred JPMorgan to cut its rating on Bed, Bath & Beyond to "underweight" from "neutral."
There's also concern that spending on the high end is slowing. Merrill Lynch cut its rating on Tiffany to "neutral" from "sell," and downgraded online jeweler Blue Nile to "sell" from "neutral."
The government's report on consumer income and spending also showed that the core PCE price index, an inflation gauge closely watched by the Fed, rose 2 percent year over year, the top of the Fed's comfort zone.
"The decline in the year-over-year core PCE is important in that it supports the notion the Fed is making the right decision in cutting rates aggressively and not threaten long-term price stability. It argues that the Fed can lower rates in the months ahead," Zach Pandl, an economist at Lehman Brothers, told Reuters.
In the Michigan survey, the 12-month inflation forecast climbed to 4.3 percent from 3.6 percent in February, while the projection for inflation in five years dropped to 2.9 percent from 3 percent last month.
Bear Falls, Lehman Climbs
In the financial sector, the big buzz was that Bear Stearns CEO Jimmy Cayne is selling his stock in the company. He's getting about $60 million for a stake once valued at closer to $1 billion. Bear Stearns shares fell about 5 percent but remained above $10 a share.
U.S. money manager Legg Mason said Friday that it is mulling options for providing liquidity to holders of auction-rate preferred securities issued by seven closed-end funds of its affiliates.
Lehman Brothers got a boost after Citigroup advised clients to start buying shares of the stock, which has been battered by shorts convinced the brokerage is going to be the next to collapse.
The troubles of U.S. banks could growas the economy slows down, Boston Fed President Eric Rosengren said, calling for more detailed reporting from banks on how they respond to the problems. Oppenheimer analyst Meredith Whitney added that banks such as Citigroup and Wachovia are likely to announce dividend cuts in Aprilas earnings won't support the current level of dividends.
Citigroup, the largest U.S. bank, is also said to be working on hiring an outsider to take over its flagging U.S. consumer business, according to a report in the Wall Street Journal.
KB Drops, Lennar Gains
On the home front, KB Home reported it swung to a lossamid impairment and abandonment charges and said it didn't expect conditions to improve in the near term.
A day earlier, Lennar posted a quarterly loss but beat estimates. That coupled with a lower-than-expected decline in new-home sales and a slight decline in inventories had offered some hope that a turnaround may be brewing for the housing sector. But both homebuilders stressed that, until prices and consumer confidence rebound, inventory levels are going to remain out of whack with demand.
Responding to a question about a proposal from Democratic presidential contender Hillary Clinton, a housing official said the the idea of freezing mortgage rates for any length of time would be a mistake.
"You'd really cause market dislocations," said James Lockhart, the director of the Office of Federal Housing Enterprise Oversight Director. "I think we're going to let the market work and interest rates have come down dramatically and people are going to be able to refinance," Lockhart said. (View the full interview, and more comments.)
Send comments to cindy.perman@nbcuni.com.