Stocks finished higher for the week, helping major indexes transcend recent highs, as financials gained and the dollar showed signs of recovery.
The Dow Jones Industrial Average closed up 0.3 percent at 12891.86 Friday, and gained 0.3 percent for the week. The blue-chip index made a key breakthrough this week, trading above 12,800 for the first time since January.
Market jitters eased, with the CBOE Market Volatility Index, viewed as the best gauge of fear in the market, dropping 3.1 percent this week and finishing below 20 for the first time in four months. The VIX has fallen more than 13 percent since the start of the year.
The S&P 500 index gained 0.7 percent to 1397.85, its highest close since mid-January. The index finished up 0.5 percent for the week.
An afternoon upturn wasn't enough to push the Nasdaq into positive territory; the tech-heavy index finished the day down 0.3 percent at 2422.93 after a disappointing outlook from Microsoft, but still managed to gain 0.8 percent for the week.
The week was marked by a handful of encouraging news, as Boeing's profit soared 38 percent and Ford posted an unexpected profit. The dollar hit a 3-week high vs. the euroas the market buzz grew louder that the Federal Reserve may be reaching a turning point, raising interest rates one last time when it meets next week, then curtailing this cycle of cuts.
The week also brought another successful IPO, as fertilizer maker Intrepid Potash shot up 58 percent on its debut Tuesday -- and held its gains through the week. That was the day crude finished above $119 for the first time.
There was a shining moment Thursday when it appeared that money may be moving out of commodities and into financials, but several market watchers said that was probably just a blast of short-covering.
By Friday, crude was back up to its old tricks, finishing at $118.52 a barrel on the New York Mercantile Exchange after a worker strike in Nigeria crimped production and as U.S.-Iran tensions heated up after a U.S.-contracted ship fired at least one shot toward an Iranian boat.
"We’re showing signs that the bottom is being put in here and there’s going to be a couple of things where they ring the bell again," Art Hogan, managing director at Jefferies, told CNBC, citing next week's Fed meeting and barrage of earnings reports as potential catalysts.
Financial stocks finished up 1.7 percent Friday.
"Our managers think financials have, probably, some of the greatest opportunities to make huge gains," said Ernie Ankrim, chief investment strategist at Russell Investment Group in Tacoma, Wash., but "there's just a lot of risk there ... Other sectors may not be grand slams, but they have less risk." Ankrim says his managers are favoring tech, health-care and energy over financials right now.
"The issue for the market now is -- do we need financials to work to make the market go? I think you do need a little bit of repair in that," said Scott Billeadeau, managing director at Fifth Third Asset Management in Minneapolis. "There's definitely some pent-up buying potential there." But, the catch is, "I don't think anybody wants to be first!"
There was also a handful of disappointing news this week. Apple blew past earnings expectations but then disappointed with its outlook. (Though analysts think Apple probably has enough momentum from Mac and iPhone 3G.) Amazon also beat, but then warned that margins may be squeezed. Starbucks also issued a warning, rattling the market with the realization that even the latte set is susceptible to a slowdown.
We also learned that fertilizer is hot, water is not as American Water Works' did a belly flop with its IPO.
In other stock action Friday:
General Motors shares skidded 3.3 percent after Moody's slashed its ratings outlook on GM to "negative" from "stable," saying the finance division's capacity to provide funding may be hampered by weakness at subsidiary Residential Capital. The UAW union on Friday extended a strike deadline at a GM metal-stamping plant in Michigan.
Microsoft , the biggest decliner on the Dow, shed 6.2 percent after the company reported its net income fell 11 percent in a report after the bell Thursday. The software giant also issued an outlook for the current quarter at the low end of expectations, which sent the stock down about 6 percent.
Yahoo shares fell 1.8 percent as this weekend is the three-week deadline Microsoft set for Yahoo to make a decision on its offer.
In a post-earnings call with analysts, Microsoft CFO Chris Liddell echoed comments made in the past week by CEO Steve Ballmer that the software giant is prepared to move ahead if a deal can't be reached and take its offer straight to shareholders.
Dow component 3M slipped 1.7 percent after the diversified manufacturer reported surpassed its earnings target but backed away from the full-year growth range of 5 percent to 8 percent.
American Express , the biggest gainer on the Dow,rose 5.7 percent after the credit-card companybeat earnings expectations in a report after the closing bell, though net fell 6 percent.Revenue rose 11 percent due to higher card-member spending.
Goodyear Tire & Rubber rose 6.1 percent, after posting a surprisingly high profit. The largest US tire maker swung to a profit of $147 million, or 60 cents per share, compared with a net loss of $174 million, or 96 cents per share, a year earlier. Excluding one-time items, Goodyear earned 67 cents a share, surpassing analyst expections of 48 cents per share, according to Reuters Estimates.
In economic news, the University of Michigan reported its consumer-sentiment index fell to 62.6from a midmonth reading of 63.2 and 69.5 at the end of March. This was the lowest the gauge has been since March 1982, when it hit 62.
On Tap for Next Week:
MONDAY: Verizon, Visa earnings
TUESDAY: Fed meeting; consumer confidence; earnings from GM, Mastercard and US Steel
WEDNESDAY: Fed meeting, rate decision (2:15 p.m. ET); first read on Q1 GDP; mortgage applications; Chicago PMI; weekly crude inventories; earnings from GM, Kraft, Kellogg, P&G, Time Warner, Prudential and Starbucks
THURSDAY: Monthly auto sales; jobless claims; personal income and spending; ISM manufacturing index; construction spending; earnings from Kodak, ExxonMobil
FRIDAY: April jobs report; factory orders; earnings from Chevron, Viacom
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