Stocks had a stellar week despite Friday's flat note.
The Dow industrials bolted out of the gate after a better-than-expected jobs report but ended the day with a modest gain. Still, the blue-chip index finished above the key 13000 level and, importantly, broke out of its 200-day moving average for the first time since December.
For the week, the Dow is up 1.3 percent, and is now off only 1.6 percent for the year.
The S&P 500 index also managed a small gain for the day. The index finished the week up 1.1 percent.
The tech-heavy Nasdaq buckled amid the drag of Sun after several downgrades on the stock. The Nasdaq finished slightly below the prior session's close, but posted a robust 2.2-percent gain for the week as techs appear to making a comeback in the market.
"I think the market is having a little trouble sorting out all of this -- the state of the economy," said Brian Gendreau.
Nonfarm payrolls declined by 20,000 jobslast month, but that was far better than the projected loss of 75,000 jobs. The unemployment rate fell to 5 percent, also better than expected. A separate report showed factory orders rose 1.4 percent, much stronger than expected, in March.
"This [payrolls number] is exactly what you want to see to continue the rally that we have started to see over the last couple of weeks," Jack Bouroudjian, of Brewer Investment Group, told CNBC. "Keep an eye on the dollar -- that will be the key over the next couple of months -- that will determine if this rally has legs or not," he said.
Payrolls may have declined less than expected, but if you dig into the jobs report, you realize that "basically, it's just the service-sector part that's been adding jobs," Gendreau said.
Still, Gendreau said his team is "overweight" equities -- 71% equities to 29% bonds -- and expects major indexes to push through their current range.
First, at a P/E ratio of 14, the S&P 500 isn't overvalued, Gendreau said. Plus, a lot of companies are reporting solid earnings and they expect strong earnings in the second half as the economy pulls out of what his team expects will be a short and shallow recession.
"We expect that those sectors that provided leadership last year –- materials, energy, industrials and technology -- are going to do the same this year," Gendreau said. "Those are the most globalized sectors and we think they stand to benefit from continued strength abroad."
Yahoo jumped 7 percent amid news that Microsoft has increased its offer "by several dollars"and the two are in active talks. The Wall Street Journal said a deal wasn't imminent and that an agreement was unlikely to be reached on Friday. Earlier, the buzz centered around a potential hostile bid by Microsoft and that Yahoo may announce a partnership deal with Google as early as next week to fend off the takeover, the Journal reported. Microsoft shares fell 0.5 percent.
Sun Microsystems dropped 23 percent, making it the biggest decliner on both the Nasdaq and S&P 500, as several brokerages downgrade the stock and cut their price targets following the company's unexpected loss and decline in quarterly revenue.
Nortel Networks fell 2.4 percent after the telecom-equipment maker posted a steeper-than-expected loss of $138 million as results were hurt by charges for restructuring, litigation and other items. Still, Nortel said it expects to meet its full-year targets.
Minutes before the April jobs report was released, the Federal Reserve announced that it was expanding the size of its term-auction facilityto help ease persistent strains in credit markets.
Big banks were mostly higher, with a few exceptions: JPMorgan, Bear Stearns and Deutsche Bank all declined.
Financial companies face a 40 percent decline in earnings in the second quarter, according to Michael Thompson, managing director of Thomson Reuters.
Airlines retreated after a meteoric rally recently. Among notable decliners were AMR , parent of American, and Continental .
Chevron reported its earnings rose 10 percentto $5.17 billion as record oil prices outweighed weak profits from gasoline production. Both Chevron and ExxonMobil , which reported a day earlier that its net income rose 17 percentto $10.9 billion, but fell short of expectations due to squeezed margins.
On Tap for Next Week:
MONDAY: ISM services index; Bernanke speaks on foreclosures
TUESDAY: Indiana, North Carolina primaries; Earnings from Fannie Mae, Cisco and Disney
WEDNESDAY: Mortgage applications; Productivity; Pending home sales; Crude inventories; Consumer credit; Earnings from News Corp.
THURSDAY: Retail same-store sales; Jobless claims; Wholesale trade; Cablevision earnings
FRIDAY: Trade report
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