Stocks Gain, Led by Materials; HP Slips

Stocks gained amid mixed economic news, as investors continued to snap up shares ahead of first quarter earnings.

The Dow Jones Industrial Average rose more than 70 points after rising 84 points on Thursdayin another session marked by light volume. At current levels, the Dow is in positive territory for the month.

Among Dow components, DuPont , Caterpillar , and IBM gained, while Hewlett-Packard slumped.

The S&P 500 and the Nasdaq also rose more than 0.5 percent. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to nearly 17.

Among key S&P sectors, materials, energy and telecom gained.

The market keeps moving slowly higher in the face of mixed economic news, including a drop in The Thomson Reuters/University of Michigan consumer sentiment indexand Thursday's weak durable goods orders.

"I think that’s a sign there’s a lot of cash out there that needs to be put to work," said Scott Brown, chief economist at Raymond James.

But the U.S. economy faces several headwinds, including rising food and gasoline prices, housing prices that continue to fall in many areas, state and local government budget troubles, and mostly, not enough jobs, Brown said.

"Obviously," Brown noted, "higher food and gasoline prices are weighing against consumer sentiment." If gasoline prices move substantially higher, he added, the outlook for the economy will darken considerably.

"If they stay where they are, that will shave a half a percent or more off GDP," he added. "It won’t throw us into recession, but the recovery won’t be as strong as we’d like it to be."

The key to the recovery will be getting job growth back on track. While the fall in jobless claimsevident in Thursday's numbers was a positive trend, "there's still plenty of room for improvement," said Brown, who would like to see claims fall closer to 320,000 than 380,000.

With state and local governments still shedding jobs at a rate of 20,000 a month, Brown expects growth in the Labor Department's nonfarm payrolls report to remain below 200,000 a month. The government reports payrolls data for March next Friday.

Technology stocks will continue to be in focus Friday. Shares in Oracle gained more than 4 percent after the company forecast a rise in sales of new software this quarterand hiked its dividend by a fifth. Several brokerages raised their price target for the tech company.

And Accenture , a technology outsourcing and consulting firm, jumped higher after raising its 2011 outlook above analyst estimates.

Research in Motion, however, tumbled in after-hours trading Thursdayafter its outlook for the current quarter fell short of estimates, and its shares were downgraded by Bank of America Merrill Lynch, Deutsche Bank, and RW Baird.

In Europe, leaders were gearing up for a second day of meetings Friday after they agreed late on Thursday to expand the euro zone’s temporary bailout fund in June.

The European debt crisis has deepened with the collapse of Portugal’s government earlier this week, raising the specter of another bailout. European markets were nevertheless slightly higher in early trade, following Asian markets, which also rose.

In Japan, the situation at the Fukushima nuclear power plant remained worrisome, with officials saying one of the reactors may have experienced a serious breach of the core.

Oil prices were flat despite planned protests in Bahrain and news thatSyrian troops fired on protesters, and as a military campaign continued against Libya. U.S. light sweet crude, fell to just above $105 a barrel, while London Brent crude fell below $116 a barrel.

The higher prices could weigh on stocks amid fears they will dent the economic recovery, although rising prices haven't been a big factor in the markets in recent days.

“$125-$150 (per barrel of) oil is going to weigh on the market, I think that goes without saying. For the most part we’ve been able to shrug off the European woes," Ben Lichtenstein, President of told CNBC. Higher oil would however hurt the economy, he said.

Elsewhere in corporate news, Best Buy fell after Citi downgraded the electronics retailer to "sell," saying among several factors that the company's forecast was disappointing and "possibly too aggressive at the high end," including, among other things, that the company doesn't see earnings-per-share growth in the first half of 2012.

Financial stocks were mostly higher despite news that Standard & Poor's was concerned that banks may be making "excessive" dividend payouts to shareholders before the banks are suffiently ready. Several banks announced dividend increases and stock buybacks earlier this week after the Federal Reserve approved their capital plans.

JPMorgan , Wells Fargo and Citigroup , which all announced dividend increases, were still higher on Friday.

In economic news, the Thomson Reuters/Consumer Sentiment Index fell to 65.5 in March, the lowest level since November 2009, from 77.5 in February.

And the second revision of U.S. economic growth by the Commerce Department was close to the initial reading of 3.1 percent made in January, but better than the 2.8 percent revision in February.

Philadelphia Federal President Charles Plosser speaks in New York at 12:15 p.m. at the Shadow Open Market Committee.

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