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Stocks Rebound, Led by Energy; Merck Slips

Stocks turned positive Friday, led by gains in the energy sector, after investors digested some disappointing news on consumer confidence.

The Dow Jones Industrial Average climbed, after ending lower in the previous session.

Chevron and Cisco were higher, while JPMorgan and AT&T slipped into negative territory.

The S&P 500 and the tech-heavy Nasdaq also turned positive. The CBOE Volatility Index, widely considered the best gauge of fear in the market, traded above 21.

Stocks are on track to snap a two-week rally and are headed for their worst week in five.

U.S. consumer sentiment fell in July to the lowest level since March 2009amid increasing pessimism over falling income and rising unemployment, according to the Thomson Reuters/University of Michigan survey. The consumer sentiment index dropped to 63.8 in July from 71.5 the month before, falling far short of expectations of an increase to 72.5, according to a Reuters poll of economists.

"Of course sentiment is lower," according to Todd Schoenberger, managing director of LandColt Trading. "The only surprise here is the number didn't drop nearly as much as it should have!"

"Macro data has been horrible the past couple of months... [Jobless] claims at 405,000 isn't a bright spot—14 straight weeks we've been north of 400k," Schoenberger explained. "EPS growth rate for this earnings season is expected to be 13.5 percent, the slowest since the recession, dare I say it, ended!"

Stocks spiked briefly after GOP lawmakers said the House of Representatives is to vote next week on a plan to raise debt ceiling with equal cuts, according to a report from the Wall Street Journal.

President Obama said it is encouraging that lawmakers from both sides are in agreement about the need to prevent the U.S. from defaulting on its financial obligations. But Obama said lawmakers shouldn't be getting this close to an Aug. 2 deadline to raise the debt ceiling without an agreement. Obama says he still wants to strike a big deal that would raise the debt limit as well as cut spending and raise revenues.

Citigroup jumped after the bank's profits surged, topping estimates, even though the firm's revenue was essentially flat from the previous year.

Also among earnings, Google soared to lead the S&P 500 leaders after the seach-engine giant reported earnings that exceeded even the most bullish forecasts. At least three brokerages raised their price target on the search-engine giant. Chinese "Google" Baidu also traded higher.

Apple gained after at least two brokerages raised their price targets on the iPod maker. IBM also rose after Collins Stewart raised its price target on the tech giant to $200 from $185.

Meanwhile, Oracle wants to question Google chief executive Larry Page in the course of high-takes patent litigation between the two companies, according to a court filing, Reuters reported.

In M&A news, Petrohawk Energy skyrocketed more than 60 percent after mining group BHP Billiton said it will buy the gas producer for $12.1 billion.

And Clorox jumped after billionaire investor Carl Icahn offered to buy the firm for $10.2 billion.

UBS has won a review by a Manhattan federal judge of $2.6 billion of lawsuits brought by the trustee liquidating Bernard Madoff's firm, at least the fourth time a bank has obtained access to that court.

Meanwhile, investigations are progressing into the U.S. operations of News Corp after the UK phone hacking scandal. And News International’s chief executive Rebekah Brooks finally bowed to political pressure tendering her resignation.

Zillow raised the price range of its initial public offering to $16 to $18 per share from $12 to $14 per share. The real estate and housing data company filed with the U.S. securities regulators for an IPO of up to $51.8 million in April.

On the economic front, however, a gauge of manufacturing in New York State showed the sector unexpectedly contracted for the second month in a rowas new orders worsened. Meanwhile, U.S. consumer prices fell slightly more than expected in June to post their biggest drop in a year on weak gasoline costs.

Industrial production rose in June for the first time in three months after revisions, on a jump in utilities and mining output, according to a Fed study.

On Tap Next Week:

MONDAY: Treasury international capital, housing market index; Earnings from Halliburton and IBM
TUESDAY: Housing starts, Fed's Hoenig speaks; Earnings from BofA, Coca-Cola, Goldman Sachs, J&J, Wells Fargo, Apple and Yahoo
WEDNESDAY: Weekly mortgage apps, existing home sales, oil inventories; Earnings from Altria, United Tech, Abbott Labs, Blackrock, AmEx, Intel, Qualcomm and Ebay
THURSDAY: Weekly jobless claims, Philadelhia Fed survey, money supply; Earnings from AT&T, Morgan Stanley, Nokia, PepsiCo, Freeport McMoran, Travelers, Mircrosoft, AMD and SanDisk
FRIDAY: No major econ. news expected; Earnings from Caterpillar, GE, McDonald's, Schlumberger, Verizon, Honeywell

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