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Stocks Close Wild Week With Quiet Gains

Markets closed out a volatile week quietly, registering modest gains as part of what is shaping up to be the market's best month ever.

After waffling through most of the session, the major averages closed slightly higher, with the Dow registering a 3.4 percent gain that has helped boost the market about 12 percent for October. It was the fifth consecutive weekly gain for the Dow.

The uneventful day came after a 3 percent rally Thursday sparked by an apparent deal regarding the European debt crisis.

As questions started to creep into the details of the deal, traders chose to take some risk off the table as another profitable week wound to a close.

"Time to sell the garbage and buy the winners," Dave Rovelli, managing director of US equity trading at Canaccord Adams, told clients in a morning note.

Materials and energy were the best sectors for the day on the Standard & Poor's 500, while weakness in consumer stocks and utilities limited gains.

On the Dow industrials, Hewlett-Packard dropped plans to spin off its PC unit, sending its shares sharply higher to lead the index. Merck , which reported quarterly profit of 94 cents a share, helped boost the bluechips as did Alcoa .

Banks were volatile even as widely followed Rochdale Securities analyst Dick Bove upgraded Goldman Sachs to buy and hiked the price target from $115 to $135. Bove said he believes all of the bad news is known about Goldman, which is trading below book value even though revenues are rising.

"I cannot think of a negative for Goldman Sachs which has not been discussed 50,000 times in the last year and a half," he said in a CNBC interview.

On the tech side, the Nasdaq saw Wynn Resorts lead the winners even as analysts scaled back earlier projections for the hotel and casino giant's earnings potential. The tech gauge, though, was the worst-performing of the majors.

Strategists worried that market enthusiasm has become overdone and stocks are due for a pullback, if only a temporary consolidation.

The market "is currently at overbought levels that are seen once a decade, much less once a year, and it’s due for at least a pause at current levels," analysts at Bespoke Investment Group wrote in a note to clients, adding that "we can continue higher and get back to new bull market highs in the coming months, but at least in the short-term we’re due for a pullback."

The Standard & Poor's 500currently has 94 percent of its stocks trading above their 50-day moving averages, including all 81 financial stocks.

However, portfolio manager risk aversion over the past three months of market turmoil could put a floor on any stock market drop.

"Now everyone everywhere is under-exposed to risk and to equities and is scrambling to get aboard," Dennis Gartman, hedge fund manager and author of The Gartman Letter, wrote this morning. "The size of the under-exposure is enormous, and although we cannot quantify that under-exposure we know it is there."

A surge of money into high yield bond funds provided some indication that investors with a longer-term view were anticipating a rally ahead.

"We saw a remarkably broad rally across risky assets, with bank and sovereign (credit default swaps) staging sizable positive moves along with similar moves in high-yield and investment grade," Thomas J. Lee, chief U.S. equity strategist at JPMorgan Chase, said in an analysis. "Thus, we see a strong foundation for an equity rally into" the end of the year.

Elsewhere, troubles continued to add up for MF Global , with a Moody's downgrade the latest issue to confront the battered brokerage run by former New Jersey Gov. Jon Corzine. Shares tumbled more than 26 percent after falling nearly 16 percent Thursday.

Also in corporate news, Samsung has overtaken Apple in terms of smartphone sales and expects the fourth quarter to be even stronger.

In other markets, gold prices moderated a bit after rising more than $100 an ounce in the past month. Bond prices edged higher, with the benchmark 10-year Treasury note yield edging lower to 2.38 percent, while the US dollar was up 0.25 against the world's currencies.

Broadly speaking, the market is back in risk-on mode.

Money flowing into equity mutual funds beat bond funds for the first time since mid-September. Treasurys lost $1.6 billion in fund flows, the most for one week since February 2009, according to Bank of America Merrill Lynch.

"You've got a lot of investors that got burned because they sold on the (debt) crisis," said Jim Paulsen, chief market strategist at Wells Capital Management in Minneapolis. "How many times are you going to do that?"

The market was unimpressed with economic reports showing that personal income grew just 0.1 percent in September but consumers increased spending by 0.6 percent, a seemingly unsustainable trend that calls into question whether the 2.5 percent growth in the third quarter was an aberration.

In other economic news, the final October reading for consumer sentimentcame in at a solid 60.9, well above expectations, though the market had little reaction.

Market breadth through noon was narrowly negative, with losers just outpacing gainers, while there were 47 new highs against just seven new lows. About 362 million shares changed hands on the New York Stock Exchange.