Stocks Close Week Higher on QE3 Confidence

NEW YORK (TheStreet) -- The major U.S. equity averages finished with solid gains Friday, capping a stellar week as the risk-on trade flourished thanks to the bold stimulus plan outlined by the Federal Reserve.

The central bank chose Thursday to go on the offensive, unveiling an open-ended program to buy $40 billion worth of mortgage-backed securities per month until the job market strengthens, pushing its pledge to keep its zero interest rate policy into at least mid-2015, and maintaining its current bond maturity extension efforts through the end of this year.

A surprise leap in consumer confidence for September despite higher gasoline prices was also helping investor sentiment on Friday. Bonds were hammered, the dollar skidded and gold ticked up as traders repositioned in the wake of Fed Chairman Ben Bernanke's promise to stick with a highly accommodative monetary policy even after the U.S. economy starts to strengthen.

The Dow Jones Industrial Average rose more than 54 points, or 0.40%, to close at 13,593. The blue-chip index finished the week up 2.15%, booking a gain for the eighth time in the last 10 weeks and sixth time in the last seven sessions. Year-to-date, the Dow is now up 11.26%.

Breadth was positive on the Dow with winners outpacing losers, 19 to 11. The biggest percentage gainers were Alcoa (AA), Caterpillar (CAT), and du Pont (DD) and United Technologies (UTX).

Home Depot (HD) was also a standout gainer after the Atlanta-based home improvement products retailer said it plans to close its seven remaining big box stores in China and cut 850 jobs. The stock gained 2%.

Prominent Dow decliners included AT&T (T), Merck (MRK), Pfizer (PFE), and Verizon (VZ).

Bernstein Research lowered its earnings estimates for AT&T, Verizon and Sprint (S) on Friday to account for the impact of Apple's (AAPL) iPhone 5 going on sale in the calendar third quarter.

"The iPhone is a double edged sword for the carriers. It drives usage, and (hopefully) higher ARPU [average revenue per user] if and when customers exceed usage thresholds," the firm said. "But it also drives higher subsidies, and therefore hurts margins. When a customer who already has a smartphone upgrades to a new one, there's lots of incremental cost ... but not much incremental revenue."

Meantime, Apple shares were again hitting new all-time highs on reports that pre-orders for the iPhone 5 sold out within an hour this morning. The stock rose 1.2% to close at $691.28 after hitting a new peak of $696.98.

Kraft Foods (KFT) finished in the red on news the company will be replaced within the Dow by UnitedHealth (UNH), effective Sept. 24, a change stemming from Kraft's plans to split into two separate publicly traded companies. The shares dipped 0.80%.

The S&P 500 closed up nearly 6 points, or 0.40%, at 1466, and added 1.9% for the week. Year-to-date, the benchmark index is up 16.55% and sitting at levels dating back to December 2007.

The Nasdaq surged more than 28 points, or 0.89%, to settle at 3184. The tech-heavy index is up 22.22%.

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