Stocks Tear It Up

Updated from 4:08 p.m. EDT

Wall Street surged Friday as a string of upbeat quarterly results convinced droves of investors to bulk up on U.S. equities.

The Dow Jones Industrial Average was off its peak for the day but still soared 228.87 points, or 1.81%, to 12,849.36. The S&P 500 jumped 24.77 points, or 1.81%, to 1390.33, and the Nasdaq Composite climbed 61.14 points, or 2.61%, to 2402.97.

Breadth was strongly positive to end the week. Roughly 2.09 billion shares changed hands on the New York Stock Exchange, with advancers crushing decliners by a 4-to-1 margin. Volume reached about 2.21 billion on the Nasdaq as winners beat losers 7 to 3.

James Park, managing director with Rodman & Renshaw, pointed to the powerful effect that these solid earnings -- and, more importantly, guidance -- have been imbuing on equity measures. "I think that's shaking out a lot of the shorts, and that there are a lot more fundamental buys going on," he said. "I think there are a lot of guys putting their cash to work."

Phillip Roth, chief technical market strategist with Miller Tabak, noted that the major averages are all closing in on their February highs, the top end of the trading range in which the market has been hemmed for most of this year.

"I don't think it's a big breakout," he added. "I think the market may futz around next week, but eventually it will go higher again. Because it looks like people have absorbed the bad news, fundamentally, and the market has also gone through resistance areas."

Given all that, Roth believes today's action should mark a step forward in a recovery that he says began in January.

Robert Pavlik, chief investment officer with Oaktree Asset Management, voiced similar predictions for next week's action. "If we see some selling early next week, that will not be all that unusual, especially after such a strong week like what we've had," he said.

The Dow and the S&P have both surged 4.3% since Monday, and the Nasdaq has catapulted by 4.9%, driven largely by rallies Wednesday and Friday.

With that, the Dow's losses for the year have now pared back to 3.1%, though the S&P is still registering a 5.3% loss since the beginning of January. The Nasdaq has sunk 9.4% so far in 2008.

As for longer-term trends, Pavlik believes that if the market can hold above the February resistance -- specifically, if the Dow and the S&P can break and stay above 12,900 and 1420, respectively -- "we'll have broken out above the long-term downtrends which were started back on October 9th."

One of the key drivers behind Friday's upward action was Google (GOOG), which said its first-quarter profit rose 31% from the prior year to $1.31 billion, or $4.12 a share, thumping analyst estimates on an adjusted basis. Revenue was also better than expected.

Google's stock, which has taken a pounding in recent months amid reports of declining paid-click numbers and an earnings miss last quarter, bolted past the $500 mark for the first time since February. Shares were up $89.87, or 20%, to $539.41.

Also bolstering buying sentiment was Dow component Citigroup (C). The banking behemoth missed the average analyst target with a loss of $5.1 billion, or $1.02 a share, as $6 billion in pretax writedowns and subprime credit costs ate into its bottom line.

Still, that was far better than the gargantuan writeoffs that some analysts were expecting, and shares bounced 4.5%.

Bulldozer maker Caterpillar (CAT), another member of the Dow, gained 8.5% after saying its its first-quarter earnings ramped up 13% to $922 million, or $1.45 a share, on better-than-expected revenue.

Honeywell (HON) was also contributing to the rally, saying quarterly sales grew 11% year over year, prompting the aerospace-equipment company to raise its full-year forecast. Schlumberger (SLB), an oilfield-services firm, offered a bullish outlook in a conference call even as rising earnings fell short of consensus.

Honeywell rose 6.3%, and Schlumberger added 6.9%.

One of the day's biggest price jumps, meanwhile, came from staffing firm Manpower (MAN), which achieved an easy earnings beat as favorable currency-exchange rates helped to push income higher by 27%. Shares were up 12%.

Xerox's (XRX) adjusted profit, which excludes heavy one-off litigation costs, was in line with expectations. Shares ticked up 0.5%.