Blue Chips Rally; Nasdaq Knackered

The major indices close mixed as investors digest Microsoft's guidance, earnings and more dismal data. Frank Curzio reviews the action in The Real Story (above).
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Updated from 3:41 p.m. EDT

Blue chips dug themselves out of early losses to end higher Friday, though tech shares ended to the downside, as investors dealt with mixed earnings reports, resurging oil prices and a confirmation of poor consumer-sentiment numbers.

After having posted declines for much of the day, the

Dow Jones Industrial Average

closed up 42.91 points, or 0.33%, to 12,893, and the

S&P 500

rose 9.02 points, or 0.65%, to 1398.84. The

Nasdaq Composite

remained in the red, however, dragged lower by

Microsoft's

(MSFT) - Get Report

disappointing near-term guidance. The index was in better shape at the close, but still lost 5.99 points, or 0.25%, to 2422.93.

Breadth was positive to end the week. Some 1.92 billion shares changed hands on the

New York Stock Exchange

, with advancing issues topping decliners by a 3-to-2 margin. On the Nasdaq, winners outpaced losers 5 to 4, despite the weak finish, as volume reached 1.98 billion shares.

"I think we're just seeing a normal Friday in a somewhat jittery market," said Steven Sheldon, CFA and principal with SMS Capital Management. "I think the market's just getting set up for next week's

Federal Reserve meeting, and oil prices continue to be rather volatile. Every day we're getting head-faked up and down."

Crude-oil futures, after sustaining a big drop Thursday, ballooned in the new session on a raft of supply-disruption concerns.

News broke that a ship contracted by the U.S. military fired warning shots at two Iranian vessels, which spurred worries of a U.S.-Iran conflict that could halt shipments from the Gulf. Also, militants in Nigeria said they had assailed another pipeline following a recent attack on two others, and

Bloomberg

reported that Britain's

BP

(BP) - Get Report

will begin shutting down a major North Sea pipeline tomorrow ahead of a planned refinery strike in Scotland.

Crude jumped $2.46 to settle at $118.52 a barrel, and gold futures took back a nominal amount of yesterday's losses, climbing 30 cents to $889.70 an ounce.

The dollar continued to climb against the euro, however, adding 0.6% at $1.5595. Against the yen, the greenback was up 0.1% at 104.42.

Against that backdrop, all three major indices ended the week on an upbeat note. The Dow has added 0.3% over the past five trading sessions, the S&P has climbed 0.5%, and the Nasdaq has risen 0.8%.

On the data side Friday, the University of Michigan's April consumer-confidence reading was revised slightly downward to 62.6 in April, a dismal level not seen since the early 1980s. That's about 7 points lower than March. The survey found that 9 out of 10 American consumers believe the U.S. is already in recession.

Still, said Peter Morici, a business professor at the University of Maryland and former director of economics at the U.S. Trade Commission, "My feeling is that this data is not unexpected."

"Economists have a lot of trouble with sentiment data," Morici added. "It's harder to predict that translating into actual purchases and sales. My feeling is, someone drives past the gas pump and you call the guy up and ask how he feels, and he says he feels bad. So it's not that big a deal."

Separately, President Bush announced that the federal government's tax-rebate checks will begin shipping out Monday, a week ahead of schedule. The cash is intended to help stimulate the sluggish U.S. economy by giving strapped consumers extra spending money.

As for corporate news, shares of Microsoft, a Dow component, sagged 6.2% after the software giant offered fiscal fourth-quarter profit guidance that leans to the lower end of analyst targets, even as it projected more robust numbers for fiscal 2009 and bested last quarter's expectations.

Disk-drive maker

Western Digital

(WDC) - Get Report

beat top- and bottom-line analyst views for the fiscal third quarter, and issued in-line profit guidance for the next, but also said a bigger-than-expected decline in demand for its products should weigh on current-quarter sales. Revenue was projected at $1.825 billion to $1.9 billion, the midpoint of which is a bit below the Wall Street consensus. Shares tumbled 9.1%.

On a brighter note,

American Express

(AXP) - Get Report

gave support to the Dow after its first-quarter profit drop wasn't as steep as analysts were expecting, thanks to its international presence. The credit-card company also reaffirmed its above-consensus view for the full year. Shares tacked on 5.7%.

Also having a good day was

Goodyear

(GT) - Get Report

, which reported swinging to a profit on a "record" top line of $4.9 billion. The tire maker also trounced Street profit views on an adjusted basis. Shares climbed 6.1%.

Among the day's research calls,

Wal-Mart

(WMT) - Get Report

was upgraded to buy from neutral at Merrill Lynch, while

Ford

(F) - Get Report

was downgraded at JPMorgan, Bear Stearns and Merrill a day after the automaker's earnings-inspired rally. Wal-Mart shares rose 20 cents at $57.65 while Ford plunged 10.7%.

Oppenheimer initiated three ethanol stocks,

Pacific Ethanol

(PEIX) - Get Report

,

VeraSun

(VSE)

and

Aventine Renewable Energy

(AVR)

, with perform ratings, after which shares were up between 5.9% and 22.4%.

Citigroup upgraded China-based Internet stocks

Baidu.com

(BIDU) - Get Report

and

Sohu.com

(SOHU) - Get Report

to buy from hold, lifting shares by 6.3% and 6.6%, respectively.

Treasury prices were losing ground. The 10-year note lost 10/32 in price to yield 3.87%, and the 30-year bond lost 23/32 in price, yielding 4.59%.

Overseas markets were mixed. In Asia, Tokyo's Nikkei 225 jumped 2.4% overnight, and the Hang Seng Index in Hong Kong declined 0.6%. As for European bourses, the FTSE 100 in London, Germany's Xetra Dax, and the Paris Cac were each rising 0.7% or more.