Microsoft Sends Tech Soaring

Big gains in Countrywide and Merrill help boost financials.
Author:
Publish date:

Updated from 4:04 p.m. EDT

An earnings beat by

Microsoft

(MSFT) - Get Report

and the promise of a fourth-quarter profit from

Countrywide

(CFC)

lifted traders' spirits Friday, even as crude continued its record-breaking journey.

The

Dow Jones Industrial Average

closed at its best level of the session, rising 134.78 points, or 0.99%, at 13,806.70, and the

S&P 500

improved by 20.88 points, or 1.38%, to 1535.28. The

Nasdaq Composite

was sharply higher, up 53.33 points, or 1.94%, at 2804.19.

Leading tech to the upside was Microsoft, who jumped 9.5% to $35.03. Late Thursday, the software giant easily beat estimates with its fiscal first-quarter earnings and revenue. Microsoft also guided higher for its fiscal second quarter and the full year.

Meanwhile, Countrywide lost more than $1 billion in the latest quarter, but the stock soared 32.4% to end at $17.30 after the lender kept its quarterly dividend and said it should return to profitability in the fourth quarter and next year.

Also among financials,

Merrill Lynch

(MER)

rallied as rumors swirled that CEO Stan O'Neal will be forced out by early next week. The stock, which tumbled just days ago after the brokerage reported a mammoth third-quarter writedown, climbed $5.19, or 8.5%, to $66.09.

"The two keys to today were Microsoft and the renaissance of the financial stocks," said Larry Wachtel, senior market analyst with Wachovia Securities. "The key movers were all in the financials, and these beleaguered names helped us rally today."

Those big stock moves mitigated the sting of soaring oil prices. A day after surging 3.9%, the December front-month crude contract was up another $1.40 to close at $91.86 a barrel. Earlier, oil prices touched a record high of $92.22 a barrel.

Breadth was decidedly positive to end the week. On the

New York Stock Exchange

3.58 billion shares changed hands, as advancers toppled decliners by a 3-to-1 margin. Volume on the Nasdaq reached 2.58 billion shares, with winners outpacing losers nearly 2 to 1.

The major averages also notched their sixth winning week in seven tries. The Dow added 2.1%, the S&P 500 gained 2.3%, and the Nasdaq finished the week 2.9% higher.

Last time out, stocks finished a volatile session with losses following record crude prices, mixed earnings and the latest round of economic data. The Dow ended down 3.33 points at 13,671.92, but was well above its session lows. The S&P 500 lost 1.48 points at 1514.40, and the Nasdaq was down 23.90 points, or 0.86%, at 2750.86.

"Technically, we tested 1500 on the S&P and held," said Marc Pado, U.S. market strategist with Cantor Fitzgerald. "Resistance isn't an obstacle until 1540."

Pado noted that the

Federal Reserve's

two-day meeting on interest rates will ultimately determine which way the major averages will swing in upcoming sessions. The Federal Open Market Committee's decision will come Wednesday, with most analysts expecting a 25-basis-point cut.

"It will all come down to the Fed next week," said Pado. "Funds using an October fiscal year will close their books on that same day."

Elsewhere on the earnings front,

Coventry Health Care

(CVH)

matched the Thomson First Call estimate for the third quarter, as did

Exelon

(EXC) - Get Report

and

Baker Hughes

(BHI)

.

Coventry dropped 7.7% for the session, and Baker Hughes lost 3.9%. Exelon, on the other hand, gained 2.5% to close at $80.22.

Wendy's

(WEN) - Get Report

, which posted results after the previous close, reported a 57% decline in third-quarter profits but still managed to beat forecasts. Shares advanced 57 cents, or 1.7%, to $34.60.

Away from equities, the University of Michigan's consumer sentiment index for October was the lone economic report of the day. The index fell to a reading of 80.9, below the preliminary 82.0 reading, as well as economists' expectation of 82.3.

Treasury prices were slightly lower on the day. The 10-year note was down 5/32 in price, yielding 4.40%. The 30-year bond was off 6/32 in price, yielding 4.69%. The dollar was again making record lows against the euro.

Overseas markets were higher. In Asia, Hong Kong's Hang Seng rose 1.8% overnight, and Japan's Nikkei 225 climbed 1.4%. In Europe, London's FTSE 100 was rose 1.3%, and Germany's Xetra Dax was up 0.2%.