Citi Propels Dow Higher, but Nasdaq Dives

As tech stocks like Google, AMD and Microsoft fall, IBM is one positive for technology. Citi climbs.
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Updated from 4:15 p.m. EDT

Blue-chips rose Friday as financials bounced courtesy of

Citigroup

(C) - Get Report

, but technology shares declined after

Google's

(GOOG) - Get Report

earnings came up short and

Microsoft's

(MSFT) - Get Report

forecast suggested a disappointment for investors.

The

Dow Jones Industrial Average

gained 47.63 points, or 0.4%, to 11,496.57, and the

S&P 500

tacked on 0.36 points at 1260.68. The

Nasdaq

sank 29.52 points, or 1.3%, to 2282.78.

The mixed results ended a strong week for the major indices. Over the past five days, the Dow climbed 3.6%, the S&P 500 jumped 1.7% and the Nasdaq added 2%.

Just after the three major indices each closed up more than 1% Thursday, Internet company Google

reported second-quarter earnings that missed analyst expectations

, a result that pressured the Nasdaq. Google slumped 9.8% to $481.32.

Microsoft dragged on both technology and the Dow, where it's one of 30 components. Though the software giant's earnings for the most recent quarter were decent, its

near-term outlook failed to impress shareholders

. Microsoft lost 6% to $25.86.

Kim Caughey, senior investment analyst at Fort Pitt Capital, says Google is a momentum play, and a trend of "slowing growth is kind of a buzzkill for the momentum space." As the world economy slows, Google's click-through revenue stands to get hurt, Caughey said.

Google's earnings may not foretell bearish news for the broader tech sector, said Caughey. She pointed to solid numbers from

IBM

(IBM) - Get Report

and an acceptable performance in some of Microsoft's segments as indications that the information technology sector is still alive.

"There are areas of the world that need to build out infrastructure and IT infrastructure," she said. "We'll see if they continue on with these projects, but at this point it looks pretty darn good."

Companies like Google and

Amazon

(AMZN) - Get Report

, she said, are less driven by IT spending and are more consumer-sensitive.

Advanced Micro Devices

(AMD) - Get Report

was another problem for tech, posting a loss that was worse than analysts expected and

ditching CEO Hector Ruiz

. The stock slid 12% to $4.65.

IBM, however, was a bright spot, topping estimates for the second quarter and

boosting its fiscal-year outlook

. Shares of Big Blue tacked on 2.7% at $129.89.

"Google and Microsoft disappointed to the downside, but it seems like some of the optimism picked up in the financials in the past couple of days" helped pull stocks higher, said Jack Ablin, chief investment officer at Harris Private Bank. "I think we've just sort of ratcheted back our worst fears, and that's helped investor attitudes."

Ablin said that whether the rally is sustainable depends on future earnings results and where the overall economy appears to be going. He said stronger profits from other sectors would help the market continue its strength.

Helping invigorate the financial space was

Citigroup

(C) - Get Report

, who cut its second-quarter losses in half compared with the first quarter and exceeded forecasts, sending the stock up 7.7% at $19.35.

That gave investors a chance to forgive a worse-than-expected $4.65 billion

quarterly loss

from

Merrill Lynch

(MER)

. The company also announced $9.7 billion in new writedowns and impairment charges. Merrill nonetheless ended the day up 0.6% at $30.91.

Fellow financial services firm

Capital One

(COF) - Get Report

saw second-quarter profits fall 40% year over year and missed expectations, but it too, finished fractionally higher, rising 0.2% to $42.87.

Also offering good news, oil-services provider

Schlumberger

(SLB) - Get Report

reported that it beat analyst estimates with profits that rose from a year ago. Defense company

Honeywell

(HON) - Get Report

also

trumped earnings expectations and raised guidance

. Schlumberger added 3.9% to $100.55, while Honeywell gave up 0.4% to $50.66.

On the M&A front,

Teva Pharmaceutical

(TEVA) - Get Report

said it would buy

Barr Pharmaceuticals

(BRL)

for

more than $7 billion

in a cash-and-stock deal. Teva rose 4.4% to $42.87, and Barr surged 11% to $63.43.

Another deal will see energy company

BP

(BP) - Get Report

buy natural gas properties in Oklahoma from

Chesapeake Energy

(CHK) - Get Report

. BP added 1.5% to $62.40, while Chesapeake ticked down 0.8% at $54.33.

In other merger news,

Republic Services

(RSG) - Get Report

rejected a $6.3 billion buyout overture from

Waste Management

(WMI)

. Republic had previously said it would buy

Allied Waste

(AW)

in a deal that was then worth $6.24 billion. Republic and Waste Management were both down fractionally. Allied Waste added 2.6% to $12.13.

The Wall Street Journal

, meanwhile, reported that mortgage company

Freddie Mac

(FRE)

is considering raising $10 billion in fresh capital through a stock sale. Freddie, along with fellow mortgage company

Fannie Mae

(FNM)

, has been a recent beneficiary of a government effort to stabilize the housing market. Freddie shares climbed 10% to $9.18.

In commodities, crude oil was down 41 cents to end at $128.88 a barrel, marking its fourth straight day of declining prices. Gold closed down $12.70 to $958 an ounce.

As for Treasuries, the 10-year note was losing 26/32 to yield 4.09%, and the 30-year was off 25/32, yielding 4.66%. The dollar was down against the euro, but rising vs. the yen and the pound.

Overseas exchanges were mixed. The FTSE in London, the DAX in Frankfurt and the Hang Seng in Hong Kong posted gains, while Japan's Nikkei edged downward.