Stocks Extend Rally

The Dow finished Friday's session more than 100 points higher as European bank stress test results and strong earnings bolstered confidence.
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NEW YORK (

TheStreet

) -- Stocks extended gains Friday as another session of strong earnings reports and results from the European bank stress tests bolstered investors' confidence in the recovery.

The

Dow Jones Industrial Average

added 102 points, or 1%, to close at 10,425 with a weekly gain of 3.2%. The

S&P 500

rose 3.6% on the week after gaining 9 points, or 0.8%, to close at 1103 and the

Nasdaq

finished ahead by 24 points, or 1.1%, at 2270 with weekly gains of 4.2%.

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After months of uncertainty regarding the strength of the European bank sector, stress test results revealed that only seven of 91 European banks failed the tests, and capital shortfalls came in at a lower-than-expected €3.5 billion ($4.5 billion). Bank failures were concentrated in Spain, with five banks failing to pass stress tests:

Banca Civica Savings Bank Group

,

Cajasur Bank

,

Diada Savings Bank Group

,

Espiga

and

Unnim Savings Bank

, according to

CNBC

. Greece's

Atebank

and Germany's

Hypo Real Estate

were the other failures, according to reports released after European markets closed.

Overseas, Hong Kong's Hang Seng rose 1.1% and Japan's Nikkei jumped 2.3%. The FTSE in London lost 0.08%, and the DAX in Frankfurt gained 0.5%.

>>The Economy

>>Company News

>>Commodities and the Dollar

>>Treasuries

The Economy

Earlier, Albert Meyer, portfolio manager of the Mirzam Capital Appreciation fund, said that recent news out of Europe doesn't suggest that situation is nearly as bleak as markets may have indicated.

"The best news coming out of Europe right now is that manufacturing and services are doing very well and reporting news that was better than expected," he said. "I also think it's pretty clear from earnings announcements up to now that manufacturing in the U.S. is also doing fine," he said, pointing to recent results from

Caterpillar

(CAT) - Get Report

,

Illinois Tool Works

(ITW) - Get Report

and

United Technologies

.

"The U.S. economy is still expected to grow. There's very healthy growth in Asia and South America. Even in Europe, services hit a 35-month high, and manufacturing beat expectations," he said, adding, "growth is growth -- even if it's anemic -- and I think earnings will continue to confirm that.

There are no economic releases scheduled for Friday's session.

Company News

Verizon

(VZ) - Get Report

,

American Express

(AXP) - Get Report

and

General Electric

(GE) - Get Report

were the Dow's best performers, while

McDonald's

(MCD) - Get Report

,

Pfizer

(PFE) - Get Report

and

Merck

(MRK) - Get Report

were its biggest laggards.

Shares of

General Electric

(GE) - Get Report

advanced 3.3% to $15.71 after the company hiked its quarterly dividend by 20%, to 12 cents a share and announced the resumption of its $15 billion stock buyback program, which was halted in September 2008.

According to reports, French drug company

Sanofi-Aventis

(SNY) - Get Report

approached

Genzyme

(GENZ)

about a potential acquisition. Genzyme shares jumped 15.4% higher, while Sanofi's stock lost 4.2%.

Honeywell

(HON) - Get Report

roared past estimates with a second-quarter profit of 78 cents, which excludes a non-cash expense, and sales of $8.2 billion. The company is also now expecting year-end earnings guidance of between $2.40 and $2.50 a share, up from between $2.30 to $2.45 a share, and sales are projected to rise to between $32.4 billion and $32.9 billion, up from between $31.5 billion and $32.3 billion. The stock gained 2%, to $43.50..

McDonald's said earnings jumped by double-digits, surpassing expectations by a penny at $1.13 a share. Sales also exceeded targets for $5.91 billion, at $5.95 billion while comps grew 3.7% in the U.S. and by 5.2% in Europe. The stock, however, fell 2.1%, to $69.90.

Shares of

Verizon

(VZ) - Get Report

rose 3.8%, to $28.02 after the company posted a second-quarter loss of 7 cents a share, which includes 65 cents in severance-related one-time charges. Sales slipped 0.3% to $26.8 billion. Analysts had been looking for a profit of 56 cents a share on sales of $27.1 billion.

Schlumberger

(SLB) - Get Report

hit analysts' second-quarter profit target of 68 cents a share and reported slightly higher-than-expected sales of $5.94 billion.

GM

is expected to file for an IPO during the week of Aug. 16, according to

Reuters

.

Apple

(AAPL) - Get Report

blamed manufacturing challenges for a delayed launch of its white iPhone. The device won't be ready until the second half of July.

BP

(BP) - Get Report

temporarily halted relief well activities in the Gulf of Mexico because Tropical Storm Bonnie is expected to reach the area by Saturday.

>>Overview

>>The Economy

>>Commodities and the Dollar

>>Treasuries

Commodities and the Dollar

Crude oil for September delivery shed 32 cents, or 0.4%, to settle at $78.98 a barrel.

Elsewhere in commodity markets, the August gold contract lost $7.80, or 0.7%, to settle at $1,187.80 an ounce.

The dollar traded lower against a basket of currencies, with the dollar index down by 0.2%.

>>Overview

>>The Economy

>>Company News

>>Treasuries

Treasuries

The benchmark 10-year Treasury was down by 18/32, lifting the yield to 2.996%.

The two-year note was lower by 1/32, strengthening the yield to 0.584%. The 30-year bond was down by 1 7/32, increasing the yield to 4.017%.

--Written by Melinda Peer in New York

.