Stocks Eke Out Gains

Results from Google and Microsoft cause some worry, but the averages close higher.
Author:
Publish date:

Updated from 4:05 p.m. EDT

Stocks surged Friday to close slightly higher as the major averages overcame disappointing revenue figures from

Google

(GOOG) - Get Report

and

Microsoft

(MSFT) - Get Report

.

The

Dow Jones Industrial Average

I:DJI

rose 23.41 points, or 0.22%, to 10,651.18, while the

S&P 500

(SPX)

gained 6.64 points, or 0.54%, to 1233.68. The

Nasdaq Composite

(NASDAQ)

added 1.14 points, or 0.05%, to 2179.74. The 10-year Treasury was up 13/32 in price to yield 4.22%, making up a portion of the selloff sparked Thursday by China's relaxation of currency regulation.

The Dow closed higher with help from a 2.8% gain in

Exxon Mobil

(XOM) - Get Report

.

About 1.37 billion shares changed hands on the

New York Stock Exchange

, with advancers beating decliners by a 2-to-1 margin. Trading volume on the Nasdaq was 1.69 billion shares, with advancers beating decliners 3 to 2.

"It's been a volatile week, so it's nice to end it on a quiet note," said Paul Mendelsohn, chief investment strategist with Windham Financial. "Between interest rates, equities and the dollar, today was a day to catch our breath and undo some movements from yesterday. The activity is still leaving us positioned next week to break out and go into a continuation pattern higher."

For the week, the Nasdaq added 1.06%. The Dow rose 0.09%, while the S&P 500 was higher by 0.47%.

Ken Tower, chief market strategist at CyberTrader, says the market faces technical resistance between 1233 and 1236 on the S&P 500 and at 2200 on the Nasdaq. "Bulls need the market to push cleanly through those two levels to maintain upside targets," Tower says.

The major indices fell about 0.6% Thursday on China's currency move and another round of violence in Britain. Friday morning, police reportedly killed a suspected suicide bomber outside the Stockwell station in South London.

"The market has been on a roll for three months and may be overextended, so the complacency level is pretty high today," says Larry Wachtel, senior market analyst with Wachovia Securities. "People need a break this weekend after a very busy week."

The dollar firmed against the yen and was roughly even against the euro. After two days of declines, oil rose $1.52 to close at $58.65 a barrel, as traders shied away from long positions ahead of the weekend.

Friday ends the first full week of second-quarter earnings reports, which David Dropsey, a research analyst with Thomson Financial, characterizes as "amazing thus far."

"We're having a remarkable quarter," says Dropsey. "We've only had 40% of companies report so far, but 72% are above expectations, the highest since the first quarter of 2004. A typical quarter only finishes up with 59% beating expectations."

Thomson was expecting overall second-quarter profit growth of about 7% prior to the reporting season. "We may easily hit double-digit growth if this continues," Dropsey says.

Google ended lower as a 98% gain in second-quarter revenue failed to please traders who have taken the stock up by nearly twice that percentage since last August. The Internet search company earned $342 million, or $1.19 a share, in the quarter, compared with $79 million, or 30 cents a share, a year earlier.

Net revenue in the quarter was $890 million. Analysts surveyed by Thomson First Call were forecasting GAAP earnings of $1.09 a share on revenue of $842.7 million. Google investors were said to be spooked by executives' reiteration on a conference call that the third quarter is historically a weak one for the company. The stock dropped $11.54, or 3.7%, to $302.40.

Microsoft put up a fourth-quarter operating number of 33 cents a share, beating estimates by 2 cents on a 9% revenue improvement to $10.16 billion. The stock fell after hours on the top-line number, which was $10 million short of estimates, and first-quarter revenue guidance that was about $120 million behind the consensus. Shares fell 76 cents, or 2.9%, to $25.68.

In Friday earnings, oilfield services giant

Schlumberger's

(SLB) - Get Report

second-quarter profit rose 35% from last year to $482.2 million, or 80 cents a share, on a 21% climb in revenue to $3.43 billion. Adjusted earnings of 78 cents a share were ahead of estimates. Shares added $4.32, or 5.5%, to $82.28.

Rival

Halliburton

(HAL) - Get Report

swung to a profit of $392 million, or 76 cents a share, in its second quarter, on a 4% rise in revenue of $5.16 billion. Income from continuing operations of 76 cents a share wiped out forecasts. Halliburton gained $4.59, or 9.4%, to $53.29.

Silicon Laboratories

(SLAB) - Get Report

shares rose 2.6% after the company reported a decline in second-quarter earnings to $15.6 million, or 28 cents a share, from $22.8 million, or 41 cents a share, a year ago. Revenue slipped to $107.2 million from $126.1 million. The Thomson First Call consensus was for EPS of 27 cents on revenue of $106.6 million. Silicon Labs was up 70 cents to close at $27.60.

Late Thursday, chipmaker

Broadcom

(BRCM)

reported second-quarter net income of $15.1 million, or 4 cents a share, down from $63.8 million, or 18 cents a share, a year ago. Sales declined to $604.9 million from $641.3 million. Excluding special charges, Broadcom said it earned $122.2 million, or 34 cents a share, beating Wall Street's expectations for 25 cents a share.

Merrill Lynch raised its price target on Broadcom to $50 from $41, believing the company reported significant upside to estimates driven by broad-based strength. Broadcom rose $4.39, or 11.4%, to $43.

Maytag

(MYG)

posted second-quarter earnings of $3.5 million, or 4 cents a share, compared with a loss of $41 million, or 52 cents a share, last year. Latest-quarter earnings were reduced to the tune of 3 cents a share by restructuring charges, but the results still fell 3 cents short of the Wall Street analyst consensus estimate. The news comes as the washing-machine maker weighs competing bids from private equity group Ripplewood and rival

Whirlpool

(WHR) - Get Report

. Maytag gained 55 cents, or 3.5%, to $16.20.

Outside of the earnings arena,

Adolor

(ADLR)

was falling after the biotech company said it must provide more information to U.S. health regulators on its experimental medicine Entereg before it could be approved. Shares lost 22 cents, or 2.1%, to $10.48.

In M&A activity, electronic-sensor maker

BEI Technologies

(BEIQ)

has agreed to be acquired by French electrical-equipment maker

Schneider Electric

for $35 a share in cash, nearly a 20% premium to BEI's Thursday closing price of $29.25. The transaction values BEI at roughly $537 million, plus assumed debt of $29 million. BEI surged 19%, up $5.57, to $34.82.

In ratings news, Prudential upgraded

Yahoo!

(YHOO)

to overweight from neutral weight, raising its stock price target to $40 from $38, on favorable valuation. Yahoo! was up 59 cents, or 1.8%, to close at $33.53.

J.P. Morgan cut

TiVo

(TIVO) - Get Report

to underweight from neutral, saying it sees substantial risk that

DirecTV

(DTV)

will end sales of new TiVo subscriptions and move to new technology. TiVo was lower by 55 cents, or 7.7%, to finish at $6.63.

Overseas markets were mostly higher, with London's FTSE 100 higher by 0.4% to 5241 and Germany's Xetra DAX up 0.2% at 4837. In Asia, Japan's Nikkei shed 0.8% overnight to 11,695, while Hong Kong's Hang Seng gained 1.1% to 14,786.

To view Aaron Task's video take on today's market, click here

.