Updated from 4:14 p.m. ESTStocks ended a four-day rout with sharp gains Friday, but the rally couldn't prevent two of the major indices from posting their worst weekly performance in a year. The Dow Jones Industrial Average gained 111.70 points, or 1.1%, to 10,240.08; the S&P 500 added 13.82 points, or 1.25%, to 1120.60; and the Nasdaq jumped about 40.82 points, or 2.1 %, to 1984.71. Volume was extremely light as traders shied away from new positions ahead of the weekend. On the New York Stock Exchange about 1.4 billion shares changed hands, while almost 1.7 billion shares were traded on the Nasdaq. Advancers outnumbered decliners by about 7 to 2 on both exchanges. Friday's gains reduced the loss for the week but didn't come close to erasing it. Over the five sessions, the Dow lost 356 points, or 3.4%, while the Nasdaq dropped 63 points, or 3.1%, and the S&P 500 fell 37 points, or 3.2%. The Dow suffered its biggest weekly point loss since a 377-point slide last March, while the Nasdaq had its biggest loss in about 15 months. The S&P 500's loss was its worst weekly decline since a 39-point selloff last September. On Thursday, stocks completed a long-awaited 5% retreat from their recent highs, with the Dow falling 168 points, or 1.6%, to 10,128 -- its lowest close since Dec. 15. The blue-chip index shed 467 points, or 4.4%, in the last four sessions. Jason Trennert, a chief investment strategist with ISI Group, sees the week's carnage as a brief pause in a bull market. "We don't sense that there is any major, fundamental change that's happened in the economy, and we think valuations are reasonable," he said. "Our expectation is that the market will start to do better once we get closer to earnings season." "We believe that the market has gotten too defensive here," Trennert added. "Essentially, people have gotten too enamored of very defensive groups like staples and are not interested enough in cyclical sectors like industrials, materials and energy."
Part of the problem was waning demand. According to research firm Trim Tabs, U.S. equity fund inflows plunged in the week ended March 10, with $700 million in new money moving into funds compared with $4.5 billion in the prior week. "We've had a little bit of a correction, and now we're due for a little bounce," said Tom Schrader, a trader at Legg Mason. "I think you're seeing some people trying to take advantage of some bargain-hunting now." The 10-year Treasury note was down 20/32 with the yield up to 3.77%, while the dollar was stronger against the euro and yen. Crude oil and gold closed lower for the day. There was more disappointment on the economic front Friday. The preliminary reading of the University of Michigan's consumer sentiment index in March showed a decline from February's 94.4 to 94.1. Economists were expecting the index to rise to 95.0. Business inventories grew a less-than-expected 0.1% in January, according to the Census Bureau. Economists expected January's growth rate to match December's 0.3%. Spanish authorities say they are investigating a number of different leads in the Madrid bombings, which killed 198 people. Homeland Security Secretary Tom Ridge said Friday that he couldn't confirm whether al Qaeda had a hand in the bombings. "There is no specific information" available, Ridge said in Thailand. "There is a lot of speculation." In corporate news, Dell ( DELL) was up about 2.7% after both J.P. Morgan and Morgan Stanley raised ratings on the shares to the equivalent of buy. Both firms predicted that a rebound in PC demand would lift the industry leader, with Morgan Stanley noting that the shares have become cheaper from a valuation perspective in the last year. Dell rose $1.06, or 3.3%, to $33.05.
Several brokerages weighed in with bullish takes on Oracle ( ORCL) after its third-quarter earnings. J.P. Morgan and SG Cowen both called the shares cheap relative to peers after Oracle reported its second straight quarter of in-line earnings and issued guidance roughly consistent with existing forecasts. Oracle was recently off 19 cents, or 1.5%, to $12.06. Intel ( INTC) finished up 61 cents, or 2.2%, to $27.69 and Broadcom ( BRCM) closed up $1.47, or 3.9%, to $39.55. Both stocks lifted after Oppenheimer raised them to buy from neutral. The brokerage opined that recent selling in the semiconductor sector made for a buying opportunity. Network-gear maker Ciena ( CIEN) was trading lower after CSFB lowered its price target, predicting that Lucent ( LU) would prevail in bidding for a $100 million contract with Verizon. Ciena was up 7 cents, or 1.26%, to $5.64. Apollo Group ( APOL) reported a 48% jump in second-quarter net income, beating analysts' estimates. The company earned $63 million, or 35 cents a share, compared with $42.6 million, or 24 cents a share, in the same quarter a year earlier. Aetna ( AET) shares rose after the company boosted first-quarter and full-year earnings guidance well above analysts' consensus expectations. The Hartford, Conn.-based health insurer said it expects first-quarter 2004 operating earnings of $1.68 to $1.73 a share, excluding any prior period. The consensus forecast is $1.54, according to Thomson One Analytics. Aetna's previous EPS forecast was $1.50 to $1.55. Shares rose $4.77, or 6%, to $84.42. European markets were mixed after a selloff Thursday following the train bombings in Spain that left 198 people dead. London's FTSE 100 was up 0.5% to 4467, while Germany's Xetra DAX was up 0.3% to 3915. In Asia, Japan's Nikkei lost 1.2% to 11,163, while Hong Kong's Hang Seng fell 0.7% to 12,932. On Monday, the New York Federal Reserve Bank will release the results of its NY Empire State Index, a volatile barometer of manufacturing conditions in the New York Area. Due out at 8:30 a.m. EST, economists expect the index to fall to 38.9 in March from 42.05 in February.
At 9:15 a.m. EST, the Fed releases industrial production figures for February. Economists expect a 0.4% increase, compared to 0.8% growth in January. Also out from the Fed, are factory use figures. Economists on Wall Street are forecasting the industrial sector operated at 76.4% of capacity in February compared to 76.2% in January. Earnings reports are due out before the opening bell from Dollar General ( DG), forecasted by analysts to report fourth-quarter earnings per share of 34 cents compared to last year's 33 cents; and ImClone ( IMCL), expected to report a fourth-quarter loss per share of 32 cents compared to a loss of 54 cents in the same quarter last year. During the trading session, Tenet Healthcare ( THC) is expected to report fourth-quarter earnings of 2 cents a share.