NEW YORK ( TheStreet) -- A weak reading on consumer sentiment and unresolved debt issues in the U.S. put a lid on stock gains even as strong earnings from Google ( GOOG) kept the Nasdaq firmly in positive territory. The Dow Jones Industrial Average finished up 43 points, or 0.3%, at 12,479. The S&P 500 climbed higher by 7 points, or 0.6%, to 1316, and the Nasdaq gained 27 points, or 1%, to 2790. Investors were cautious given that lawmakers indicated that answers surrounding the debt ceiling would not come until next week at the earliest. House Republican Leader Eric Cantor said the House will vote on a bill that would raise the debt ceiling by $2.4 trillion, cut spending and possibly balance the budget. However, the bill is expected to die in a Democrat-led Senate after GOP approval. Cantor's comments came this morning after Standard & Poor's raised the pressure on Washington by warning that it could cut its rating on U.S. government debt before the U.S. actually defaults on some of its financial obligations. The U.S. Treasury has estimated that the government has until Aug. 2 before it faces default. President Barack Obama warned that failing to raise the government's borrowing limit would push up interest rates, effectively creating a tax increase for everyone.
Obama also said that while the parties will likely reach some kind of an agreement, he still hopes for a broader debt-reduction plan. During Friday's afternoon session, ratings agency S&P said certain U.S. financial stocks could be downgraded if the U.S. loses its triple-A credit rating. Strong earnings and deals news gave stocks a boost in early trading. Shares of Google gained 12.5% to close at $595.22 after the Internet search giant easily beat Wall Street's expectations late Thursday with a quarterly profit of $8.74 a share on revenue of $6.92 billion. Analysts had been looking for earnings of $7.85 a share on revenue of $6.55 billion. Citigroup ( C) topped analysts' estimates with a second-quarter profit of $1.09 a share and revenue of $20.6 billion, while Wall Street had been projecting earnings of 96 cents a share on revenue of $19.89 billion. The stock soared during the morning trading session but was last down by 1.6% at $38.40. Shares of Petrohawk Energy ( HK) soared 62.6% to $38.20 on news that mining giant BHP Billiton ( BHP) wants to buy the oil and natural gas company for $38.75 a share, representing a total equity value of roughly $12.1 billion and a total enterprise value of about $15.1 billion. BHP's stock closed down 1.5% at $90.87. Clorox ( CLX) saw its stock surge 8.8% to $74.42 on news that Carl Ichan offered to buy the company for $76.50 a share, or roughly $12.6 billion. According to a regulatory filing, the bid values Clorox shares at a 12% premium to Thursday's closing price. Ichan-controlled entities currently hold 9.4% of Clorox's outstanding stock, making him the company's largest shareholder.
Stocks, however, pared earlier gains after consumer sentiment sunk to its lowest level in two years, according to the University of Michigan's preliminary reading. The consumer sentiment index is an important measure since consumers spend more when they feel confident in the economy and strong consumer spending is crucial to a sustainable U.S. economic recovery. The consumer sentiment index fell to 63.8, from June's level of 71.5. Economists had been projecting a milder decline, to a reading of 71.4, according to Briefing.com.
Results from the European stress tests showed that eight banks failed including two Greek banks, five Spanish banks and one Austrian bank, according to a CNBC report. European banks included in the test would lose €400 billion, which represents 40% of core capital. Shortly after results from the European bank stress tests were released, the Italian parliament passed its austerity budget, leading the euro to trade 0.01% higher against the greenback. The dollar index weakened 0.06%. The FTSE in London shed 0.06%, while the DAX in Frankfurt added by 0.07%. Hong Kong's Hang Seng shed 0.3% while Japan's Nikkei gained 0.4%. Other macroeconomic releases from the morning got minimal reaction from the market. Economists welcomed a 0.2% fall in consumer prices for June after a 0.2% rise in May, but a uptick of 0.3% in the core rate, which excludes volatile food and energy costs, suggested inflation continues to take a toll on consumers. The Federal Reserve Bank of New York said that regional manufacturing activity improved slightly in July, rising to a reading of -3.76, from -7.79 in June. The latest update came short of market expectations for a positive reading of 1. "We had a lot of macro news out and the best that could be said about it was that it was mixed," said Jay Suskind, senior vice president at Duncan Williams. "Citigroup earnings and the Clorox news were more bullish but then I think reality started to sink in. There's been nothing this week that said we're out of the woods in terms of a slowdown." Market breadth was split down the middle with 48% of the 3.9 billion shares trading on the New York Stock Exchange rising while 48% were declining. There were 1.8 billion shares changing hands on the Nasdaq. Energy stocks recorded the session's best gains with Chevron ( CVX) and Exxon Mobil ( XOM) among the Dow's top performers alongside Microsoft ( MSFT), Cisco Systems ( CSCO) and Caterpillar ( CAT). The financial sector pulled down the market with JPMorgan Chase ( JPM) and Bank of America ( BAC) among the Dow's biggest laggards alongside Merck ( MRK), Pfizer ( PFE) and Walt Disney ( DIS). In other corporate news, Rebekah Brooks has resigned as CEO of New International, News Corp.'s ( NWSA) UK newspaper unit, amid the media company's alleged phone hacking scandal. Brooks will be replaced by Tom Mockridge, CEO of News Corp.'s Sky Italia operations. News Corp.'s stock gained 0.5% to $15.51. After the close, Dow Jones CEO Les Hinton, who oversaw News International during the scandal, announced his resignation. The August crude oil contract gained $1.55, or 1.6%, to settle at $97.24 a barrel. Gold for August delivery added 80 cents, or 0.05%, to settle at $1,590.10 an ounce. The benchmark 10-year Treasury rose 12/32, lifting the yield to 2.913%. . -- Written by Melinda Peer and Chao Deng in New York.