Bright spots drive stocks to big close
Wall Street closed an erratic week with strong gains Friday as impressive earnings from Microsoft and an optimistic forecast from Countrywide Financial outweighed investor concerns about the glum housing market, record-high oil prices and unremarkable corporate earnings.
Friday’s report from Countrywide that it expects to return to profitability soon, despite a big third-quarter loss, gave investors hope that the problems in the housing market are contained and that U.S. consumers still have spending power. Thursday night’s report from Microsoft inspired strong buying of shares across the tech sector.
“The market is higher for just two reasons -- Countrywide and Microsoft,” Peter Boockvar, equity strategist at Miller Tabak, said of Friday’s trading. “You take those two stocks out of the equation and there is no reason for the market to be higher. Microsoft single-handedly is driving the Nasdaq.”
Mixed profit reports and data showing economic weakness have made investors uncertain whether the market is overvalued. Earnings will be pushed aside next week, however, as the main focus of investor attention -- and taking its place will be the Federal Reserve’s rate-setting meeting Tuesday and Wednesday.
The Dow Jones industrial average rose 134.78 points, or 1%, to 13,806.70. Broader stock indicators also gained. The Standard & Poor’s 500 index rose 20.88 points, or 1.4%, to 1,535.28, and the technology-dominated Nasdaq composite index advanced 53.33, or 1.9%, to 2,804.19.
The Russell 2,000 index of smaller companies surged 15.28 points, or 1.9%, to 821.39.
Advancing issues outnumbered decliners by nearly 3 to 1 on the New York Stock Exchange.
For the week, the Dow rose 2.1%, the Nasdaq was up 2.9%, and the S&P; 500 jumped 2.3%. The gains followed losses for all three indexes last week.
High oil prices didn’t damp investors’ spirits either. After oil surged above $92 a barrel in Asian trading overnight, December crude futures rose $1.40 to settle at $91.86 a barrel on the New York Mercantile Exchange, marking the near-term contract’s second consecutive record close.
“Because oil prices are so high, our nation’s oil bill has gone up. We’re exporting dollars to pay for oil and [foreigners] are reinvesting those dollars back in our markets -- the so-called petrodollars finding their way back,” said Tom McManus, investment strategist with Banc of America Securities.
Even as stocks advanced, investors poured money into commodities as a hedge against a falling dollar, which hit another record low against the euro. Gold surged $16.60 to $783.90 an ounce, its highest price since January 1980. Other metals and energy commodities and agriculture futures all moved higher.
Treasury bond yields rose as stocks climbed. The yield on the 10-year Treasury note climbed to 4.40% from 4.38% late Thursday.
Friday’s stock gains were fueled by company-specific news.
Countrywide posted a loss of more than $1 billion in the third quarter, but the beleaguered mortgage lender, whose stock has plummeted because of rising sub-prime mortgage defaults, said it would be profitable in the fourth quarter and next year. The shares jumped $4.23, or 32.4%, to $17.30.
Microsoft reported that its profit jumped 23%, thanks to brisk sales of the new “Halo 3” video game, the Windows operating software and the Office productivity suite. Microsoft shares rose $3.04, or 9.5%, to end at $35.03.
Financial stocks rebounded solidly, but the sector continued to show signs of uneasiness after the summer’s credit market problems. The New York Times reported that after Merrill Lynch posted its sharp third-quarter loss Wednesday, the investment bank’s chairman and chief executive floated the idea of a merger with Wachovia. Merrill shares rose $5.19, or 8.5%, to close at $66.09.
In other market highlights:
* DeVry soared $15.06, or 38%, to $55.09 after the for-profit education company topped profit and sales projections, and some analysts upgraded the stock.
* Puget Energy surged $3.85, or 16%, to $27.80. A group of investors agreed to pay $30 a share, or $3.5 billion, for the Washington state utility company.
* Tesoro rallied $7.28, or 13%, to $64.48. Kirk Kerkorian’s L.A.-based Tracinda plans to offer $64 a share for 16% of the oil refiner, raising its Tesoro stake to 20%.
* BEA Systems slumped $1.03, or 5.9%, to $16.50. The software maker again rejected Oracle’s buyout offer of $17 a share, or $6.7 billion. The offer carries a deadline of Sunday. Oracle rose 35 cents, or 1.7%, to $21.35.
* Trident Microsystems plummeted $5.06, or 41%, to $7.15 after several analysts downgraded the graphics chip maker.
* Baidu.com jumped $19.09, or 5.7%, to $353.39. The Chinese search engine operator said third-quarter profit more than doubled on increased traffic.
* Stock markets overseas advanced. Key stock indexes rose 1.4% in Japan, 1.8% in Hong Kong, 1.3% in Britain, 0.2% in Germany and 0.6% in France.
