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Stocks Close Mostly Higher On Upbeat Earnings News - U.S. Commentary

Stocks moved mostly higher over the course of the trading day on Friday, although buying interest was relatively subdued. The markets benefited from some upbeat earnings news as well as a better than expected reading on consumer sentiment.

The major averages ended the day in positive territory but off their highs for the session. The Dow edged up 23.69 points or 0.2 percent to 13,228.31, the Nasdaq climbed 18.59 points or 0.6 percent to 3,069.20 and the S&P 500 crept up 3.38 points or 0.2 percent to 1,403.36.

With the gains on the day, the major averages all closed higher for the week. The Dow rose by 1.5 percent, while the Nasdaq and the S&P 500 advanced by 2.3 percent and 1.8 percent, respectively.

The strength that emerged on Wall Street was partly due to upbeat earnings news from big-name companies like Amazon.com (AMZN), with the online retailer surging up by 15.8 percent after reporting its first quarter results.

After the close of trading on Thursday, Amazon reported first quarter earnings that fell year-over-year but still came in substantially higher than analysts had expected.

Drug giant Merck (MRK) and auto giant Ford (F) also reported better than expected first quarter earnings but ended the day in the red.

Positive sentiment was also generated by a report from Reuters and the University of Michigan showing an unexpected improvement in U.S. consumer sentiment in the month of April.

The report showed that the consumer sentiment index for April came in at 76.4 compared to the mid-month reading of 75.7. With the upward revision, the index came in above March's final reading of 76.2 and is at its highest level since February of 2011.

The upbeat data helped to offset negative sentiment generated by a separate report from the Commerce Department showing somewhat weaker than expected economic growth in the first quarter.

The Commerce Department said that GDP increased by 2.2 percent in the first quarter compared to the 3.0 percent growth seen in the fourth quarter. Economists had been expecting first quarter GDP to increase by about 2.5 percent.

While GDP rose by less than expected in the first quarter, it still marked the eleventh consecutive quarter of economic growth. Additionally, traders often view the GDP data as old news.

Sector News

Extending a recent upward move, housing stocks saw substantial strength on the day, driving the Philadelphia Housing Sector Index up by 2.2 percent. With the gain, the index reached its best closing level in over a month.

Ryland Group (RYL), PulteGroup (PHM), and Standard Pacific (SPF) turned in some of the housing sector's best performances, adding to the strong gains posted in the past few sessions.

Internet stocks also saw significant strength, resulting in a 2.1 percent gain by the NYSE Arca Internet Index. While Amazon helped to lead the sector higher, Expedia (EXPE) also posted a standout gain after reporting better than expected first quarter results.

Considerable strength also emerged among airline stocks, as reflected by the 2 percent gain posted by the NYSE Arca Airline Index. With the gain, the index reached a two-month closing high.

On the other hand, health insurance stocks came under pressure on the day, with the Morgan Stanley Healthcare Payor Index falling by 3 percent to a three-month closing low. Coventry Health Care (CVH) posted a steep loss after reporting first quarter earnings that missed estimates.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index fell by 0.4 percent, while Hong Kong's Hang Seng Index ended the day down by 0.3 percent.

Meanwhile, the major European markets moved to the upside on the day. The U.K.'s FTSE 100 Index rose by 0.5 percent, the German DAX Index advanced by 0.9 percent and the French CAC 40 Index jumped by 1.1 percent.

In the bond market, treasuries saw modest strength on the heels of the weaker than expected GDP data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.6 basis points to 1.933 percent.

Looking Ahead

The Labor Department's monthly employment report is likely to be in focus next week, although reports on manufacturing activity, personal income and spending, and labor productivity are likely to attract some attention ahead of the release of the jobs report next Friday.

On earnings front, Kraft (KFT), Pfizer (PFE), Humana (HUM), Time Warner (TWX), Allstate (ALL), Cigna (CI), and Visa (V) are among the big-name companies scheduled to release their quarterly results next week.

by RTTNews Staff Writer

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