|BEGINSUB|Stocks End Friday’s Session Mixed After Late Day Recovery – U.S. Commentary|ENDSUB|
Shrugging off weak consumer confidence data, stock ended Friday’s session mostly higher as investors focused on positive results from companies like American Express
(AXP). The tech-heavy Nasdaq ended the session moderately lower, however, as traders were unimpressed with Microsoft’s
(MSFT) quarterly results.
While stocks moved lower over the course of the morning, Dow component American Express kept selling pressure to a minimum after the credit card company reported first-quarter net earnings that came in above analysts’ expectations and affirmed its full year earnings forecast.
Nonetheless, technology stocks saw particular weakness, hurt by a sharp decline by Microsoft. After the close of trading on Thursday, Microsoft's third quarter earnings came in above expectations but its quarterly revenue fell short of analysts' forecast. The company also gave a tepid outlook for the fourth quarter.
Consumer sentiment fell to its lowest level in 26 years in April, according to the revised reading of the Reuters/University of Michigan consumer sentiment index, with the index coming in below economist estimates. The troubling data made investors skittish, sending the markets lower for the majority of the session, as consumer spending makes up 70 percent of the U.S. economy.
The reading on the consumer sentiment index for April was revised down to 62.6 from the previously reported 63.2. Economists had been expecting the index to come in unchanged from the previously reported reading. With the downward revision, the April reading was even further below the March reading of 69.5 and was the lowest reading for the index since March of 1982.
The major averages staged a recovery in the afternoon, lifting the Dow and the S&P 500 into positive territory. The Dow closed up 42.91 points or 0.3 percent at 12,891.86 and the S&P 500 closed up 9.02 points or 0.7 percent at 1,398.74, while the Nasdaq closed down 5.99 points or 0.3 percent at 2,422.93.
Despite the mixed performance on Friday, the major averages all closed higher for the week. The Dow posted a weekly gain of 0.3 percent, while the Nasdaq rose 0.8 percent and the S&P 500 added 0.5 percent. With the gains, the Dow and the S&P 500 ended the week at three-month closing highs.
Sector News
Healthcare provider stocks turned in some of the best performances after two healthcare stocks were upgraded. The Morgan Stanley Healthcare Provider Index closed up 3.9 percent, adding to gains posted in the previous two sessions to end the day at its best closing level in two months.
Among healthcare provider stocks, Tenet Healthcare
(THC) was one of the biggest gainers after it was upgraded to an Outperform rating by an analyst at Credit Suisse. The stock gained 13.4 percent, setting a nine-month closing high.
Boosted by American Express’ positive earnings, bank stocks also saw significant buying interest. The S&P Bank Index climbed 3.3 percent, adding to a strong gain posted in the previous session.
Natural gas stocks ended the day sharply higher as well, helped by an increase in the price of natural gas. The Amex Natural Gas Index ended the day up 3.2 percent, nearly reversing two day’s worth of declines. With the gain, the index set a new record closing high.
Other stocks that posted notable gains include chemical, health insurance and brokerage stocks. The S&P Chemical Index closed up 3.2 percent, while the Morgan Stanley Healthcare Payor Index saw a 3.1 percent gain. The Amex Securities Broker/Dealer Index ended the day 2.9 percent higher.
On the other hand, disk drive stocks saw considerable weakness. The Amex Disk Drive Index fell 2 percent, nearly reversing two day’s worth of gains, although it remains stuck in a three-week trading range.
Within the disk drive sector, Western Digital
(WDC) closed sharply lower despite reporting better than expected third quarter earnings and revenues. The stock fell 9.1 percent, pulling back from the monthly closing high set in the previous session.
Hurt by the significant decline in Microsoft, the software sector also showed a substantial decline. The Amex Software Index ended the day down 1.7 percent, pulling back from the three-month closing high set on Thursday. Telecommunications and tobacco stocks closed modestly lower as well.
Dow Components
A majority of the Dow components moved back into positive territory in late-day trading, sending the blue chip index modestly higher. Of the 30 stocks that make up the Dow, 19 ended the day up while 11 closed down.
American Express was one of the biggest gainers of the Dow. Earlier, Standard & Poor’s noted that the credit card company should be able to weather the credit market problems due to the high quality credit of its customers. The comments came after the company reported better than expected first quarter earnings.
Shares of the credit card company closed 5.7 percent higher, adding to gains posted in the past two sessions. With the gain, American Express set a two-month closing high.
Boosted by American Express’ gain, Citigroup
(C) also saw significant buying interest. The stock added to a gain posted in the previous session to set a two-month closing high. Citigroup ended the day up 3.3 percent.
Home Depot
(HD) saw considerable strength as well, ending the day up 3 percent. The home improvement retailer closed at its best level in almost three months. Earlier, a Lehman Brothers analyst initiated coverage on the stock with an Overweight rating.
Other Dow components that saw notable gains include Alcoa
(AA), Boeing
(BA) and Pfizer
(PFE). Alcoa ended the day up 2.5 percent, while Boeing saw an increase of 2.2 percent. Pfizer closed 2 percent higher.
On the other hand, Microsoft posted a notable loss after the company reported its third-quarter results. Despite seeing quarterly earnings come in above expectations, its quarterly revenue fell short of analysts’ forecast. Microsoft reported net income for the third quarter of $0.47 per share, compared to $0.50 per share in the year-ago quarter.
Shares of the software giant ended the day down 6.2 percent, reversing the gains posted in the previous two sessions. On Thursday, the stock set a two-month closing high.
General Motors
(GM) also saw considerable selling pressure after Moody’s Investors Service lowered its outlook on the automaker to Negative over concerns about the mortgage unit of GMAC LLC, GM’s former finance arm. General Motors fell 3.3 percent, pulling back from the six week closing high set on Thursday.
Hewlett Packard
(HPQ), 3M
(MMM) and Coca Cola
(KO) ended the day weaker as well. Hewlett Packard closed down 1.9 percent, compared to a 1.7 percent decline by 3M. Coca Cola ended the day 1.5 percent lower.
Other Markets
In overseas trading, the major Asian markets had another mixed session on Friday. The Japanese, Indian, Singaporean and South Korean markets advanced, while the rest of the markets showed weakness. Japan’s Nikkei 225 average ended the day up 2.4 percent.
The major European markets rallied on Friday following the release of strong results from Ericsson. The French CAC 40 Index rose 1 percent compared to a 1.1 percent advance by the German DAX Index and a 0.7 percent gain by the U.K.’s FTSE 100 Index.