Wall Street ended a difficult week with the broad S&P 500 closing higher on Friday as investors bought beaten-up financials on hopes of further aid from Washington, offsetting a disappointing outlook from General Electric that kept the Dow under water.
GE's stock dropped almost 11 percent after the economic bellwether reported earnings that met Wall Street's expectations, but warned of an "extremely difficult" 2009. News that President Barack Obama and his economic advisers will meet on Saturday fuelled hopes that the new administration will put together another rescue package for the ailing financial sector. The S&P Financial Index rose 3.4 percent.
"Financials are getting a lift in anticipation of more creative federal involvement from the Obama White House next week," said Peter Kenney, managing director at Knight Equity Markets in Jersey City, New Jersey. "People are expecting the financials to get significant help."
The Dow Jones industrial average shed 45.24 points, or 0.56 percent, to 8,077.56. But the Standard & Poor's 500 Index rose 4.45 points, or 0.54 percent, to 831.95. The Nasdaq Composite Index added 11.80 points, or 0.81 percent, to 1,477.29.
For the week, the Dow dropped 2.5 percent, the S&P 500 slipped 2 percent and the Nasdaq fell 3.4 percent. The Nasdaq was the best-performing index, led higher on Friday by large technology companies, including Google Inc, whose shares rose 5.9 percent to $324.70 after the Silicon Valley company's quarterly earnings beat estimates.
J.P. Morgan Chase and Bank of America were among the top-performing financial stocks. Some analysts cited market talk of further government cash injections to banks, while others said investors were tempted by stocks whose prices were slashed in this week's sell-off. J.P. Morgan Chase, gained 5.1 percent to $24.28 and gave the greatest support to the Dow, while Bank of America's stock shot up 9.3 percent to $6.24, while Citigroup jumped nearly 12 percent to $3.47, all in NYSE trading.
Chevron ranked among the Dow's best performers as March crude oil futures rose more than 6 percent, or $2.80, to settle at $46.47 a barrel, aided by expectations of a cold snap in the US Northeast. Chevron gained 1.2 percent to $70.82. An S&P index of energy stocks advanced 2.2 percent.
In the afternoon,, the Dow briefly turned positive and quickly climbed almost 30 points, rising as high as 8,152.59. But the blue chip average couldn't overcome the drag of GE and investors' concerns about the weak business outlook in 2009 for some major industrial companies.
During Friday's session, the Dow swung 243.56 points from its intraday high to its session low of 7,909.03 - its lowest level intraday since November 21, 2008. For January so far, the Dow is down 8 percent month-to-date. With respect to General Electric, investors also fretted about a possible dividend cut despite reassuring comments by GE's chief executive.
The Dow component is considered a barometer of the US economy's health because its businesses range from financial services with its GE Capital unit to media and entertainment through NBC Universal and the manufacturing of products as diverse as jet engines, medical imaging equipment and light bulbs. On Friday, GE warned that 2009 would be "extremely difficult." GE's stock lost 10.8 percent to $12.03.
Fellow Dow component United Technologies Corp, which was downgraded to "market perform" by Bernstein Research, lost 3.2 percent to $47.41. Also weighing on the Dow was Caterpillar, which dropped 4.2 percent to $35.66 after rival Komatsu Ltd lowered its profit forecast for the year, citing a sharp decline in global demand.
Trading volume was light on the New York Stock Exchange, with about 1.42 billion shares changing hands, slightly below last year's estimated daily average of roughly 1.49 billion, while on the Nasdaq, about 2.19 billion shares traded, slightly below last year's daily average of 2.28 billion. Advancing stocks outnumbered decliners on the NYSE by a ratio of about 8 to 7. But on the Nasdaq, the trend was the opposite, with about seven stocks falling for every six that rose.
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