US stocks capped a third straight week of gains on Friday as encouraging earnings helped the market sustain upward momentum, led by Baidu Inc, the latest tech company to beat estimates. The market has defied expectations for a pullback following a strong rally prior to the earnings season. Some investors were expecting the results to provide an excuse for broad profit-taking.
"To get decent earnings after a nice little rally in the market and have the market sustain the gains or even achieve a little more is a really good thing and bodes well," said Robert Stimpson, a fund manager at Oak Associates in Akron, Ohio. Volume was very light after nearly two weeks of more active trading.
Just 5.76 billion shares were traded on the NYSE, Amex and Nasdaq. The daily average this year has been around 8.8 billion shares. Earnings in the technology sector, the S&P's largest, have been particularly strong. Profit at Baidu, the Chinese Web search engine, beat Wall Street estimates and the company forecast strong demand ahead. Baidu's shares rose 4.6 percent to $107.28.
The Dow ended lower, weighed down by American Express whose shares slipped as regulatory issues overshadowed rising profit. Verizon Communications Inc also fell after it said additions of new wireless customers may lag. The Dow Jones industrial average dropped 14.01 points, or 0.13 percent, to 11,132.56. The Standard & Poor's 500 Index gained 2.82 points, or 0.24 percent, to 1,183.08. The Nasdaq Composite Index gained 19.72 points, or 0.80 percent, to 2,479.39.
For the week the Dow and the S&P 500 each rose 0.6 percent, while the Nasdaq climbed 0.4 percent. Technology has led gains in the recent rally. The Nasdaq is up more than 17 percent since the end of August compared with the S&P 500, which is up 12.7 percent. The Nasdaq closed just shy of its highest level since May on Friday. Early reports from technology companies have given a mostly rosy picture of the sector's future, including Google's much stronger-than-expected earnings a week ago. Baidu late Thursday gave a robust outlook for its business.
Also boosting the Nasdaq were shares of online retailer Amazon.com Inc, which gained 2.5 percent to $169.13 after Wall Street analysts raised their price targets on the company, even as Amazon gave a disappointing forecast on Thursday. Shares of American Express declined 3 percent to $39.03 while Verizon lost 1.3 percent to $32.09. Also on the down side, Leggett & Platt Inc posted a lower-than-expected quarterly profit, hurt by weakness in its residential furnishings market. The company also forecast 2010 earnings below market expectations. The shares lost 8.6 percent to $21.01.
The S&P 500 sent a bullish signal as the index's 50-day moving average crossed above its 200-day moving average, known as a golden cross. That upward momentum indicator last occurred in June 2009, and the benchmark index rose more than 35 percent in the following 10 months. However, the bullish signal doesn't always signal an up market, says Chris Burba, short-term market technician at Standard & Poor's in New York.
"If you get a golden cross when the market has been consolidating for a while, you have a much higher probability the market is going to take off," he said. Two top Federal Reserve officials gave contrasting views on the need for more stimulus for the US economy.
Growing speculation in recent weeks that the Fed will extend the quantitative easing measures at its next meeting in November has pressured the dollar while boosting equities. Equities have recently traded in tandem with the euro, with S&P futures rising along with Europe's single currency.
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