NEW YORK (CNNfn) - U.S. stocks stabilized Friday as Wall Street staged a strong recovery from a big selloff earlier this week, while investors looked beyond fresh signs of economic weakness and dour results from fiber-optic component maker JDS Uniphase.|
The optimism sent the Nasdaq composite index higher for a third straight session following big losses Monday and Tuesday.
Analysts were upbeat.
"This week has been a big victory for stocks," said Charles Payne, president of Wall Street Strategies. "We weathered the continuous stream of bad news a lot better and we weren't shocked when companies warned for the third quarter. Investors are starting to forget about the past and focus on the future."
The Nasdaq composite index ended the week almost where it began, falling less than 1 point over the five-day period. Meanwhile, the Dow Jones industrial average shed 1.5 percent and the S&P 500 edged 0.4 percent lower.
The tech sector was in focus throughout the week as investors struggled to determine whether the worst news for companies like AT&T (T: down $0.02 to $20.48, Research, Estimates), Amazon.com (AMZN: down $0.08 to $12.25, Research, Estimates), and Hewlett-Packard (HWP: up $0.36 to $24.36, Research, Estimates) was factored into stock prices.
The jury was still out.
"Intuitively people believe we are bottoming but we need to get some sort of confirmation," Frank La Salla, president of BNY Clearing International, told CNNfn's The Money Gang.
On Friday, the Nasdaq composite index gained 6.11 points to 2,029.07 while the Dow Jones industrial average shed 38.96 points to 10,416.67. The S&P 500 advanced 2.89 points to 1,205.82.
Analysts, while heartened, were still cautious.
"I think we've got a market with a lot of renters but not a lot of owners," Mike Murphy, head of equity trading with First Union Securities, told CNNfn's Street Sweep. "There's still not a lot of conviction out there and there won't be until we get some signs of economic stability."
The vacillating action came after two sessions of late-day strength, which was mildly encouraging and investors signaled willingness to test the waters.
"We've had some rainbows, but the themes of low visibility and investor uncertainty have run loud and clear here," said Bryan Piskorowski, market commentator with Prudential Securities. "But you get to the point where selling has run its course and late-day flurries have shown that this process is under way."
Analysts said some investors may want to start nibbling at technology issues, but traders are expected to still dominate the near-term activity.
"If you can't handle volatility or the near-term gyrations, it may be early for a really conservative investor, but those who can handle a little bit of roughness can do extremely well," said Payne.
Market breadth was positive. Nasdaq winners topped losers 1,954 to 1,6948 as 1.57 billion shares changed hands. On the New York Stock Exchange, advancing issues beat declining ones 1,680 to 1,382, as 1.01 billion shares traded.
In other stock markets, Europe's advanced while Asia's mostly rose, with the exception of Tokyo. The dollar was little changed against the euro and the yen. Treasury securities surged.
JDS, Qualcomm send mixed signals
Fiber-optic component maker JDS Uniphase (JDSU: down $0.92 to $8.55, Research, Estimates) posted a $7.9 billion loss for its fiscal fourth quarter and a staggering $50.6 billion loss for the year, and said it will cut another 7,000 jobs. But the stock came off its lows after First Call interpreted the quarterly operating results as a 2-cent-a-share profit, just a penny shy of the consensus forecast.
"The elusive trough in corporate profits does seem to be at hand, but what the Street is looking for is confirmation," Prudential's Piskorowski said. "What we're looking for is the guidance and giving of the time frame of when the worst will be over."
Meanwhile, Qualcomm (QCOM: up $3.52 to $63.18, Research, Estimates) saw third-quarter earnings and revenue fall from the same period a year earlier, but the developer of wireless technology and chips beat profit expectations by a penny.
Internet domain registry and security firm VeriSign (VRSN: up $6.93 to $54.10, Research, Estimates) reported a sharply wider second-quarter net loss, yet beat Wall Street expectations, on sales that soared following its acquisition of Network Solutions.
Biotech company Amgen (AMGN: up $3.10 to $60.82, Research, Estimates) beat analysts' second-quarter earnings estimates by 2 cents a share, but came in well below revenue expectations.
Insurer UnitedHealth Group (UNH: down $0.01 to $65.00, Research, Estimates) posted record second-quarter earnings and revenue Friday, surpassing estimates, and said growth through next year should be in line with forecasts.
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Campbell Soup (CPB: down $0.75 to $27.01, Research, Estimates) lowered its earnings guidance for the fiscal year that begins Monday and cut its dividend 30 percent, saying it needs to increase investment in marketing, capital improvements, and research and development.
Digesting economic news
Consumer sentiment continues to a driving force behind the skittish trading activity. And the latest data didn't help inspire confidence.
The University of Michigan's revised July index on consumer sentiment reached 92.4 percent, weaker than the expected 93.7 percent.
Still, analysts weren't overly concerned.
"It's notoriously a very volatile number, but it went to record levels just a scant year ago," Ben Hock, senior investment officer with AIM Management Group, told CNNfn's Market Call.
In other data, the U.S. economy grew at a 0.7 percent annual rate in the second quarter but was weaker than expected, according to the Commerce Department. U.S. gross domestic product (GDP) – the broadest measure of the nation's economy – was less than a revised 1.3 percent growth rate in the first quarter.
June new home sales rose 1.7 percent to an annual rate of 922,000. While modestly short of expectations – economists polled by Briefing.com forecast a rate of 925,000 – the latest data reflected continued strength in the U.S. housing market.
Few were surprised to see some weakness in the second-quarter reports, as most people had expected dismal news on the economic and earnings front.
"The past two days' strength is not a function of what happened in the June quarter, it's a function of traders trading more toward the notion that the economy is going to recover and you have to buy them before you miss them," said Bill Meehan, chief market analyst with Cantor Fitzgerald.
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