NEW YORK (CNN/Money) -
U.S. stocks managed to close higher for the second week in a row on gains Friday, as investors bet that a U.S.-led military attack on Iraq is still a few weeks away. But next week's market may not be so lucky.
Although few analysts expect any Iraq resolution in the next few weeks, market participants will have plenty of other issues to keep them distracted.
Next week is again heavy on economic reports. Existing home sales and consumer confidence data are both due Tuesday. Thursday brings reports on durable goods orders and new home sales. Friday is a doozy: reports are due on preliminary fourth-quarter gross domestic product, the revision of the University of Michigan's consumer sentiment index, and regional manufacturing activity.
The economic news and continued underlying war jitters will remain front and center next week, particularly since only a few influential companies are due to report quarterly results. Among the companies expected, computer hardware maker Hewlett-Packard (HPQ: up $0.30 to $18.17, Research, Estimates) and retailer Home Depot (HD: up $0.76 to $22.41, Research, Estimates) are due to announce results Tuesday.
On Friday, the Dow Jones industrial average (Charts), the S&P 500 index (up 11.07 to 848.17, Charts) and the Nasdaq composite (up 17.79 to 1349.02, Charts) all gained around 1.3 percent.
For the week, the Dow gained 1.4 percent, the S&P 500 index gained 1.6 percent, and the Nasdaq composite gained 3 percent.
Stocks opened mixed Friday and then sank after mid-morning reports about an explosion near a fuel loading dock in Staten Island, N.Y., caused fears of a terrorist attack. But when officials confirmed the explosion was accidental and unrelated to terrorism, stocks surged and managed to maintain their gains through the close.
Light volume and the expiration of February options on stocks and indexes had led some market watchers to predict late session volatility, but that was not to be the case, with the markets trading fairly consistently through the last hour.
With little news from the Middle East, there was more focus for stock investors on other factors and particularly the price of commodities, said Matt Ruane, head of listed trading at Gerard Klauer Mattison.
"There's also still some money being put to work out there for solid companies with good fundamentals. It's just really selective," Ruane said.
Dow stocks in the consumer and retail sectors, including Johnson & Johnson (JNJ: up $1.56 to $53.48, Research, Estimates), Wal-Mart (WMT: Research, Estimates), and Home Depot (HD: up $0.76 to $22.41, Research, Estimates), were among the bigger gainers.
"The key here is still commodities. Oil has been above $30 a barrel for what, the last 90 days?," Ruane said. "Commodity prices need to come down. Wholesale numbers yesterday were high because of energy, because of oil. It's a concern. It's a drag on the economy and the dollar."
On Thursday, the Producer Price Index, a reflection of movement in wholesale prices, showed its largest gain in 13 years. But apparently producers were unable to pass on this cost to consumers and the Consumer Price Index came in at an as-expected 0.3 percent Friday. The "core" index, which excludes fickle energy and food prices, rose only 0.1 percent, compared with expectations for a 0.2 percent increase.
Among commodities, light crude oil rose 84 cents to $35.58 a barrel in New York, gaining in particular after the explosion in Staten Island. Also in New York, gold fell $1.30 to $351.80 an ounce.
Prices in the bond market were mostly lower and the yield on the benchmark 10-year note rose to 3.89 percent. The dollar was slightly stronger against the euro but weaker against the yen.
Of the few individual stock stories yielding influence, BEA Systems (BEAS: down $0.58 to $10.63, Research, Estimates), a software maker, tumbled more than 5 percent after the company gave a cautious outlook in its current quarter and declined to give fiscal year guidance.
SBC Communications (SBC: down $0.57 to $20.73, Research, Estimates) was one of the Dow's few decliners, losing more than 2 percent in a hangover effect from the previous session. Lehman Bros. Thursday downgraded the stock to "equal weight" from "overweight." In addition, an FCC ruling Thursday to enforce regulations that force local phone companies to share their networks with rivals was perceived as being partially negative for the stock.
Any market gains in the near-term are likely to be small amid continued uncertainty about the Middle East, market watchers said. In the latest developments, Turkish officials said they have reached a broad agreement with Washington to allow U.S. troops to use Turkey's bases in the event of a war. However, nothing is expected to happen for the next few weeks.
Market breadth improved gradually throughout Friday, along with the rally, on very light volume. On the New York Stock Exchange gainers led losers by 11 to 5 as 1.35 billion shares traded. On the Nasdaq, advancers edged decliners 5 to 3 on volume of 1.29 billion shares.