NEW YORK (CNN/Money) - Bullish notes on McDonald's and Caterpillar and an encouraging forecast from Microsoft propelled the Dow industrials to a higher close Friday, giving the blue-chip average its third straight week of gains.

The Nasdaq and the S&P 500 both closed higher on the session but couldn't manage the same feat for the week.

The Dow Jones industrial average (up 137.33 to 9188.15, Charts) added 1.5 percent and the Standard & Poor's 500 (unchanged at 981.73, Charts) rose about 1.2 percent. The Nasdaq composite (up 10.48 to 1708.50, Charts) added around 0.6 percent after trading close to unchanged throughout the early afternoon.

For the week, the Dow added 0.75 percent, while the S&P 500 lost 0.5 percent and the Nasdaq lost 1.5 percent.

Investors have taken a curious response to the large spate of earnings released this week, on the one hand expressing relief that results have been largely in line, but on the other, shrugging off or giving a negative spin to some heavyweight reports.

Such was the case with IBM Thursday, when investors seemed disappointed that Big Blue's second-quarter bottom line was solid but not spectacular. Similarly, Microsoft's outlook didn't provoke quite as strong a tech reaction as some market watchers might have expected.

"There are a lot of cross-currents going this week," said Robert Philips, chief investment officer at Walnut Asset Management. "Bond prices have been falling sharply, but it hasn't seemed to help stocks. Then you've got all the earnings pretty much coming in in-line but not providing many surprises."

Currently, second-quarter earnings for the S&P 500 companies are expected to rise 6.9 percent from a year earlier, according to earnings tracker First Call. Third-quarter earnings are forecast to rise 13.1 percent, and fourth-quarter earnings are expected to rise 22.2 percent.

"My sense is that we're going to keep consolidating over the next few weeks after the kind of run we've had. Then you could see stocks start to move higher again," Philips added.

Already, one-third of the S&P 500 has reported earnings, and by the end of next week, two-thirds will be done reporting.

Monday brings earnings from 3M and Merck before the opening bell, and from Texas Instruments, Corning and Novellus after the close. Other earnings due later in the week include such influential companies as Boeing, AT&T, Amazon.com, Pfizer, UPS, and AOL Time Warner. (For more details on next week's earnings, click here.)

Monday's main economic report is the June index of leading economic indicators, forecast to show a gain of 0.1 percent after gaining 1.0 percent in May, according to a consensus of economists surveyed by Briefing.com.

Friday was a volatile, if low-key day, with many traders bailing out early ahead of the weekend. Volatility was intensified by the fact that Friday was a triple options expiration day. In addition, after three down days, due largely to tech selling, investors may have been willing to jump back in, particularly in technology. Of the 30 issues that comprise the Dow industrials, 27 closed higher.

After the close of trade Thursday, Microsoft (MSFT: up $0.20 to $26.89, Research, Estimates) reported fiscal fourth-quarter profit of 23 cents per share, up from 21 cents a year earlier but a penny shy of estimates. However, revenue came in better than expected and up from a year earlier. The company also said fiscal year 2004 results would top estimates on a revenue and earnings-per-share basis. The stock rose 0.75 percent.

In addition, shares of Swedish telecom Ericsson (ERICY: up $1.78 to $12.57, Research, Estimates) rose 16.5 percent in active trade after the company reported a narrower-than-expected quarterly loss that improved from a year earlier due largely to cost-cutting. The company also pledged to return to profitability by the year's end. The comments were welcomed by telecom investors still stinging from Thursday's weak report from Nokia (NOK: up $0.38 to $14.76, Research, Estimates).

Non-earnings related gains paced the Dow's move Friday. McDonald's (MCD: up $0.90 to $21.39, Research, Estimates) shares rose 4.4 percent after Bear Stearns upgraded the stock to "outperform" from "peer perform," saying it expects the company to top the consensus estimate for third- and fourth-quarter earnings due to management tactics and improved trends.

Caterpillar (CAT: up $2.07 to $65.61, Research, Estimates) rose almost 3.3 percent after Goldman Sachs raised its 2003 earnings-per-share forecast on the heavy machinery maker, following the company's strong earnings report and forecast Thursday. Goldman expects Caterpillar to earn $3.25 per share, up from an earlier forecast of $2.20.

Additionally, AOL Time Warner (AOL: up $0.34 to $16.74, Research, Estimates) shares added 2.1 percent after the parent of CNN/Money agreed to sell its CD and DVD manufacturing business to Canadian company Cinram for $1.05 billion, in an attempt to cut its bulging debt load.

Market breadth was positive. On the New York Stock Exchange, where volume was 1.35 billion shares, the gainer/loser ratio stood at better than two to one. On the Nasdaq, where 1.58 billion shares traded, advancers beat decliners nine to seven.

Treasury prices fell, sending the 10-year note yield up to 4.00 percent from 3.92 percent late Thursday, as its price dropped 21/32 of a point. The dollar gained against the euro, but slipped versus the yen.

NYMEX light sweet crude oil futures rose 31 cents to $31.03 a barrel. COMEX gold rose $3 to $347.30 an ounce.