NEW YORK (CNN/Money) -
Stocks rallied Friday, near the end of a tough week for the market, as investors took comfort in reports showing a rise in industrial production and a drop in a key inflation measure.
The Nasdaq composite (up 17.35 to 2,087.91, Charts) gained more than 0.8 percent. The Dow Jones industrial average (up 52.17 to 10,558.00, Charts) and the Standard & Poor's 500 (up 7.07 to 1,184.52, Charts) index both rose a bit more modestly.
For the week, the Nasdaq and the S&P 500 closed just below unchanged and the Dow posted a small loss.
The morning's strong economic reports supported the stock advance, and helped quell some worries about the strength of the economy, said John Davidson, president and CEO at PartnersRE Asset Management.
"The industrial production and capacity utilization numbers were pretty strong and inflationary pressures seem to be under control, as the PPI showed," he said.
While the economic numbers are looking pretty upbeat generally, he said expectations for growth may need to come down a bit. Additionally, as the period of quarterly earnings reporting heats up, what corporations have to say about their business going forward will be key to driving stocks.
"If we have a good earnings season, that could turn the tide for markets," he added.
Approximately 76 members of the S&P 500 report earnings during next week's holiday-shortened trading week, including 8 Dow components.
Stock and bond markets are closed Monday for the Martin Luther King, Jr. Day national holiday.
Tuesday earnings highlights include 3M (Research), Bank of America (Research), Citigroup (Research) and Wells Fargo (Research).
Friday was noteworthy in that it marks the five-year anniversary of the Dow Jones industrial average hitting its all-time high, toward the end of the bull market bubble. On Jan. 14, 2000, the Dow hit an intraday high of 11,750.28 and ended the session at 11,722.98.
As of Friday's close, the Dow was down around 11 percent from that all-time closing high.
Econ news impresses
A number of reports were released Friday. However, due to ongoing worries about inflation, the most closely watched report was likely the producer price index (PPI), which measures wholesale prices.
PPI saw a 0.7 percent decrease in December versus a 0.5 percent rise in November, due in large part to a drop in energy prices. Economists surveyed by Briefing.com thought PPI would fall 0.2 percent, on average.
The so-called "core" PPI, which excludes volatile food and energy, rose 0.1 percent, versus economists' forecasts for a rise of 0.2 percent. Core PPI rose 0.2 percent in November.
A report on industrial production showed surprising strength, with a 0.8 percent gain in December.
A separate report showed that business inventories rose 1 percent in November versus expectations for a rise of 0.6 percent. Business inventories rose an upwardly revised 0.4 percent in October.
Stocks have had a tough week as the market continues to consolidate after the big gains of late 2004. Thursday was a fairly quiet, slightly negative session until the last hour, when a weaker-than-expected 2005 earnings forecast from Dow component General Motors sent stocks reeling.
After that big selloff, investors were willing to scoop up some of the beaten-down shares, egged on by the solid economic reports.
On the move
Among stock movers, Dow component Walt Disney (up $0.55 to $28.30, Research) popped 2 percent after Merrill Lynch upgraded it to "buy" from "neutral," saying the company's earnings and share momentum looks like it should continue. The brokerage also lifted its forecast on Disney's fiscal 2005 earnings to $1.26 per share from $1.23 per share.
A number of Internet shares rose, sending the Goldman Sachs (up 5.15 to 169.83, Charts) Internet index up nearly 2.5 percent.
Yahoo! (up $1.37 to $36.70, Research) and Ask Jeeves (up $3.00 to $30.04, Research) both rose on a bullish Piper Jaffray note. The brokerage boosted the 12-month price target of the two Web search firms, saying that they are both seeing strong growth and gaining market share, which should boost earnings.
Sun Microsystems (down $0.36 to $4.22, Research) slumped after the company reported quarterly revenue that fell from a year ago and missed analysts' estimates. Sun also reported a profit of a penny a share, in line with estimates and up from a loss a year earlier.
Cree (down $9.19 to $25.88, Research) tumbled 26 percent in active Nasdaq trade following the release of the company's quarterly results late Thursday.
The chipmaker reported earnings that rose from a year ago and met estimates, but margins -- a key measure of profitability -- were short of estimates. Cree also warned that current-quarter earnings will miss forecasts.
After the close Friday, Oracle (Research) said that it was cutting 5,000 jobs, or roughly nine percent of its workforce, over the next ten days as part of its integration of recently purchased PeopleSoft (Research).
Market breadth was positive. On the New York Stock Exchange, winners beat losers by 2 to 1 on volume of nearly 1.33 billion shares. On the Nasdaq, advancers topped decliners 2 to 1 on volume of around 2.07 billion shares.
U.S. light crude oil for February delivery rose 34 cents to settle at $48.38 a barrel on the New York Mercantile Exchange.
Treasury prices slumped after the industrial production report, pushing the yield on the 10-year note up to 4.22 percent from 4.16 percent late Thursday. Treasury prices and yields move in opposite directions.
In currency trading, the dollar gained versus the euro and fell versus the yen.
COMEX gold fell $2 to settle at $423 an ounce.
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