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NEW YORK (CNN/Money) -
Stocks climbed Friday afternoon, as investors scooped up beaten-down shares in technology and banking at the end of an otherwise tough week for the market.
The Dow Jones industrial average (up 70.75 to 10,287.34, Charts) added 0.7 percent. The broader Standard & Poor's 500 (up 9.73 to 1,186.57, Charts) index and the Nasdaq composite (up 17.61 to 2,064.83, Charts) both gained over 0.8 percent.
The three major gauges slipped modestly for the week, now having fallen four out of the last five weeks.
The major gauges had languished in the morning amid a bevy of economic news, including a mixed read on inflation and a bigger-than-expected drop in consumer sentiment.
But stocks recovered in the afternoon as oil prices dipped and investors engaged in some bargain hunting after the recent selloff. Software, financials, retailers and biotechs led the session's gainers.
Stocks have had a tough two weeks with worries about inflation and higher interest rates sparking a selloff in some of the sectors that have fueled the advance of the third quarter, including energy stocks, homebuilders and a variety of tech issues.
The major gauges began Friday's session at or near five-month lows.
After such a decline, the market seems to have put in a short-term bottom, said David Briggs, head of equity trading at Federated Investors. That should allow it to rise in the short term, he added.
The movement was also seasonal, he noted.
"We seem to have a hiccup every late September or October, and that's set us up for a bit of a rally," Briggs added. "The question is whether it fades in early November or lasts through the holidays. I need to wait and hear from retailers before that becomes clear."
Next week bring the first big batch of quarterly earnings reports, including half of the components that make up the Dow 30.
Economic reports of interest will include the Producer Price index and the Fed's "beige book" survey of the economy.
Mixed reads on inflation
In a day heavy on economic news, the Consumer Price index (CPI) stood out.
"The CPI captured the center stage as it's the biggest one-month increase in 25 years," said Stuart Hoffman, chief economist at PNC Financial Services Group. "We certainly know why, with energy prices having skyrocketed."
The consumer price index (CPI) rose 1.2 percent in September, topping forecasts and rising from the previous month, the government reported Friday morning. However, most of the rise was due to the jump in oil prices during the period.
Excluding the volatile food and energy sector, so-called "core" CPI rose a smaller-than-expected 0.1 percent in September, the same as it did in August; the core CPI is among the Federal Reserve's most closely-watched economic indicators.
"People drew some comfort in the smaller-than-expected core index, but I think the core is a bit deceptive," Hoffman added. He noted that a closer look at the numbers showed broader pricing pressure.
"I think the Fed will look at the core number and determine that it was understated, and still raise rates by a quarter-percentage point at the meeting on November 1," Hoffman added.
The fed funds rate, an overnight bank lending rate, currently stands at 3.75 percent after 11 consecutive rate hikes. Investors have been focused on recent data for hints about what the Fed might do at the last two meetings of the year.
The bond market certainly seemed to react to the inflationary aspect of the CPI and to bets of higher interest rates.
Treasury prices fell, raising the yield on the 10-year note to 4.48 percent from 4.46 percent late Thursday. Treasury prices and yields move in opposite directions.
In other economic news, another government report showed overall retail sales edged higher in September after August's decline, but the increase failed to meet economists' forecasts. Sales excluding autos rose a bigger-than-expected 1.1 percent.
There was also a weaker-than-expected preliminary read on October consumer sentiment from the University of Michigan, reflecting the impact of higher energy prices and inflation fears.
A separate report showed a larger-than-expected rise in business inventories in August. Another report showed a decline that was steeper than expected in both industrial production and capacity utilization.
What moved?
Shares of General Electric (up $0.32 to $34.34, Research) edged higher after the Dow component reported improved quarterly earnings that were in line with analysts' estimates. The stock is only the second of the Dow 30 to report results, with more than half of the components set to report next week.
Other Dow gainers included economically-sensitive issues like Alcoa (up $0.43 to $22.97, Research) and Caterpillar (up $0.74 to $54.74, Research), as well as Merck (up $0.35 to $27.16, Research), General Motors (up $0.83 to $27.98, Research) and United Technologies (up $1.14 to $51.63, Research).
Oil stocks rebounded from a morning selloff to surge through the close. The Philadelphia Oil Service (up 3.95 to 159.63, Charts) index added 2.5 percent.
Oil producer Vintage Petroleum agreed to a $3.52 billion buyout from larger rival Occidental Petroleum. Following the news, Vintage (up $10.35 to $48.94, Research) jumped nearly 27 percent in active New York Stock Exchange trade, while Occidental (down $2.25 to $72.73, Research) shares slipped 3 percent.
Biotechs rallied, bouncing back after taking a drubbing in recent weeks. Celgene (up $4.09 to $51.70, Research) led the way, jumping on a Merrill Lynch upgrade.
The Amex Biotech (up 12.33 to 620.58, Charts) index added 2 percent.
Financial stocks gained as well, boosting the Philadelphia Bank (up 1.27 to 95.23, Charts) index up more than 1.3 percent.
Chip stocks were among the decliners, with investors taking profits after lifting the Philadelphia Semiconductor (down 3.64 to 442.69, Charts) index by more than two percent Thursday.
Texas Instruments (down $0.96 to $29.93, Research) lost 3.1 percent after Bear Stearns downgraded it to "peer perform" from "outperform." The analyst said the company was facing tougher competition and pricing pressure heading into 2006.
Among other decliners, Waters (down $4.80 to $36.58, Research) fell 11.6 percent in unusually active New York Stock Exchange trade after the maker of instruments for drug research warned that third-quarter sales and earnings would miss forecasts.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by eleven to five on volume of almost 1.70 billion shares. On the Nasdaq, advancers topped decliners by just over two to one on volume of 1.55 billion shares.
U.S. light crude oil for November delivery fell 45 cents to settle at $62.63 per barrel on the New York Mercantile Exchange.
The dollar fell versus the euro and yen.
COMEX gold fell $2 to settle at $471.80 an ounce.
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