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Bulls rule Wall Street, day 2
Stock market rallies Friday, gaining for a second session, as investors welcome strong earnings and ignore spiking oil prices.
By Alexandra Twin, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) - Stocks surged Friday, gaining for a second session as Microsoft's upbeat quarterly results and forecast reassured investors about the strength of the earnings period.

Stocks gained for the week, too, recovering from last week's big sell off.

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The Dow Jones industrial average (up 97.74 to 10,907.21, Charts) and the Nasdaq composite (up 21.23 to 2,304.23, Charts) both gained around 0.9 percent. The Standard & Poor's 500 (up 9.89 to 1,283.72, Charts) index added 0.8 percent.

Treasury prices ended little changed, while the dollar gained against other major currencies.

A mild read on the nation's economic growth in the last months of 2005 added to the advance, playing into hopes that the Federal Reserve can end its rate-hiking campaign sooner rather than later.

Friday's advance was a function of bad and good, said Art Hogan, chief market analyst at Jefferies & Co.

"We're looking beyond the negative implications of the GDP numbers and focusing on what it could mean for rate hikes," he added. "And we're looking at the positive news out of Microsoft and others over the past few days."

Strong quarterly results also fueled a rally Thursday. Whether the two-day advance can continue next week may be determined by what the Federal Reserve says at its interest-rate policy meeting Tuesday, said Peter Cardillo, chief market analyst at S.W. Bach & Co.

"We have a lot to get through next week, but I think the advance can continue," Cardillo added. "There seems to be a lot of enthusiasm returning to the market."

Microsoft (Research) reported higher quarterly earnings late Thursday that met analysts' forecasts and higher quarterly revenue that missed forecasts. The software leader also forecast revenue for the current quarter in a range that sets the midpoint above analysts' forecasts.

Shares gained close to 5 percent and gave a boost to other techs.

Stock movers

In addition to Microsoft, fellow Dow component Procter & Gamble (up $0.92 to $59.74, Research) reported quarterly earnings that were flat with a year earlier, but nonetheless topped analysts' estimates.

The consumer products maker also forecast current-quarter results above Wall Street's forecasts. Shares rose 1.6 percent.

Dow stock Pfizer (up $0.94 to $25.99, Research) jumped 3.8 percent after the Food and Drug Administration said late Friday afternoon that it approved the drugmaker's inhaled treatment for diabetes.

Earlier in the day, Pfizer's chief executive mistakenly said that the drug had been approved, prior to the FDA's final decision.

The Dow 30's other big gainers were United Technologies (up $1.23 to $58.75, Research) and Caterpillar (up $2.36 to $67.53, Research).

Homebuilding stocks gained, bouncing back after some early week declines. The Dow Jones Home Construction (up $10.44 to $955.06, Research) index gained over 1 percent.

Among technology movers, chips were particularly strong, with the Philadelphia Semiconductor (up 14.37 to 550.91, Charts) index, or the SOX, gaining 2.7 percent.

Oil stocks also jumped, in tune with a rise in oil prices. The Amex Oil (up 20.39 to 1,114.64, Charts) index gained almost 2 percent, due to a jump in components such as Exxon Mobil (up $1.34 to $61.29, Research) and Valero Energy (up $0.87 to $60.05, Research).

U.S. light crude oil for March delivery increased $1.50 to settle at $67.76 a barrel on the New York Mercantile Exchange.

Market breadth was positive and volume was robust. On the New York Stock Exchange, winners beat losers five to three on volume of 1.94 billion shares. On the Nasdaq, advancers beat decliners by more than four to three on volume of 2.38 billion shares.

GDP grew at an annual rate of 1.1 percent in the fourth quarter, according to a report released Friday, the slowest pace of growth in three years. Economists surveyed by Briefing.com thought GDP would increase at a 2.8 percent rate. It rose at a 4.1 percent rate in the previous quarter.

However, investors seemed to welcome the seemingly negative report, particularly ahead of next week's Fed policy meeting. Investors may be betting that slower economic growth will mean the Fed can stop raising interest rates soon.

A separate report showed a bigger-than-expected rise in new home sales in December.

Treasury prices were little changed, with the yield on the 10-year note at about 4.51 percent.

In currency trading, the dollar gained versus the euro and the yen.

COMEX gold fell $1.10 to settle at $558.80 an ounce.

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