Dow ends week with record 3-peat

NEW YORK (CNNMoney.com) -- The Dow industrials surged to a record close Friday, hitting that peak for the third session in a row, after a bevy of strong earnings reports that also propelled the broader stock market.

The Dow Jones industrial average (up 153.35 to 12,961.98, Charts) jumped more than 150 points or 1.2 percent, to 12,961.98, a new closing high. Shortly before the close, the Dow hit a new intraday high of 12,966.29. The Dow finished the week up about 2.8 percent.

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The broader S&P 500 (up 13.62 to 1,484.35, Charts) index added almost 1 percent and hit a fresh 6-1/2-year high. For the week, the S&P 500 gained 2.2 percent.

The Nasdaq (Charts) composite gained roughly 0.8 percent and hit a fresh 6-year high. For the week, the Nasdaq rose about 1.4 percent.

Oil jumped nearly $2, the dollar gained on the euro and yen, and bonds held steady.

"We had another strong day driven by earnings and the predominance of positive earnings surprises," said Timothy Ghriskey, chief investment officer at Solaris Asset Management.

Earnings surprises are typical as corporations typically seek to lowball estimates. That has particularly been true in the first quarter, with executives reluctant to boost expectations amid an uncertain economic picture.

However, the earnings surprises so far have gone beyond the fact that estimates were so low, Ghriskey said.

"We're seeing that companies are able to generate strong earnings growth even in a mid-cycle (economic) slowdown," he said. "I think that impresses the stock market and is helping people look ahead to an eventual pick up in growth as the year progresses."

He said that stocks should be able to sustain and build on gains next week, provided that next week's earnings don't deliver any high-profile surprises.

Companies due to report include Amgen (Charts, Fortune 500), Exxon Mobil (Charts, Fortune 500), Amazon.com (Charts, Fortune 500) and Microsoft (Charts, Fortune 500).

The Dow closed at a record Thursday despite a mixed broader market. But the tone was much more positive Friday, with all three major gauges spiking after solid earnings from Google, American Express, Caterpillar and others.

Beyond the earnings, the advance marked a broader recovery for Wall Street from the big late February selloff, when slumping Shanghai markets triggered a global stock decline on worries about growth. On that day, the Dow slumped 416 points - its biggest one-day loss since the day the markets reopened after the Sept. 11 attacks.

That threw a wrench into eight straight months of gains for stocks, part of the broader 4-1/2-year-old bull market. Trading grew more volatile as investors started worrying about economic growth and how the then emerging fallout in the subprime mortgage market would scar the broader economy. Analysts also began lowering earnings estimates.

But slowly, confidence seems to have returned, thanks to some encouraging economic news and the positive start to the earnings period.

"A lot of negativity had built up, with people finding a cloud in every silver lining, and so now you're seeing a reversal from that," said Douglas Roberts, managing principal at Channel Capital Research.

Roberts said both the recent economic news and outlook from the Federal Reserve seems to be that growth is slowing, but not at a pace to suggest a recession. Also, the fallout from subprime seems to be contained, he said.

Friday afternoon comments from Fed Governor Frederic S. Mishkin seemed to reiterate those views.

"The so-called Goldilocks scenario that Ben Bernanke laid out seems to be developing," Roberts said, referring to the not-too-cold, not-too-hot middle ground for the economy that stock investors prefer.

Nonetheless, stocks are likely to remain volatile in the months ahead, particularly in the typically difficult summer months.

With just over one-fourth of the S&P 500 having reported, earnings are on track to grow 5.2 percent from a year ago, according to the latest Thomson Financial figures. That's a blended number that combines reported and expected results.

Of the companies that have reported so far, 65 percent have topped estimates, 17 percent have met forecasts and 17 percent have missed. Although the early results have been mostly better than expected, earnings are still on track to grow at the slowest pace in 3-1/2 years.

Among the latest to report, Google (up $10.83 to $482.48, Charts, Fortune 500) reported higher quarterly sales and earnings that beat estimates late Thursday, sending shares 2.3 percent higher Friday.

American Express (up $2.05 to $61.00, Charts, Fortune 500), a Dow component, also reported higher quarterly sales and earnings that topped forecasts late Thursday, and it rallied 3.5 percent Friday.

Friday brought earnings from four Dow components including Caterpillar (up $3.20 to $71.82, Charts, Fortune 500), which posted earnings and sales that beat forecasts and boosted its 2007 financial outlook. The stock jumped 4.7 percent.

Fellow Dow stock Honeywell (up $2.34 to $51.40, Charts, Fortune 500) reported higher quarterly sales and earnings that topped estimates and boosted its 2007 financial forecast. Honeywell climbed 4.8 percent.

McDonald's (down $0.42 to $48.36, Charts, Fortune 500) reported higher quarterly sales and earnings that met estimates and also said it will take a $1.6 billion charge in the second quarter. Shares lost 0.9 percent.

Pfizer (down $0.10 to $26.97, Charts, Fortune 500) reported lower quarterly profit, but adjusted earnings topped Wall Street estimates. Shares lost 0.4 percent.

McDonald's and Pfizer were the only Dow 30 components that slid Friday, with the other 28 all rising.

Among other movers, Advanced Micro Devices (down $0.12 to $14.16, Charts, Fortune 500) reported a bigger-than-expected quarterly loss late Thursday, due to lower prices and unit shipments. Shares fell Friday.

Market breadth was positive and volume was improved from recent days. On the New York Stock Exchange, winners topped losers by almost 4 to 1 on volume of 1.9 billion shares. On the Nasdaq, advancers topped decliners by more than 2 to 1 on volume of 12.17 billion shares.

U.S. light crude oil for May delivery rose $1.88 to settle at $63.38 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery rose $7.50 to settle at $695.80 an ounce.

Treasury prices were little changed, with yields on the ten-year note hovering around 4.67 percent, roughly in line with late Thursday levels.

In currency trading, the dollar recovered a bit after hitting a two-year low versus the euro and inched higher versus the yen.