Techs stoke stock rally

Wall Street recharges the run; technology leads the way on potential software-sector merger, McDonald's forecast, strong economic news; oil closes at all-time high.

By Alexandra Twin, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- Technology shares jumped Friday on a potential merger in the software industry, while broader gains were limited as investors welcomed strong economic news but questioned how it will impact interest-rate policy.

The Dow Jones industrial average (Charts) and the S&P 500 (Charts) index both gained around 0.5 percent. Both major gauges hit all-time intraday highs on Thursday.

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The Nasdaq composite (Charts) added 1.2 percent. The tech-heavy index hit a fresh 6-1/2 year high on Wednesday.

For the week, the Dow and S&P 500 ended barely higher, while the Nasdaq gained nearly 1 percent.

Although a few profit reports trickled in this week, next week brings the first big batch of quarterly earnings, with Citigroup starting things off Monday and Yahoo! up on Tuesday.

U.S. light crude oil for November closed at a record high of $83.69 a barrel. Oil briefly hit a record trading high of $84.05 a barrel during the session before pulling back.

Treasury prices slipped, boosting the corresponding yields. The dollar gained versus other major currencies.

"The market today is just slightly higher, with the Nasdaq up more because it sold off so hard yesterday," said Timothy Ghriskey, chief investment officer at Solaris Asset Management.

Ghriskey said that the move into the sector was rotational, as much as a response to a possible sale of BEA Systems, sparked by Oracle's bid for the software firm.

Technology led a broader selloff Thursday, with investors backtracking after pushing the major gauges to multi-year highs in the morning. But after that breather, investors were back in rally mode Friday.

Oracle's bid for BEA, McDonald's improved earnings forecast and GE's strong quarterly results highlighted the session's positive corporate news as the earnings reporting period gets underway.

Wall Street also embraced a strong read on retail sales and a mild reading on inflation. Although on the downside, those reports may have also dampened hopes that the Federal Reserve will cut interest rates at its next policy meeting that ends Oct. 31, as was evident by rising Treasury bond yields.

However, concerns that the economy might be at risk of perking up too much were tempered by weaker-than-expected reports on business inventories and consumer sentiment.

The reports seemed to further recent hopes that the economy is in the sweet spot between growth that is strong, but not inflationary. If that proves to be true, that would put the economy in a place not so different from where it was before the housing market slump and credit crisis raised fears of recession, said Douglas Roberts, managing principal at Channel Capital Management.

"The global central banks have the credit crisis under control, the overhead resistance from inflation is waning and recession fears are starting to recede quite a bit," Roberts said. "So it's a very positive environment for stocks."

In corporate news, Oracle (Charts, Fortune 500) made a $6.7 billion bid for software maker BEA Systems. The all-cash offer would represent a 25 percent premium over BEA's closing price Thursday.

However, BEA said in the afternoon that it had rejected the offer, which it says undervalues the company, a move that could set up a bidding war between Oracle and rival SAP.

Oracle shares were unchanged, while BEA (Charts) shares jumped 38 percent.

In other corporate news, General Electric (Charts, Fortune 500) reported higher quarterly earnings that met estimates. However, investors took a "sell the news" approach and sent shares of the Dow component lower.

General Motors (Charts, Fortune 500) rose after the company reported strong third-quarter sales in Latin America and other international regions. The automaker also continued to benefit from news Wednesday that its union has ratified a new four-year labor contract.

On that same day, the union ended a strike against Chrysler and there is optimism about how Ford Motor will fare when it talks with the union next. Ford (Charts, Fortune 500) shares jumped 5 percent Friday.

Fellow Dow component McDonald's (Charts, Fortune 500) said third-quarter earnings will top earlier forecasts, thanks to strong global sales. The company also reported a 5.9 percent rise in September sales.

But on the downside, Citigroup (Charts, Fortune 500) slipped after announcing a management shakeup.

Shares of Coldwater Creek (Charts) slumped 26 percent after the retailer warned late Thursday that it will report a quarterly loss versus forecasts for a gain.

Centex (Charts, Fortune 500) shares fell after the homebuilder warned that it expects to post a quarterly loss.

Market breadth was positive. On the New York Stock Exchange, winners topped losers 9 to 7 on volume of 1.10 billion shares. On the Nasdaq, advancers beat decliners 3 to 2 as 2.01 billion shares changed hands.

Retail sales jumped 0.6 percent in September, double what they rose in the previous month and above forecasts. Sales, excluding autos, rose 0.4 percent, after falling 0.4 percent in the previous month. Economists surveyed by Briefing.com thought sales would rise 0.3 percent, on average.

The Producer Price Index (PPI) rose 1.1 percent in September after falling 1.4 percent in the previous month, topping estimates. The so-called "core" PPI, which strips out food and energy prices, rose 0.1 percent, short of forecasts. Core PPI rose 0.2 percent last month.

Reports on consumer sentiment and business inventories, released in the mid-morning, were both weaker than expected.

The University of Michigan's consumer sentiment index fell to 82.0 in early October from 83.4 at the end of September. Economists, on average, thought it would rise to 84.0.

Inventories rose 0.1 percent in August after rising 0.5 percent in July. Economists thought inventories would rise 0.3 percent.

Treasury prices slumped, raising the yield on the benchmark 10-year note to 4.68 percent from 4.63 percent late Wednesday. Bond prices and yields move in opposite directions.

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

COMEX gold for December delivery fell $2.90 to $753.80 an ounce. Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.