Techs surge at Wall Street open

Nasdaq index up 2% as Microsoft results help lift U.S. markets.

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NEW YORK (CNNMoney.com) -- Tech stocks led an initial surge on Wall Street Friday after Microsoft's better-than-expected earnings and raised outlook.

The Nasdaq composite index gained nearly 2 percent. The Dow Jones industrial average rallied 0.8 percent. The Standard & Poor's 500 index was 0.9 percent higher.

After the market close Thursday, the markets got good news when Microsoft (MSFT, Fortune 500) reported better-than-forecast earnings and revenue in its just completed fiscal second quarter and raised its earnings and sales guidance for the next two periods.

Shares of the Dow component shot up 4.5 percent in after-hours trading and were up 7 percent in early Frankfurt trading, helping to lift both S&P and Nasdaq futures.

David Kelly, chief market strategist for JPMorgan Funds, said the outlook from Microsoft not only assured investors about the company's performance, but also fed the view that the overall economy may not be as dire as had originally been feared.

"I think part of what could be going on in future markets is going on all over the world, which is a collective realization that people were too negative at the start of the week," he said.

The news out of Microsoft "suggests that the economy, while it's going through a difficult patch here, is not falling off the cliff. So this can properly be called a relief rally," Kelly added.

Another Dow component, diversified manufacturer Honeywell (HON, Fortune 500), reported earnings at the top end of its earlier guidance. It said it sees continued growth in spite of a weaker economic outlook in 2008.

A third Dow component, Caterpillar (CAT, Fortune 500), reported improved earnings per share early Friday that met forecasts. The company also reaffirmed its earlier guidance for 2008 for revenue and profit growth, despite the slowdown in U.S. construction..

After the closing bell Thursday, E*Trade Financial (ETFC), whose shares have plunged 84 percent in the last 12 months, reported a much bigger-than-forecast loss due to massive losses on its subprime mortgage investments. But shares rebounded 9 percent in after-hours trading after the company said it expects to be profitable in 2008 and that it is open to a merger with one of its stronger rivals if the right deal comes along.

In other news, independent film studio Lions Gate Entertainment (LGF) and the studio arm of comic book publisher Marvel Entertainment (MVL) reached interim labor deals with the Writers Guild of America to allow union writers to work on their projects. The deals could be a step towards a broader agreement between the union and the Alliance of Motion Picture and Television Producers to reach a deal to end the nearly 12-week old strike.

Distressed asset investor Wilbur Ross told the Financial Times that he is looking at possibly buying one of the embattled bond insurers such as Ambac Financial (ABK) or MBIA. Earlier this week, Wall Street cheered reports that New York regulators and banks had met to discuss a means of raising up to $15 billion to bailout those firms.

In global trade, Asian markets finished higher, and European stocks advanced in midday trading. To top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.