Stocks end the day and week higher
Wall Street rallies on improved earnings from Google, Caterpillar and others raise hopes that corporate profits outside the financial sector are holding up.
NEW YORK (CNNMoney.com) -- Stocks rallied Friday, ending the week higher, after strong earnings from Google reassured investors that earnings outside the financial sector seem to be holding up despite the economic slowdown.
Wall Street also appeared to bet that Citigroup's results provided further signs that the worst for the financial sector has passed.
The Dow Jones industrial average (INDU) gained 1.8%. The broader Standard & Poor's 500 (SPX) index gained 1.8%. The Nasdaq composite (COMP) surged 2.6%. The Russell 2000 small-cap index added 1.9%.
The major gauges rallied on the week as well, as investors welcomed upbeat earnings from influential companies such as IBM, Intel and Coca-Cola.
"IBM had good news, Google had good news, and there's a sense that many companies outside of the financial sectors are not doing terribly," said Ken Kam, portfolio manager of the Masters 100 fund (MOFQX).
"It's a big change to go from anticipating worse news to anticipating better news," Kam said.
Investors seemed to take in stride big quarterly losses from a variety of financial companies, including Merrill Lynch, Washington Mutual and Wachovia and better-than-expected results from JPMorgan Chase.
"I think the reaction you're seeing, particularly to the financial earnings, is a sense of relief that there doesn't seem to be anything coming out of these companies that hasn't been feared or anticipated," said Douglas Altabef, managing director at Matrix Asset Advisors.
Financial stocks jump. Citigroup (C, Fortune 500) reported a steep quarterly loss and took around $13 billion in writedowns, at least half of which were related to subprime-related exposure. Citi also said it will cut about 9,000 jobs. However, the company's quarterly revenue was higher than analysts were expecting, and shares jumped 4.5%.
Other financial stocks rose in response, including Dow components Bank of America (BAC, Fortune 500), American Express (AXP, Fortune 500), AIG (AIG, Fortune 500) and JPMorgan Chase (JPM, Fortune 500).
Google fires up tech sector. The Web search leader reported sales and earnings that topped forecasts late Thursday. Google (GOOG, Fortune 500) stock rallied 20% Friday, its biggest one-day gain in at least two years.
The sector also got support from PMC-Sierra (PMCS), which reported higher sales and earnings that topped forecasts. Shares of the chipmaker jumped nearly 18% in active Nasdaq trade.
Microsoft (MSFT, Fortune 500), Intel (INTC, Fortune 500) and Apple (AAPL, Fortune 500) were among the other big tech gainers.
Dow component Caterpillar (CAT, Fortune 500) reported higher quarterly sales and earnings that beat estimates. The heavy-equipment maker said it benefited from higher prices and the impact of the weak dollar. Shares gained 8.5%.
With roughly 20% of the S&P 500 having reported results so far, earnings are currently on track to have dropped 14.6% from the year-earlier quarter, according to the latest Thomson Financial figures.
In other corporate news, Dow component AT&T (T, Fortune 500) said it will cut around 4,650 employees, or about 1.5% of its workforce. Shares ended little changed.
Market breadth was positive. On the New York Stock Exchange, winners topped losers by more than 3 to 1 on volume of 1.48 billion shares. On the Nasdaq, advancers beat decliners 7 to 3 as 2.23 billion shares changed hands.
Commodity prices. The national average price for a gallon of regular unleaded gas hit an all-time record of $3.445, AAA reported.
U.S. light crude oil for May delivery rose $1.83 to settle at $116.69 a barrel on the New York Mercantile Exchange, after touching an all-time high of $117 a barrel earlier in the session.
COMEX gold for June delivery fell $27.70 to settle at $915.20 an ounce.
Other markets. The dollar edged up against the euro after falling to another record low against the European currency yesterday. The greenback rallied against the yen.
Treasury prices erased losses, turning higher. The advance lowered the yield on the benchmark 10-year note to 3.71% from 3.73% late Thursday. Bond prices and yields move in opposite directions. 
