Dow at nearly 4-month high
Blue chips bounce back, as investors look beyond rising commodity prices and scoop up financial stocks.
NEW YORK (CNNMoney.com) -- Blue chips gained Friday, with the Dow closing at a nearly 4-month high, as investors set aside worries about rising oil and gas prices and Microsoft's forecast, and scooped up a variety of financial shares.
The Dow Jones industrial average (INDU) added 0.3% and closed at its highest point since Jan. 3. The broader Standard & Poor's 500 (SPX) index added 0.7%. The Nasdaq composite (COMP) lost 0.3%. The three major stock gauges ended moderately higher on the week, too.
Verizon Communications (VZ, Fortune 500), Procter & Gamble (PG, Fortune 500), Exxon Mobil (XOM, Fortune 500), General Motors (GM, Fortune 500) and Time Warner (TWX, Fortune 500) are among the companies that are due to report quarterly results in the week ahead.
Next week also brings economic reports on consumer confidence, first-quarter GDP growth, manufacturing and construction spending, personal income and personal spending, and the labor market.
Stocks slipped throughout the session Friday on surging oil and gas prices, a weak consumer sentiment number and Microsoft's outlook, following a two-day rally that had left the Dow at a multi-month high.
But by the late afternoon, investors had shrugged off most of the day's losses, with strength in financials, retailers and other areas of the market sparking a recovery.
Stocks have been on better ground for the last five or six weeks, as investors have started to bet that the worst of the credit market crisis is over.
"The attitude is better," said Donald Selkin, director of research at Joseph Stevens. "Some of the earnings have been OK, the dollar seems to have bottomed out and gold has come off its highs."
He said that the action in the treasury market - with short-term yields having risen sharply over the last month - suggests that there's some optimism that the Federal Reserve is near the end of its rate-cutting campaign and that the monetary stimulus is going to start having an impact.
Friday's market: Microsoft (MSFT, Fortune 500) late Thursday reported weaker earnings that nonetheless beat forecasts on stronger sales that missed expectations. The software maker also forecast slightly weaker-than-expected current-quarter earnings and stronger-than-expected fiscal-year 2009 results.
The company is in the midst of a huge takeover bid for Yahoo (YHOO, Fortune 500) and has given the search leader until Saturday to answer. Microsoft shares slumped 6.2% Friday, while Yahoo shares fell 1.8%.
A variety of technology shares fell on Microsoft's news, dragging down stocks during most of the session. But blue chips were stronger throughout the day, following earnings from American Express, Ericsson and others that topped forecasts. By the afternoon, blue-chip gains pulled the market out of its doldrums.
American Express (AXP, Fortune 500) reported weaker earnings as more credit-card holders failed to make payments, but earnings beat estimates nonetheless. Shares of the Dow component gained 5.7% and lifted a variety of financial shares.
Wireless telecom gear maker Ericsson (ERIC) reported higher-than-expected quarterly sales and earnings, and a cautious outlook. Shares jumped 13.5% in active Nasdaq trade.
With 52% of the S&P 500 having already reported results, earnings are currently on track to have fallen 14.1% from a year earlier, largely due to a steep drop in financial results, according to the latest Thomson Financial forecasts.
Commodity prices: Oil and gas prices surged.
U.S. light crude oil for June delivery jumped $2.46 on supply concerns to settle at $118.42 a barrel on the New York Mercantile Exchange.
The national average price for a gallon of regular unleaded gas hit an all-time record of $3.577, AAA reported.
COMEX gold for June delivery rose 30 cents to settle at $889.70 an ounce.
Other markets: The dollar rose versus the euro and the yen.
Treasury prices fell, raising the yield on the benchmark 10-year note to 3.87% from 3.82% late Thursday. Bond prices and yields move in opposite directions.
Investors also reacted to the morning release of the University of Michigan's consumer sentiment index. April sentiment was revised down to 62.6 from 69.5 in March, a 26-year low reflecting the impact of higher fuel prices and falling housing prices.
In other news, the government said it will begin distributing the economic stimulus payments four days earlier than initially planned, sending out the first 800,000 checks on Monday. 
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