Blue chips rally, but techs tumble
Stocks close mixed on volatile oil prices and a mixed bag of earnings. The Dow finishes up 50 points, but techs end sharply lower.
NEW YORK (CNNMoney.com) -- Wall Street was erratic throughout the day Friday, with blue chips rallying late on more encouraging financial sector news, after volatile oil prices sent shares lower early in the day.
Techs, however, couldn't shake losses after a number of disappointing quarterly results. That sent the tech-heavy Nasdaq composite (COMP) down 1.3% Friday.
The Dow Jones industrial average (INDU) rose 50 points to close the day 0.4% higher. Stocks rallied for the third straight day, after gaining more than 200 points in the previous two sessions.
The broader Standard & Poor's 500 (SPX) index finished just a fraction of a point above Thursday's close.
"Investors were waiting to see if the rebound we saw over the past two days is sustainable over the long term as we go into earnings season," said Russell Lundeberg Jr., chief investment officer at Barrett Capital Management. "People are paying attention to how much impact high commodity prices have had on companies, as well as liquidity issues."
Stocks oscillated in the first few minutes of trade, but turned decidedly lower minutes later as a slew of disappointing quarterly financial reports - especially from the tech sector - were absorbed.
Rising oil prices thwarted several attempts at a comeback by the non-tech stock gauges throughout the day. But oil prices dipped into negative territory in the afternoon, sending the Dow and S&P 500 into a late-session rally.
"Oil has a lot of effect on stocks in the short term," said Lundeberg. "It's a headline number that investors are easily excited about."
Oil fell 41 cents a barrel to settle at $128.88, after seesawing above and below the $130-per-barrel level for much of the day Friday. A four-day tumble in crude has brought the contract's decline to more than $16. (Full story).
Oil's volatility made investors jittery until late in the session, after traders' sentiment was overwhelmingly positive in the past two sessions.
"Except for some disappointments from the tech sector, in general, earnings have been coming out better than expected," said Bill Stone, chief investment strategist for PNC Wealth Management. "We were so down in the dumps that any bit of good news was going to set us up for a run."
Investors will see if the market can sustain the run into next week. The Conference Board will release its Leading Indicators economic report shortly after the market open on Monday.
Traders also will see quarterly earnings results from Bank of America (BAC, Fortune 500), as well as pharmaceutical companies Merck (MRK, Fortune 500) and Schering-Plough (SGP, Fortune 500), before the market open Monday.
Tech sector tumbles. Internet search leader Google (GOOG, Fortune 500), software giant Microsoft (MSFT, Fortune 500) and chipmaker AMD (AMD, Fortune 500) all missed analysts' earnings-per-share estimates after the market closed Thursday, sending tech shares lower.
IBM (IBM, Fortune 500) posted earnings that beat analysts' expectations, but that positive news could not put the brakes on a sharp tech sector decline.
AMD led the tech selloff, dropping 12.3% in Friday trading. Google fell 9.8%, and Microsoft lost 6%. Shares of IBM gained 2.7%.
"There was little direction given by tech companies for investors to manage their expectations on," said Lundeberg. "Techs in general had been a little bit of a safe haven this year, but people are now taking a little bit of a more cautious view."
Market breadth was mixed. On the New York Stock Exchange, advancers just barely topped decliners on a volume of 1.7 billion shares. On the Nasdaq, losers beat winners by a margin of 5 to 4 on volume of 2.3 billion shares.
Mixed financial sector reports. Financials have been hammered by the subprime mortgage collapse and credit crisis, but sector stocks had rebounded strongly in the past two sessions. However, a mixed bag of news took some of the wind out of the sails Friday.
Investment bank Merrill Lynch (MER, Fortune 500) reported a loss of $4.95 per share after Thursday's close. The loss was far worse than analysts' expectations, but shares managed to gain 0.6% Friday. (Full story).
Dow component Citigroup (C, Fortune 500), however, roundly beat Wall Street's expectations with its quarterly financial report. The bank posted a loss of $2.5 billion on writedowns and soaring credit costs, but Wall Street had been expecting a wider loss. Shares rallied 7.7% Friday. (Full story).
Government-backed mortgage financier Freddie Mac (FRE, Fortune 500) filed a registration statement with the Securities and Exchange Commission for a possible stock offering, although there's no guarantee that the beleaguered company will go ahead with that. Freddie is considering a plan to raise new capital by selling up to $10 billion in new shares, according to The Wall Street Journal.
Shares of Freddie rose 10.2%, and its counterpart Fannie Mae (FNM, Fortune 500) soared 22.6%. (Full story).
"Overall, good news is coming out of the financial sector, which no one expected," said Stone. "Time will tell if it will continue, but so far, so good."
Other earnings news. Oil-field services provider Schlumberger (SLB) said Friday its second-quarter profit increased nearly 13%, beating analysts' expectations. Shares were 3.9% higher Friday. (Full story).
Toymaker Mattel (MAT, Fortune 500) said Friday that its second-quarter earnings fell by nearly 50% on slumping demand and higher costs amid a difficult economic climate. Results still beat Wall Street estimates, though, sending shares soaring 13%. (Full story).
Dollar rises. In currency trading, the dollar rose slightly against the euro and yen, as inflation worries in the European Union - especially Germany - mounted.
Gas prices. The average price of regular unleaded gasoline fell 0.9 cent to $4.105 a gallon Friday. Gas fell from its all-time high set the day before, according to a daily survey from motorist advocacy group AAA. (Full story).
Other markets. COMEX gold for August delivery fell $12.70 to settle at $958 an ounce. Gold has crept back near record levels recently, after falling into the $800 range in the past few months.
Treasury prices fell Friday, bringing the yield on the benchmark 10-year note up to 4.09%, from 4.04% at Thursday's close. Bond prices and yields move in opposite directions. 
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