Stocks Finish Week With Polite Gains

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NEW YORK (TheStreet) -- U.S. stocks finished Friday with polite gains as investors looked past a tepid report on economic growth in the first quarter and concentrated on what's shaping up to be a decent first-quarter earnings season.

Amazon was the big winner on Friday, surging nearly 16% after its blowout quarter. More than half of the components of the S&P 500 have reported their numbers now with nearly 73% of companies exceeding Wall Street's consensus view, according to Thomson Reuters.

The year-over-year profit growth rate is running above 7%, better than the flat performance that analysts were expecting.

The Dow Jones Industrial Average rose 24 points, or 0.2%, to close at 13,228. The blue chip index ran as high as 13,267. The S&P 500 was rising more than 3 points, or 0.2%, to settle at 1403.

The Dow, which is now up in four straight sessions, added 1.5% for the week, while the S&P 500 gained 1.8%.

The Nasdaq outperfomed its counterparts with an advance of nearly 19 points, or 0.6%, at 3069. The index, which has benefited from Apple's massive post-earnings rally, jumped 2.3% for the week with Apple rising 5.2%.

Breadth within the Dow was positive with 19 of the 30 components moving higher. The biggest percentage gainers among the blue chips were Cisco , Coca-Cola , Kraft Foods and McDonald's , all rising more than 1%.

In the broad market, advancers outnumbered losers by a 2-to-1 ratio on the New York Stock Exchange and 1.5-to-1 on the Nasdaq.

Alan Zafran, partner at Luminous Capital, was chalking up Friday's buying to a favorable technical environment. The 1400 level is viewed as key for the S&P 500, and a convincing break above it could lead to the market back toward recent highs.

"The number one driver is technical," says Zafran. "Institutional money is still underweight, trailing the indices and playing catch up. Hedge fund and mutual fund managers are trailing market indices. They've been overly defensive and bearish for the entirety of 2012 so far and they're playing catch up and putting money to work. That's what I think is going on."

"I think that the technical factor is overwhelming whether earnings are good or bad," says Zafran. "And it's overwhelming whether Spain has a debt crisis or not. It's overwhelming whether or not Congress will act like adults and eventually address the fiscal crisis we face. Right now, managers are focused on relative performance versus the index and their hand is being forced to invest."

The major U.S. equity indices finished with respectable gains on Thursday as data showing progress in the housing market offset a handful of high-profile earnings misses and another disappointing read on weekly initial jobless claims.

On Friday, however, the Department of Commerce reported a disappointing advance gross domestic product growth estimate of 2.2% for the first quarter, a slip from the 3% expansion reported for the fourth quarter. Economists polled by Thomson Reuters, on average, expected growth of 2.5%.

The final University of Michigan read on consumer sentiment in April was a much-better-than-expected 76.4, but the markets barely budged at the report.

In Europe, London's FTSE closed up 0.5% and Germany's DAX rose 0.9%. The euro was recovering after a decent bond auction in Italy provided some comfort about the strains on the eurozone peripheral debt markets and Spain's credit rating downgrade by Standard & Poor's.

Italy sold debt due in 2016 and 2019 to yield a respective 4.29% and 5.21%. On the 10-year bonds, Italy was able to sell at the top end of its target of €2.5 billion. All in all, Italy sold €5.95 billion of debt, which did not meet the maximum target of €6.25 billion.

"They got the auction done, which is critical, but I think Italy is slowly moving back onto the radar screen," warned Alan Gayle, senior strategist at RidgeWorth Investments. "It will be competing with Spain, but there is a lot of nervousness around Italy and that's something that's going to continue. And that's why the European Union has to be talking about more pro-growth strategies."

In addition to Europe, "there are a lot of people potentially looking forward to next week's non-farm payroll and unemployment report after last month's ... worse-than-expected," said Joe Bell, senior equity analyst at Schaeffer's Investment Research. "People are just trying to see if that was kind of a blip or whether there's actually going to be some slowing in the labor market."

Hong Kong's Hang Seng fell 0.33% and Japan's Nikkei Average closed 0.43% lower.

Ahead of the open, U.S. automaker Ford reported earnings of $1.4 billion, or 35 cents a share, on revenue of $32.4 billion, down 2% from a year earlier. Shares shed 2.3%.

Adjusted earnings in the quarter were 39 cents a share. The results beat the average expected earnings of 35 cents a share on revenue of $31.5 billion, according to a Thomson Reuters poll.

Amazon was the standout report of the day. The online mega-retailer topped analysts' earnings estimates, showing some progress on margins. The company posted earnings of 28 cents a share as revenue rose 34% to $13.2 billion, thanks in part to strong Kindle Fire sales.

In other corporate news, Expedia shares were soaring nearly 24% after the online travel company posted a first-quarter loss, though profit excluding certain costs in the period beat expectations.

Merck shares ticked lower after the drug maker posted first-quarter adjusted earnings of 99 cents a share, which edged past the Wall Street consensus target by a penny.

Procter & Gamble shares closed down 3.6% after the consumer products giant lowered its full-year outlook to $3.82 to $3.88 a share from $3.93 to $4.03. Analysts, on average, were expecting profit of $3.96 a share. The stock was the biggest percentage decliner in the Dow.

"The challenge from an earnings perspective is that you've got nominal growth in the economy still at a very low level, and profit margins are already at cyclical highs," adds RidgeWorth's Gayle. "So this means that continuing to generate strong earnings numbers becomes more difficult, which is why earnings estimates have come down and why I think we're getting a market that's much more discerning about this reporting period."

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In commodity markets, the June crude oil contract settled up 38 cents at $104.93 a barrel. The June gold contract rose $4.30 to $1,664.80 an ounce.

The benchmark 10-year Treasury was flat with the yield at 1.939%. The greenback was slipping 0.2%, according to the dollar index.


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-- Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.

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