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Stocks rallied Friday, lifting the Dow Jones Industrial Average to another record high while the broader market scored strong weekly gains, following a rebound rally in Asian markets overnight and better-than-expected earnings from the likes of Caterpillar Inc. and Google Inc. While, everything is pointing to a slowing economy, companies seem to be handling that quite well, either raising guidance or keeping it the same.

Today, the Dow Jones industrial average closed up 153.35 or 1.2% to 12,961.98, setting intraday and closing highs, according to early tallies. The broader S&P 500 closed up 13.62 or 0.93% to 1,484.35, and hit a fresh 6-1/2-year high. The Nasdaq composite closed up 21.04 or 0.84% to 2526.39 and hit a fresh 6-year high. For the week, the Dow finished up about 2.8%, the S&P gained about 2.2% and the Nasdaq rose about 1.4%.

Market breadth was positive and volume was improved from recent days. On the New York Stock Exchange, winners topped losers 25 to 7 on volume of 1.9 billion shares. On the Nasdaq, advancers topped decliners by more than 20 to 9 on volume of 2.2 billion shares.

The market tone was positive as all three major gauges spiked after solid earnings from Google, American Express, Caterpillar and others. Slowly, the confidence seems to have returned, thanks to some encouraging economic news and the positive start to the earnings period. Both the recent economic news and outlook from the Federal Reserve seems to be that growth is slowing, but not at a pace to suggest a recession. Also, the fallout from subprime seems to be contained. Nonetheless, stocks are likely to remain volatile in the months ahead, particularly in the typically difficult summer months.

With just over a fifth of the S&P 500 having reported, earnings are on track to grow 4.2% from a year ago. That’s a blended number that combines reported and expected results. Of the companies that have reported so far, 65% have topped estimates, 17% have met forecasts and 17% have missed.

Stock of Google closed up $11.62 or 3.3% to $483.27, after reporting higher quarterly sales and earnings that beat estimates. The internet search engine company reported a 69% jump in profit and earnings per share. Net sales rose 66% to $2.53 billion, slightly beating analyst expectations of $2.49 billion.

Shares of American Express closed up $1.98 or 2.5% to $60.93, after reporting higher quarterly sales and earnings that topped. Its quarterly profit rose 21%, helped by higher cardholder spending. Its net income in the first quarter rose to $1.1 billion, from $873 million in the year-ago period. Revenue, net of interest expense, rose 10% to $6.67 billion.

Shares of Advanced Micro Devices closed down $0.20 to $14.08, after reporting a bigger-than-expected quarterly loss, due to lower prices and unit shipments. Its adjusted gross margin was 31%, compared to 40% in the previous quarter and 59% a year earlier. The net loss for the fiscal first quarter was $611 million, compared to a profit of $184.5 million a year earlier. Revenue fell 7.4% to $1.23 billion, in line with Wall Street expectations. AMD also said it expected revenue in the second quarter to be flat to slightly up from the first quarter.

Stock of H&R Block Inc. advanced more than 3%, after the company agreed to sell its Option One Mortgage business, which has some sub-pime loans, to OOMC Acquisition Corp, a newly formed company affiliated with Cerberus Capital Management.

U.S. light crude oil for May delivery rose $1.53 to settle at $63.38 a barrel on the New York Mercantile Exchange.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter
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