U.S. stocks ended modestly higher Friday, wounding up a week of solid gains as investors braced for the third-quarter financial results. Sentiments also got a boost after Federal Reserve Chairman Ben Bernanke indicated that the central bank will be ready to tighten monetary policy once the economy improves. Bernanke’s tightening comments helped the dollar regain some lost ground. Bond prices fell sharply.
After a two-week selloff, fueled in part by concerns that the seven-month old rally had gotten ahead of any economic recovery, stocks got a boost last week following better-than-estimated economic numbers and Alcoa’s (NYSE:AA) surprise quarterly profit. That helped investors set aside worries and extend the rally. Meanwhile, White House economic adviser Lawrence Summers reiterated the Obama administration’s commitment to a strong dollar, citing recent comments by U.S. Treasury Secretary Timothy Geithner.
This morning’s stock futures show markets are headed for a higher opening as the busy week of earnings commences. Ahead of the market’s open, Dow Jones industrial average futures are up 59 points, or 0.6%, to 9,866. Standard & Poor’s 500 index futures gained 7.30 points, or 0.7%, to 1,075.40, while Nasdaq 100 index futures rose 11 points, or 0.6%, to 1,736.50.
On Friday, the Dow Jones industrial average rose 78 points, or 0.8%, to 9,864.94 — its highest closing level in a year. The S&P 500 index gained 6 points, or 0.6%, to 1,071.49 and the Nasdaq climbed 15 points, or 0.7%, to 2,139.28. On the New York Stock Exchange, advancing issues beat those that declined in price by a three-to-two margin. For the week, the DJIA rose 4% and the S&P 500 index gained 4.5% – their best performance since July. The Nasdaq advanced 4.5% during the week.
Last week’s rally saw all but one of the S&P500 industry sector recording gains. Only telecommunications shares failed to advance, and fell 5.9%, following AT&T’s (NYSE:T) announcement that it plans to allow internet-based phone calls on phones including Apple’s (NASDAQ:AAPL) iPhones. The gains last week were led by basic materials (+8.4%), oil and gas (+7.6%), financials (+6.3%), industrials (+5.0%), tech (+4.9%), consumer services (+4.5%), consumer goods as well as utilities (+2.9%), and health care (+2.7%). Financials rose after a Goldman Sachs (NYSE:GS) report recommended large-cap banks. Gains in industrial shares were helped by last week’s fall in dollar and Caterpillar’s (NYSE:CAT) announcement that it plans to hike prices globally in 2010. Retail shares rose after firms reported better-than-expected comparable monthly sales numbers.
This week sees the release of the first big batch of third-quarter earnings. Companies reporting their numbers include Johnson & Johnson (NYSE:JNJ), Intel (NASDAQ:INTC), JP Morgan (NYSE:JPM), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Nokia (NYSE:NOK), Google (NASDAQ:GOOG), IBM (NYSE:IBM), Bank of America (NYSE:BAC), and General Electric (NYSE:GE).