Wall Street closed an erratic week with strong gains on Friday as strong earnings from Microsoft Corp. and an optimistic outlook from Countrywide Financial Corp. outweighed investor concerns about the economy.
Housing market news over the week was glum; oil prices surged to record highs. And though corporate earnings have so far been mixed, investors have been heartened by good news for individual companies.
Friday's report from Countrywide that it expects to return to profitability soon, despite a big third-quarter loss, gave investors hope that the problems in the housing market are contained and that U.S. consumers still have spending power. Thursday night's strong report from Microsoft inspired strong buying throughout the technology sector.
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"The market is higher for just two reasons — Countrywide and Microsoft," said Peter Boockvar, equity strategist at Miller Tabak. "You take those two stocks out of the equation and there is no reason for the market to be higher. Microsoft single-handedly is driving the Nasdaq."
Mixed profit reports and data showing economic weakness has made investors uncertain whether the market is overvalued. However, earnings will be pushed aside next week as the main focus of investor attention _ and taking it place will be the Federal Reserve's rate-setting meeting on Tuesday and Wednesday.
The Dow Jones industrial average rose 134.78, or 0.99 percent, to 13,806.70.
Broader stock indicators also gained. The Standard & Poor's 500 index rose 20.88, or 1.38 percent, to 1,535.28, and the technology-dominated Nasdaq composite index advanced 53.33, or 1.94 percent, to 2,804.19.
For the week, the Dow rose 2.11 percent, the Nasdaq was up 2.90 percent, and the S&P 500 jumped 2.31 percent. The gains were welcome after all three indexes posted losses in the previous week.
High oil prices didn't dampen investors' spirits either. After spiking above $92 a barrel in Asian trading overnight, December crude futures rose $1.40 to settle at $91.86 a barrel on the New York Mercantile Exchange.
"Because oil prices are so high, our nation's oil bill has gone up. We're exporting dollars to pay for oil and our counterparties are reinvesting those dollars back in our markets — the so-called petrodollars finding their way back," said Tom McManus, investment strategist with Banc of America Securities.
Even as stocks advanced, investors poured money into commodities markets as a hedge against a falling dollar, which hit another record low against the euro. Gold futures rose $16.50 to close at $787.50 an ounce, the highest price since January 1980. Energy, metals and agriculture futures all moved higher.
Treasury bonds turned lower as stocks barreled higher. The yield on the 10-year Treasury note, which moves inversely to the price, rose to 4.39 percent from 4.38 percent late Thursday.
Friday's stock gains were fueled by company-specific news, according to Robert Pavlik, portfolio manager at Oaktree Asset Management.
"Trading today is sort of choppy, but stocks are moving up based on strong earnings from Microsoft," he said. "You're also getting a pop from Countrywide's strong guidance going forward. All this is bring some attention back to the stock market.
Countrywide posted a wide loss of more than $1 billion in the third quarter, but the beleaguered mortgage lender, whose stock has plummeted due to rising subprime mortgage defaults, said it will be profitable in the fourth quarter and next year. The shares jumped $4.23, or 32.36 percent, to $17.30.
Microsoft's reported that its profit jumped 23 percent, thanks to brisk sales of the new Halo 3 video game, Windows and Office. Microsoft shares rose $3.04, or 9.50 percent, to end at $35.03.
Financial stocks were solidly higher Friday, but the sector continues to show signs of uneasiness following the summer's credit market problems. The New York Times reported that after Merrill Lynch & Co. posted its sharp third-quarter loss Wednesday, the investment bank's chairman and chief executive floated the idea of a merger with Wachovia Corp. Merrill shares rose $5.19, or 8.52 percent, to close at $66.09.
Advancing issues outnumbered decliners by nearly 3 to 1 on the New York Stock Exchange, where consolidated volume fell to 3.51 billion shares traded from 4.07 billion on Thursday.
The Russell 2000 Index of smaller companies rose 15.28, or 1.90 percent, to 821.39.
Stock markets overseas advanced.
In Asian trading, Japan's Nikkei stock average rose 1.36 percent, and Hong Kong's Hang Seng index rose 1.84 percent. In Europe, Britain's FTSE 100 rose 1.29 percent, Germany's DAX index rose 0.21 percent, and France's CAC-40 rose 0.60 percent.