After a see-saw session, stocks finished higher Friday as investors poured over producer price index numbers, an improved U.S. trade deficit, and a drop in consumer sentiment. Investors were also gearing up for Monday's report on retail sales and next week's heavy dose of first-quarter earnings results.
Among the highlights Friday: Merck's (MRK) higher earnings guidance provided a boost to the Dow industrials, says S&P. The Nasdaq was hurt by weakness in Apple (AAPL) after it announced a delay in the release of its Leopard operating system. On the deal front, there are reports that college lender SLM Corp. (SLM) could be a takeover target.
The Dow Jones industrial average rose 59.17 points, or 0.47%, to 12,612.13. The broader Standard & Poor's 500 index was up 5.05 points, or 0.35%, to 1,452.85. The tech-heavy Nasdaq composite gained 11.62 points, or 0.47%, to 2,491.94.
Kicking off next week's busy calendar is Monday's release of March retail sales, which is expected to rise 0.5% (and sales excluding autos is seen up 0.8%). Autos will be a drag, while gasoline prices should provide a big boost, says Action Economics. Chain store sales were stronger-than-expected in March, as the earlier shift in Easter this year and unusually warm weather boosted spring sales, says Action Economics. But the big wild-card is building materials and other housing-related components, says Action Economics.
Also coming out Monday are business inventories and the April Empire State index.
In economic news Friday, the producer price index (PPI) rose more than expected, by 1.0% in March, while the core index (excluding food and energy) was flat -- lower than expected. That follows a 1.3% headline increase in February and a 0.4% rise in the core. On a year-over-year basis, the PPI is up a hefty 3.2% after a 2.5% pace in February, while the core rate slowed a touch to 1.7% from 1.8%.
The U.S. February trade deficit narrowed 0.7% to .4 billion following a revised .9 billion in January. That's better than the market expected. Imports fell another 1.7%, while exports fell 2.2%. The narrowing in the deficit could give a boost to first-quartet GDP estimates, says Action Economics.
The University of Michigan's preliminary consumer sentiment index fell in April to 85.3 from 88.4 in March, continuing a pattern of receding confidence revealed in other sentiment measures.
Earnings season will also kick into high gear next week. In earnings news Friday, Merck says it expects first-quarter EPS will be 84 cents, excluding restructuring charges, and reported EPS will be 78 cents. The drug maker raised 2007 EPS guidance to .75-.85, and reported EPS to .60-.75. The FDA voted against recommending approval of Arcoxiz.
General Electric (GE) posted in line results for first-quarter earnings from continuing operations of 44 cents, vs. 40 cents a year ago, on a 5.7% revenue rise. S&P reiterated a strong buy opinion on the stock.
Apple says it is unable to release Leopard in early June as planned, and expects to ship it in October. However, its iPhone passed several of its required certification tests, and is on schedule to ship in late June as planned.
SLM Corp. is in talks to be bought out by private equity in a deal that could be worth over billion, according to The New York Times.
Morgan Stanley (MS) announced it is buying 13 hotels from Japanese carrier All Nippon Airways Co. for .4 billion, which would roughly double the bank's hotels in the country.
In the energy markets, May Nymex crude oil fell 23 cents to .62 a barrel in a seesaw session, as gasoline prices pulled back, says Action Economics.
Treasury Market
Treasury prices fell, sending yields clear of the 4.75% top that had haunted the market all week, says Action Economics. Catalyst for trade came from an unlikely source -- the rise in the inflation expectations component of the weaker than expected University of Michigan sentiment report, says Action Economics. This appeared to eclipse the flat core reading on PPI, which initially prompted gains by bonds, says Action Economics.
