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Market Wrap: U.S. Stocks Have Best Week in Nearly 2 Years


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Microsoft Corp Chief Executive Officer Satya Nadella Speaks At Company Events
Graham Crouch/Bloomberg via Getty ImagesMicrosoft CEO Satya Nadella in New Delhi last month, spoke about plans to build more data centers in India to support cloud-based computing. Its cloud offerings are a big reason Microsoft beat the Street in its earnings report Friday.

NEW YORK -- The stock market closed out its best week in nearly two years on a positive note Friday, helped by strong quarterly earnings from Microsoft (MSFT) and other big U.S. companies.

Investors were able to set aside dismal third-quarter results from Amazon (AMZN). The giant online retailer's shares took a beating, but that wasn't enough to drag the rest of the market down.

After weeks of speculation over the fate of Europe's economy, Ebola fears and plunging oil prices, investors were able to get back to basics. Wall Street is in the midst of one of the busiest times of the year, when companies report their quarterly results. Ultimately what drives stock prices higher is the potential for that company to earn more profits, so higher profits generally mean higher stock prices.

"What matters most to the market are earnings expectations and corporate fundamentals, and so far they're looking pretty good," said Michael Arone, chief investment strategist at State Street Global Advisors.

Profits for S&P 500 companies are up 5.6 percent from a year ago so far this earnings season, according to FactSet, which is better than the 4.6 percent growth the market was looking for before the season began.

Quarterly results from Microsoft and UPS (UPS) helped lift the market Friday, but there have been other strong earnings reports all week. Caterpillar (CAT), 3M (MMM), Apple (AAPL) and others have all came in well above expectations.

Microsoft reported sales and profits that were well above analysts' expectations. Cloud services, a business that Microsoft has been focusing on, also grew. Microsoft's stock rose $1.11, or 2.5 percent, to $46.13.

UPS also reported strong quarterly results and expects December shipments to be up 11 percent from a year ago. Many investors consider UPS a bellwether for how the U.S. economy is doing, particularly during the crucial holiday shopping season. UPS rose 11 cents, or 0.1 percent, to $100.59.

The Dow Jones industrial average (^DJI) rose 127.51 points, or 0.8 percent, to 16,805.41. The Standard & Poor's 500 index (^GPSC) added 13.76 points, or 0.7 percent, to 1,964.58 and the Nasdaq composite (^IXIC) rose 30.92 points, or 0.7 percent, to 4,483.72.

With Friday's gains, U.S. stocks had their best week in nearly two years. The S&P 500 rose 4.1 percent for the week, the biggest gain since January 2013. But volatility can go both ways. Just as the market jumped sharply this week, it plunged just as sharply last week. Even with this week's gains, the S&P 500 is still down 0.4 percent for October.

"We've seen the market sell-off and we saw people buy on the bounce, and that looks like it will continue," said Brad McMillan, chief investment officer at Commonwealth Financial.

One company that fell well short of investors' expectations was Amazon. The company reported a steeper-than-expected quarterly loss despite soaring sales. Investors have grown impatient with Amazon, which has been unable to deliver profits even as it gains ground as one of the world's largest retail companies. Amazon fell $26.12, or 8 percent, to $287.06.

Investors are turning their focus to next week's Federal Reserve policy meeting for hints about the future of the central bank's bond purchases. The program has kept long-term interest rates extremely low to keep markets fluid and to encourage investment and hiring. Recent mixed signals about the strength of the U.S. recovery have prompted speculation that the Fed might let the program continue for longer than previously anticipated.

Investors will also get another large batch of quarterly results from U.S. companies next week, when 159 members of the S&P 500 index report results, including Merck (MRK), ExxonMobil (XOM), Chevron (CVX) and Visa (V).

The price of oil fell Friday on further evidence of ample supplies and weak demand. Benchmark U.S. crude fell $1.08 to close at $81.01 a barrel on the New York Mercantile Exchange.

Brent crude, a benchmark for international oils used by many U.S. refineries, fell 70 cents to close at $86.13 on the ICE Futures exchange in London. In New York, wholesale gasoline fell 2.5 cents to close at $2.182 a gallon, heating oil fell 1.7 cents to close at $2.482 a gallon and natural gas rose 0.1 cent to close at $3.623 per 1,000 cubic feet.

The price of gold rose $2.70 to $1,231.80 an ounce, silver rose two cents to $17.18 an ounce and copper was flat at $3.04 a pound.

AP Business Writer Steve Rothwell contributed to this report from New York.

What to Watch Monday:
  • The National Association of Realtors releases its index of pending home sales for September at 10 a.m. Eastern time.
  • The Federal Reserve Bank of Dallas releases its survey of manufacturing conditions in Texas for October at 10:30 a.m.
These major companies are scheduled to release quarterly financial results:
  • Amgen (AMGN)
  • Buffalo Wild Wings (BWLD)
  • Canon (CAJ)
  • Hartford Financial Services Group (HIG)
  • Franklin Resource (BEN)
  • Masco (MAS)
  • Merck (MRK)
  • Regal Entertainment Group (RGC)
  • Roper Industries (ROP)
  • Seagate Technology (STX)
  • T-Mobile US (TMUS)
  • Tenneco (TEN)
  • Twitter (TWTR)


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