Stocks Rise Amid Consumer Worries, Decreasing Crude Prices

Stocks rallied in extremely volatile trade Friday as investors digested a mixed bag of data, including a positive outlook from Microsoft Corp. (MSFT), a reassuring inflation report, a weaker-than-expected read on consumer confidence and tumbling oil prices.

After trading closed Friday, the blue-chip Dow Jones industrial average (search) was up 122.14 points at 10,192.51 while the technology-packed Nasdaq Composite Index (search) was up 17.47 points at 1,921.65. The broader Standard & Poor's 500 Index (search) was up 13.63 points at 1,156.85.

Crude oil fell, with a barrel of light crude quoted at $49.72, down $2.05, on the New York Mercantile Exchange (search ), its lowest level since Feb. 18. Oil prices began the week above $55 per barrel.

"I think it's well recognized that oil is one of the risk factors in the economic picture, and this drop is helping the market," said Richard Rippe, chief economist for the Prudential Equity Group. "A decline is both beneficial to the inflation outlook and prospects for demand and growth. Oil prices are still high, no mistaking that. But it helps."

Despite the gains, the market finished the week mixed, with the Dow up 0.34 percent, the S&P gaining 0.41 percent and the Nasdaq losing 0.55 percent.

The University of Michigan's (search) final reading on consumer sentiment index for April was 87.7, a bit below the Wall Street economists' expectations for a dip to 89 from 92.6 in the previous period.

On the positive side, a Commerce Department (search) report showing a 0.5 percent increase in income and a 0.6 percent hike in spending for March helped assuage concerns about the economy's growth.

And a Labor Department (search) report showed that labor costs showed only a modest increase for the first three months of the year, which will corporate America maintain strong earnings while keeping prices steady. With the Federal Reserve meeting Tuesday to decide on an interest rate increase, both reports helped ease fears that rising prices would result in larger rate hikes.

"Investors are very anxious to see if the Fed is going to become more aggressive in its inflation talk," said Peter Cardillo, chief strategist and senior vice president at S.W. Bach & Co. "There's been a lot of damage done over the past few weeks, and until we get a new catalyst that can reverse this market sentiment, it's going to be touch and go."

Bonds fell slightly after a strong session Thursday, with the yield on the 10-year Treasury note rising to 4.20 percent from 4.15 percent late Thursday. The dollar fell against most major currencies, while gold prices rose.

Data from the National Association of Purchasing Management-Chicago (search) showed the April manufacturing index for the Midwest fell to 65.6 from 69.2, but was ahead of economists' expectations for 63.9.

Microsoft (MSFT) shares gained 85 cents to end at $25.30 on Nasdaq, as investors were reassured by the positive revenue forecast for fiscal 2006 by the world's biggest software company late on Thursday.

Banc of America Securities raised its rating on International Business Machines Corp. (IBM) to "buy" from "neutral," saying it sees limited downside after the stock's prolonged slide this year. IBM rose 47 cents to $76.38.

Meanwhile, ChevronTexaco Corp. (CVX) the No. 2 U.S. oil company, on Friday reported a rise in quarterly profit but missed analysts' expectations. Its shares moved up 85 cents to $52.00.

Clear Channel Communications Inc. (CCU), the largest U.S. radio station chain, said it would spin off its entertainment unit and declared a $3 per share special dividend and a 50 percent increase in its recurring quarterly dividend. Clear Channel said first-quarter profit fell 59 percent. Its shares went down 0.9 percent to $31.94.

Sun Microsystems Inc. (SUNW) rose 5.23 percent, or 18 cents, to $3.62 after a published report said the high-end computer company was discussing a leveraged buyout with private equity firm Silver Lake Partners.

The Russell 2000 index of smaller companies was up 4.36, or 0.8 percent, at 579.38.

Overseas, Japan's markets were closed Friday for a national holiday. In Europe, Britain's FTSE 100 was up 0.24 percent, France's CAC-40 edged 0.01 percent higher for the session, and Germany's DAX index climbed 0.16 percent.

Reuters and the Associated Press contributed to this report.