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Posted at 11:44 a.m., Friday, July 22, 2005

Stocks edge higher despite Microsoft earnings, oil prices

Stocks edge higher despite Stocks edge higher despite Associated Press

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NEW YORK — Wall Street eked out modest gains today to finish the week higher, overcoming tepid earnings from Microsoft Corp. and a fresh surge in crude oil futures to extend Wall Street's rally for a fourth consecutive week.

Microsoft's after-hours earnings report yesterday initially failed to provide any lift, while the jump in oil prices also stymied trading for much of the session. A barrel of light crude was quoted at $58.64, up $1.51, on the New York Mercantile Exchange.

Yet investors' optimism, buoyed by generally strong earnings throughout the week, asserted itself in late trading and produced modest gains for the major indexes. Maintaining that optimism, however, with stocks near four-year highs, will be difficult in the days ahead.

"The markets are just treading water here," said Michael Sheldon, chief market strategist at Spencer Clarke LLC. "Despite a generally positive week of earnings, the markets are in for a bit of consolidation or profit-taking over the next few days."

The Dow Jones industrial average rose 23.41, or 0.22 percent, to 10,651.18.

Broader stock indicators also made gains. The Standard & Poor's 500 index climbed 6.64, or 0.54 percent, at 1,233.68, while the Nasdaq composite index gained 1.14, or 0.05 percent, at 2,179.74.

Bonds retraced much of yesterday's steep losses, with the yield on the 10-year Treasury note falling to 4.22 percent from 4.29 percent late yesterday. The dollar edged higher against most major currencies, recovering from a sharp drop yesterday after China's decision to revalue its currency. Gold prices also rose.

Trading was somewhat lackluster due to a dearth of economic news and the typical light volume of a summer Friday, but the late rally extended Wall Street's winning streak to four straight weeks. For the week, the Dow edged 0.1 percent higher, the S&P gained 0.47 percent and the Nasdaq rose 1.06 percent.

Analysts noted that the markets rallied even as oil prices moved to their highs of the session, showing that investors are looking forward with optimism.

"Considering this is a Friday in July, the market's a little more constructive than I'd expect it to be," said Richard Madigan, equity analyst with J.P. Morgan Private Bank. "We've had a few earnings issues, but they're overall pretty good. I think the market wants to consolidate here and maybe then move up some more."

Dow component Microsoft posted a 37 percent gain in net earnings, but a large part of that came in a tax benefit, and analysts worried that the company's operating earnings weren't seeing stronger growth. Microsoft lost 68 cents to $25.76.

Google Inc. tumbled $12.73 to $301.21 despite beating Wall Street's second-quarter profit forecasts by a wide margin. The Internet search company more than quadrupled its net income and nearly doubled its revenues from a year ago, a stellar quarter by any measure. The stock had been bid up to a record high yesterday in anticipation of an even better performance, however, illustrating investors' soaring expectations for the company.

Kimberly-Clark Corp. rose $1.44 to $64.29 as the maker of Kleenex tissues and Huggies diapers said it would cut 6,000 jobs and sell or close up to 20 manufacturing plants as part of a restructuring plan. The company's second-quarter earnings beat Wall Street expectations by a penny per share.

The Wall Street Journal reported that Ford Motor Co. could lay off up to 15,000 white-collar workers in North America over the next few years, far more than had been expected. The news sent Ford shares up 8 cents to $10.72.

Struggling appliance maker Maytag Corp. added 41 cents to $16.06 after posting a profit of 7 cents per share in the second quarter, versus a loss last year, but short of the 10 cents per share analysts had expected. The company said it is still considering whether a takeover bid by rival Whirlpool Corp. is better than one already received by a private equity group. Whirlpool dropped 57 cents to $77.33.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where preliminary consolidated volume came to 1.79 billion shares, compared with 2.14 billion yesterday.

The Russell 2000 index of smaller companies was up 10.68, or 1.6 percent, at 677.78, an all-time high.

Overseas, Japan's Nikkei stock average fell 0.78 percent. In Europe, Britain's FTSE 100 was up 0.39 percent, France's CAC-40 lost 0.23 percent for the session, and Germany's DAX index rose 0.15 percent.

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The Dow Jones industrials ended the week up 10.35, or 0.1 percent, finishing at 10,651.18. The S&P 500 index gained 5.75, or 0.47 percent, to close at 1,233.68.

The Nasdaq rose 22.96, or 1.06 percent, during the week, closing Friday at 2,179.74.

The Russell 2000 index, which tracks smaller company stocks, closed the week 14.04, or 2.12 percent, higher at 677.78.

The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended the week at 12,337.25, up 82.55 points from last week. A year ago the index was 10,553.82.