Upbeat Intel Guidance Helps Push Stocks Modestly Higher - U.S. Commentary

(RTTNews) - While buying interest remained somewhat subdued, stocks moved modestly higher over the course of the trading day on Friday. The slim gains on the day partly offset the notable pullback seen in the two previous sessions.

The major averages saw some volatility in the final hour of trading but managed to close in positive territory. The Dow rose 41.55 points or 0.3 percent to 16,775.74, the Nasdaq climbed 13.02 points or 0.3 percent to 4,310.65 and the S&P 500 advanced 6.05 points or 0.3 percent to 1,936.16.

Despite the modest gains on the day, the major averages all moved lower for the week. The Dow and the S&P 500 fell by 0.9 percent and 0.7 percent, respectively, while the Nasdaq edged down by 0.2 percent.

A positive reaction to upbeat guidance from Intel (INTC) contributed to the modest strength on Wall Street, with the semiconductor giant surging up by 6.8 percent.

Citing stronger than expected demand for business PCs, Intel said it now expects second quarter revenues of $13.7 billion, plus or minus $300 million, up from its previous guidance of $13 billion, plus or minus $500 million.

For the full year, Intel said it now expects some revenue growth compared to its previous forecast for flat revenues. The company also lifted its gross margin guidance.

While the news contributed to some strength in the tech sector, traders seemed reluctant to resume buying stocks amid concerns about escalating violence in Iraq.

News that militants have seized control of significant portions of the country and are on the march toward Baghdad has raised concerns about crude oil supplies and a broader regional conflict.

On the economic front, the Labor Department released a report before the start of trading showing an unexpected decrease in U.S. producer prices in the month of May, with the drop partly reflecting a notable decrease in prices for trade services.

The Labor Department said its producer price index for final demand dipped by 0.2 percent in May after climbing by 0.6 percent in April. Economists had expected prices to inch up by 0.1 percent.

Excluding food and energy prices, core producer prices edged down by 0.1 percent in May following a 0.5 percent increase in April. Core prices had been expected to tick up by 0.1 percent.

Meanwhile, Thomson Reuters and the University of Michigan released a separate report showing an unexpected deterioration in U.S. consumer sentiment in the month of June.

The report showed that the preliminary reading on the consumer sentiment index for June came in at 81.2 compared to the final May reading of 81.9. Economists had been expecting the index to climb to 83.0.

Sector News

While a majority of the major sectors moved to the upside on the day, most still ended the day showing relatively modest moves.

Computer hardware stocks saw significant strength, however, with the NYSE Arca Computer Hardware Index advancing by 1.6 percent. Hewlett-Packard (HPQ) posted a standout gain, jumping by 5.3 percent.

Software, internet, and semiconductor stocks also moved notably higher, reflecting the strength in the tech sector as a whole following Intel's upbeat guidance.

Energy and transportation stocks also saw some strength on the day, with airline stocks regaining some ground after falling rather sharply over the past few sessions.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index advanced by 0.8 percent, while Australia's All Ordinaries Index dropped by 0.5 percent.

Meanwhile, the major European markets all moved lower on the day. While the U.K.'s FTSE 100 Index fell by 1 percent, the German DAX Index and the French CAC 40 Index dipped by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries regained some ground after coming under pressure in early trading but still closed modestly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, crept up by 1.8 basis points at 2.604 percent.

Looking Ahead

Next week, the Federal Reserve will move back into the spotlight, with the central bank scheduled to announce its latest monetary policy decision on Wednesday.

Traders are also likely to keep an eye on the Fed's economic projections as well as Fed Chair Janet Yellen's accompanying press conference.

Ahead of the Fed meeting, trading could be impacted by the release of reports on industrial production, homebuilder confidence, housing starts, and consumer price inflation.