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CBS MarketWatch
U.S. stocks regain momentum
Friday July 25, 1:24 pm ET
By Rex Nutting


WASHINGTON (CBS.MW) -- U.S. stock markets regained strength in the early afternoon after a morning of choppy trading.
Markets got an early boost from encouraging signs of a capital spending rebound in the U.S. economy. Investors also picked over a slower flow of earnings reports to close out the week.

Financial stocks led the afternoon push. Technology stocks were mostly lower.

In recent trading, the Dow Jones Industrial Average (CBOT^DJINews) gained 77 points or 0.8 percent, to 9,189. The Nasdaq Composite (NasdaqSC^IXICNews) added 6 points or 0.3 percent to 1,707. The broad S&P 500 (CBOE^SPXNews) gained 8 points or 0.8 percent, to 990.

The Russell 2000 index (CBOE^RUTNews) , tracking stocks of smaller companies, was flat.

Winners outnumbered losing stocks 3 to 2 on the New York Stock Exchange, while losers narrowly outpaced winners on the Nasdaq.

Trading volume was modest at 755 million on the NYSE and 940 million on the Nasdaq.

The major indexes had closed at their lows of the session on Thursday, with the Dow falling 0.9 percent, the Nasdaq sinking 1 percent and the S&P 500 off 0.7 percent.

Investors should get used to choppy trades in the near term, said Peter Cardillo, chief market strategist at Global Partners Securities. The recent rally has led to a "tug of war." He predicts a 5 percent pullback.

Capital spending
Traders on Friday mostly ignored an impressive 2.1 percent increase in durable goods orders for June, the biggest increase since January.

Orders for core capital goods rose 2 percent, fueling hope that the nation's three-year drought in capital spending could be ending.

"The dormant capital good spending sector appears to be awakening from its long hibernation period," said Anthony Chan, chief economist at Bank One Investment Advisors.

Microsoft (NasdaqNMMSFTNews) isn't just hoping to spend more; it's putting its money on the line. The software giant said it would invest $7 billion in research and development and hire as many as 4,000 workers. Shares gained 2 percent.

Mixed reports on home sales had little impact on the markets. New home sales surged to a record 1.16 million while existing home sales fell a surprising 0.3 percent to a 5.83 million-unit pace, still the fourth-best sales figure ever.

Earnings spotlight
Technology in the broad sense remained the focus of Friday's action. Investors were paying particular emphasis to any forward-looking statements.

The semiconductor index (Philadelphia^SOXXNews) dropped 0.6 percent, while Internet stocks (CBOE^GINNews) fell 1.2 percent. Financials (Philadelphia^BKXNews) gained 1.1 percent.

Reporting results before the bell, Pfizer (NYSEPFENews) said its revenue rose 37 percent in the second quarter but left its outlook for earnings unchanged. Shares rose 1 percent. Drug stocks (AMEX^DRGNews) gained 0.1 percent.

EBay (NasdaqNMEBAYNews) disappointed investors even after revising its outlook higher and declaring a stock split. Shares tumbled 5 percent.

Igen International (NasdaqNMIGENNews) was the biggest winner after Roche Holdings offered to pay a hefty premium to buy the biotech company's technology and then spin the company back to current shareholders. Shares soared 54 percent to $57.23.

The overbuilt telecommunications sector isn't spending any money. JDS Uniphase (NasdaqNMJDSUNews) was a big loser Friday following its warning about sliding sales, with shares down 13 percent on heavy volume of more than 80 million shares.

Also in telecom equipment, Nortel Networks (NYSENTNews) said its revenue fell 3 percent in the latest quarter. Shares dipped 2 percent, with more than 20 million shares trading hands.

While many companies may be ready to spend money on new equipment, they don't appear willing to invest in new structures.

Steelmaker Nucor (NYSENUENews) warned the weak economy would depress third-quarter earnings to 15 to 20 cents a share, about half the consensus. Granite Construction (NYSEGVANews) issued a similar warning.

Shares of both Nucor and Granite suffered at the hands of investors.

Money has been flowing into U.S. stock funds over the past week. U.S. equity funds took in $3.2 billion in new money during the week ended Wednesday, Trim Tabs estimated. Meanwhile, international stock funds had outflows of $800 million. Bond funds had inflows of $1.5 billion.

Other markets
Treasurys sold off on the durable goods report, then recovered almost immediately. The benchmark 10-year note, whipsawed in recent sessions, was last yielding (CBOE^TNXNews) 4.17 percent, down 3/32. See Bond Report .

The dollar was weaker. The euro gained 0.3 percent to $1.1506, while the dollar sank 0.1 percent to 118.83 yen. See Currencies .

Crude oil futures dipped 12 cents to $30.10 a barrel. Gold futures gained $1.30 to $363.60 an ounce. Gold stocks were up 1 percent. See Futures Movers .