U.S. Stocks Rally Amid End-of-quarter Buying

NEW YORK (MarketWatch) -- U.S. stocks hovered near the flat line at midday Friday, as worries about higher crude prices took much of the shine off a morning rally in trade made volatile by portfolio managers making last-minute adjustments as the first half of the trading year winds to a close.

"We are seeing some volatility because of oil prices being higher," said Donald Selkin, director of equity research at Joseph Stevens. "We've had a strong quarter and people are trying to lock in some profits before it closes."

The Dow Jones Industrial Average gained 16 points to 13,439, as 14 of its 30 stocks advanced, led by Alcoa Inc. , Exxon Mobil Corp. , AT&T Inc. , General Electric Co. and Dupont .

The S&P 500 rose 1.73 points to 1,507.46, while the Nasdaq Composite gained 2.95 points to 2,611.32.

Trading volumes showed 645 million trading on the New York Stock Exchange and 991 million on the Nasdaq stock market. Advancing issues topped decliners by 19 to 12 on the New York Stock Exchange and by 14 to 13 on the Nasdaq.

Leading the gains among technology shares, Research In Motion jumped over 21% after the Blackberry maker announced a 76% gain in revenue and a 73% rise in profit for the most recent quarter.

And shares of Apple Inc. rose 1.9%. The company's iPhone will appear in some stores today.

Palm Inc. last was off 3.2%. The maker of the Treo smart phone reported a 43% drop in quarterly profit.

Defused London bomb boosts oil

The U.S. stock market showed little overall reaction to news that a car-bomb was defused and a street was closed in London.

But crude oil prices jumped 79 cents, or 1.1%, to $70.36 a barrel. News of lower than expected gasoline supplies earlier this week have also helped boost oil prices ahead of the U.S. summer driving season.

Energy shares were the top gainers, along with gold and telecom shares . Semiconductors , hardware and airlines fell.

Earnings in focus

Stocks finished mixed and little changed Thursday, after the Federal Reserve held interest rates at 5.25% for the eighth straight time and said it wasn't persuaded that inflation's entirely under control. The Dow industrials fell 5.5 points and the S&P 500 declined 0.6 of a point, while the Nasdaq Composite rose 3 points.

On Friday the market's attention is on the upcoming second-quarter earnings season, which will get going in earnest in the second week of July.

"With the FOMC meeting behind us, rates should calm down and investors should start to focus on second quarter earnings results," said Marc Pado, chief U.S. market strategist at Cantor Fitzgerald. "Today is the last day of the quarter."

Tame inflation

The Commerce Department report that core consumer prices increased just 0.1% in May, in line with economists' expectations, leaving core inflation within the Federal Reserve's comfort zone for a second straight month.

Concerns about global inflation pressures have led bond yields to rise, lifting the costs of borrowing for consumers and businesses.

But Treasurys rallied Friday, after the consumer price report. The fixed income market is highly sensitive to inflation because it eats into the value of assets and increases pressure on the Federal Reserve to keep rates higher.

The 10-year benchmark Treasury bond was recently up 11/32 at 95-23/32 with a yield of 5.058%.

Meanwhile, little attention was paid to the University of Michigan's consumer sentiment index, which rose to 85.3 from 83.7 earlier in the month The MarketWatch forecast, based on a poll of economists, was for a headline reading of 84.1.

Other markets

The dollar was mixed in the wake of Thursday's Fed decision to leave the fed funds rate unchanged at 5.25% and issue a policy statement that emphasized the central bank's continuing preoccupation with inflation. The U.S. currency rose against th yen but fell against the euro.

Gold futures rose, extending their prior-session gains, underpinned by mixed dollar and rising crude-oil prices. Gold for August delivery gained $2.50 to $652.70 an ounce on the New York Mercantile Exchange.

By Nick Godt