U.S. Stocks Rise On Microsoft's Strong Profit

NEW YORK (MarketWatch) -- U.S. stocks advanced on Friday, with tech stocks leading the charge after Microsoft Corp.'s earnings flew past analysts' estimates, while shares of Countrywide Financial Corp. surged on future profit forecasts.

"Nasdaq [is] leading the way," said Peter Cardillo, chief market economist at Avalon Partners. "It's about earnings today."

The Dow Jones Industrial Average gained 25 points to 13,698. Among blue chips, Microsoft jumped 9.7%.

Late Thursday, the software giant posted a surprisingly strong quarterly profit, boosted by sales of the Vista operating system and the Halo 3 video game.

The S&P 500 index gained 6 points to 1,520, while the Nasdaq Composite gained 26.4 points to 2,777.

Trading volumes showed 592 million shares exchanging hands on the New York Stock Exchange and 1.2 billion trading on the Nasdaq stock market. Advancing stocks topped decliners by 17 to 12 on the NYSE and by 7 to 6 on Nasdaq.

Oil topping $92 to a new record, along with gold reaching 28-year highs as the dollar slumped to record lows, also helped boost commodities-related stocks.

Highlighting the market's leading sectors, strong gains were seen in the Amex Computer Technology Index , and the Amex Morgan Stanley Hi Tech index , along with the Amex Oil Index and the Amex Broker/Dealer Index .

On the downside were airlines and transportation stocks .

Countrywide sees profit

Shares of Countrywide , the nation's largest mortgage lender, jumped 16% after the largest U.S. mortgage lender posted a wider-than-forecast loss of $1.2 billion but said it would return to profitability in the fourth quarter, sending the stock surging 13% in pre-open action.

Separately, the New York Times reported that Merrill Lynch CEO Stanley O'Neal discussed with Wachovia the possibility of merging -- without first getting the Merrill board's consent to do so. The move so enraged the board that they began discussing possible replacements, the report said.

Arkansas Best , the freight transportation company, reported a 40% profit decline during the third quarter, blaming a weaker economy among other factors.

But Kimco Realty edged past funds-from-operations estimates in what could be an indicator of the health of the commercial real-estate market.

Oil lends a hand

The energy sector was also lending a hand to the market, with crude-oil futures touching a new record high of $92.22 a barrel overnight. A barrel recently traded at $91.72 on the New York Mercantile Exchange. Crude was boosted by concerns over dwindling U.S. inventories, Middle East tensions and a weak dollar.

"We'll see a market that's going to initially move on earnings and keep a very close eye on what's happening with the price of oil," said Avalon's Cardillo. "If the oil-dollar situation worsens, we could be in for a bumpy trading day."

Over the past week, the market has began pricing in expectations that the Federal Reserve will cut interest rates next week to boost a U.S. economy that's working through the slumping housing market and related troubles in credit markets.

Earlier, the University of Michigan said its consumer confidence index fell to 80.9 in October from 83.4 in September.

Expectations of lower rates have again hit the dollar, which hit another record low against the euro overnight. The euro was recently up 0.4% at $1.4372 near a record $1.4387.

A weak dollar in turn helps boost the price of dollar-denominated commodities, such as crude oil and gold. Gold futures also rallied to $782.80, a 28-year high.

Commodities-related shares also rose, with the Amex oil index up 2%, led by the likes of Valero Energy . Metals mining shares also rose, with the Amex Gold Bugs Index gaining 1.8%, led by the likes of Kinross Gold .

U.S. stocks ended modestly lower on Thursday in another choppy session, with investors contrasing some better-than-forecast earnings and rate-cut hopes against disappointing durable-goods orders and a mixed report on new-home sales. The Dow fell 3 points, the S&P 500 fell 1.5 points and the Nasdaq dropped 23 points.

By Nick Godt