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Stocks edge higher after Citi, GE earnings beat expectation

WALL Street found enough in the latest earnings reports to keep its six-week rally alive.

Stocks ended another winning week with a modest advance yesterday as earnings from Citigroup Inc. and General Electric Co. came in ahead of the market's meager expectations.

Stocks fluctuated for much of the day to end with slight gains.

The Dow Jones industrial average rose 5.90, or 0.1 percent, to 8,131.33.

The Standard & Poor's 500 index added 4.30, or 0.5 percent, to 869.60, while the Nasdaq composite index rose 2.63, or 0.2 percent, to 1,673.07.

For the week, the Dow is up 48 points, or 0.6 percent. The S&P 500 index posted a gain of 1.5 percent. The Nasdaq is up 1.2 percent for the week and 6 percent for the year.

The profit numbers weren't great by normal standards but were good enough to extend a rally that began on early signs that the economy was finding some stability.

Citigroup was the fourth bank in a week with news that pointed toward a budding recovery in the industry. But the company, echoing comments from JPMorgan Chase & Co. on Thursday, also said loan losses are expected to continue in the months ahead.

GE, meanwhile, said its first-quarter earnings dropped 36 percent as sales and profits shrank at its GE Capital financial division. The stock edged up 1 percent.

Kent Engelke, chief economic strategist at Capitol Securities Management, said the results placated investors. "If these companies didn't meet or exceed these expectations, we would have gotten killed," he said.

Wall Street showed resilience in the first big week of first-quarter earnings reports, weathering disappointments from chip maker Intel Corp. and Google Inc. While investors weren't happy with yesterday's news, they weren't caving to uncertainty as they did the first two months of the year, when heavy selling brought the major indexes to 12-year lows.

"I think most people realize there are still causes for concern, but maybe not causes for panic," said Carl Beck, a partner at Harris Financial Group, a Colonial Heights, Va.-based investment advisory firm.

Wall Street's rally began in early March after Citigroup reported it had operated at a profit during the first two months of the year. A string of more upbeat economic and earnings data gave the rally momentum, but, as often happens during earnings season, the market has stumbled when companies have unsettling news.

While Wells Fargo & Co., Goldman Sachs Group Inc. and JPMorgan Chase have all reported profits that surpassed expectations, some of those gains came on trading activity that's not expected to continue. And companies that depend heavily on lending are still seeing borrowers default because of the recession.

"I think the response is guarded," said Joseph Tatusko, chief investment officer at Westport Resources Management. "There are waves of defaults and credit issues that have yet to come on shore."

Citigroup reported a quarterly loss of just under US$1 billion, less than analysts expected. A year ago, the bank suffered a loss of more than US$5 billion. Its shares lost 9 percent, falling 36 cents to US$3.65.

Jim Herrick, director of equity trading at Baird & Co. attributed some of the buying to short-covering. This occurs when investors who earlier sold borrowed stock on expectations of a market drop are forced to buy back those shares.

The pattern of stocks fluctuating in early trading only to move higher late in the day has been a recurring theme in the past few days.

In other trading, the Russell 2000 index of smaller companies rose 5.49, or 1.2 percent, to 479.37.

About two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 2 billion shares.

Bond prices dipped, sending the yield on the 10-year Treasury note up to 2.95 percent from 2.83 percent.


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