Wall St. wipes out losses late to end with slim gain

SHARES TRADING FLOORS

WALL STREET Stocks erased losses late in Friday’s session to close slightly higher on investors’ optimism about the likelihood that the Federal Reserve will keep its easy money policy in play a while longer.

With just three trading days left in the month, the S&P 500 is set to post its best month since October 2011. The Nasdaq’s advance makes July so far the best month in a year and a half.

After declining for most of the day, the market regained ground shortly before the close, and all three major indexes finished in positive territory. At one point, the Dow was down as much as 150.45 points.

“I was surprised we ended up, but people have a sense of optimism about the market,” said Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor Inc.

“The bad news from the morning was digested and discarded. Earnings haven’t been as bad as people expected, and the political issues aren’t in the forefront right now. That could change at any moment, but enjoy the summer rally while you can.”

The Dow Jones Industrial Average rose 3.19 points, or 0.02 percent, to end at 15,558.80. The Standard & Poor’s 500 Index gained 1.40 points, or 0.08%, to finish at 1,691.65. The Nasdaq Composite Index advanced 7.98 points, or 0.22%, to close at 3,613.16.

Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey, said the market began to turn around on news that President Barack Obama had not reached a decision on who will succeed Federal Reserve Chairman Ben Bernanke and on optimism that the central bank will keep monetary policy accommodative.

The prospect that former Treasury secretary Lawrence Summers might get the nod, and not current Fed Vice Chairwoman Janet Yellen, has concerned investors.

Yellen is seen as more likely to provide a smooth transition after Bernanke’s term ends, while Summers is viewed as more critical of the effectiveness of the central bank’s stimulus.

Investors will scrutinize the Federal Open Market Committee policy statement this Wednesday for any additional clues about the Fed’s intended timeline for scaling back its quantitative easing.

For the week, the S&P 500 finished essentially flat – down just 0.03% – the first week in five that it did not manage a gain. But the benchmark index is up 5.3% so far in July – its best month since October 2011.

The Dow rose 0.1% for the week, extending its string of weekly gains. For July, the Dow is up 4.4%.

The Nasdaq is up 6.2% in July so far, its best monthly gain in a year and half. For the week, the Nasdaq is up about 0.7%.

Expedia ranked among the most active names traded on the Nasdaq.

Shares of the online travel agency plunged 27.4% to $47.20 a day after it reported a quarterly profit far short of market estimates.

Starbucks gave the biggest boost to the S&P 500 a day after the world’s largest coffee chain reported a bigger-than-expected jump in quarterly profit. Starbucks’ stock rose 7.6% to close at $73.36.

Amazon shares turned higher despite a forecast that disappointed on income and revenue. The stock rose 2.8% to $312.01, a rebound from a session low at $295.55. Earlier on Friday, Amazon’s stock hit a 52-week high of $313.62.

Boeing Co shares declined after the US Federal Aviation Administration said it was proposing to fine the company’s commercial airplane division $2.75 million for failing to take prompt action to fix a problem with fasteners on its model 777 airplanes. Shares of Boeing fell 1% to $105.60 and were the biggest drag on the Dow.

In addition to the FOMC meeting on Tuesday and Wednesday, this week’s packed economic calendar includes the advance estimate, or second look, at gross domestic product for the second quarter, and the July nonfarm payrolls report. EUROPE The FTSE 100 sagged, testing support around the 6,544 level.

The UK’s benchmark index was dragged down by heavyweight financials, which took off 7 points. UK lenders Lloyds Banking Group and Royal Bank of Scotland fell 0.4 and 3%, respectively, as Investec issued cautious notes on both banks ahead of earnings next week.

Lenders were also hit after UBS swallowed a $885 million settlement with a US regulator over allegations the Swiss bank misrepresented mortgage-backed bonds during the housing bubble, paving the way for billions more to be paid by other banks.

Although results from Pay-TV operator BSkyB were initially well received by analysts, the company’s shares fell 3.3% with traders citing profit taking after the 11% rise ahead of the numbers.

Engine maker Rolls Royce was the top faller, down 3.2% after Deutsche Bank cut its rating to “sell” the day after results.

Shares in publishing group Pearson, however, rose 6.1% to close just off 12-year highs after it announced the sale of its Mergermarket news service along with first-half results. ASIA Japan’s Nikkei share average slid 3% to a near three-week low on Friday, with blue-chip exporters and financials leading declines on the back of a stronger yen and profittaking.

The Nikkei closed down 432.95 points at 14,129.98 after dropping as low as 14,114.52 earlier, its lowest level since July 8. The benchmark shed 3.2% on the week, snapping a five-week winning streak.

The broader Topix shed 2.9% to 1,167.06, with investors taking profits ahead of the peak of the corporate earnings season.