NEW YORK – IBM and Microsoft drove the Dow Jones industrial average higher Friday after the tech giants reported stronger earnings than analysts expected.

Microsoft said sales of Xbox games and Office software helped push revenue up in the last quarter of 2011. IBM credited better sales of software and services and raised its earnings outlook for the year. Microsoft rose 5 percent and IBM rose 4 percent.

The Dow rose 96.50 points to close at 12,720.48. That’s a gain of 0.8 percent. Without the huge gains in IBM and Microsoft, the Dow would have risen just 24 points.

The S&P 500 index inched up 0.88 to 1,315.38. Both the Dow and S&P ended the week with gains of more than 2 percent.

Plenty of things are going right, said Frank Fantozzi, CEO of Planned Financial Services, an independent wealth manager in Cleveland. Applications for unemployment benefits dropped last week to the lowest level in nearly four years. Housing sales are steadily rising. And most companies are reporting better profits.

“Overall, we’re moving in the right direction and it’s bolstered the market,” Fantozzi said. “The S&P getting over 1,300 this week is a nice sign.”

Google lost 8.4 percent after its earnings per share fell a dollar short of analysts’ estimates. The misfire stemmed from an 8 percent drop in prices that the Internet search giant charges advertisers for each click.

Google’s drop tugged the Nasdaq composite index lower. It fell 1.63 points to 2,786.70.

Even though high-profile companies such as Google and JPMorgan Chase have posted disappointing earnings results in the past week, the trend is moving in the opposite direction. Of the 60 companies in the S&P index that have reported earnings so far, 62 percent have beaten estimates, according to John Butters, senior earnings analyst at FactSet Research.

In another sign that traders were becoming more willing to take on risk, the yield on the 10-year Treasury note crossed above 2 percent for the first time in two weeks. The yield, a widely used benchmark for corporate and consumer borrowing, had inched lower since early December as traders parked money in the safest of assets.

The National Association of Realtors said that home sales rose 5 percent in December, the third straight monthly increase.

Among other companies in the news:

• Capital One Financial lost 5.6 percent. The bank and credit-card company’s earnings sank 41 percent as expenses for marketing, salaries and legal fees jumped compared with the year before.

• Schlumberger rose 1.3 percent. The oil-field services company’s quarterly profit surged 36 percent, helped by exploration work in the Middle East and Africa. The company also raised its quarterly dividend to 27.5 cents.

- Intel rose 2.9 percent. The world’s largest chip maker reported stronger profits after the market closed Thursday. Intel’s results got a boost from sales to China and other developing countries, where many people are buying PCs for the first time.

Stocks have been on a slow and steady climb to start 2012. The S&P 500 has closed higher on 11 of 13 days and is now up 4.6 percent for the year.

NEW YORK (Reuters) – The S&P 500 and Nasdaq dipped on Friday after a pair of bellwether corporate earnings fell short of lofty expectations, though a trio of strong results from Dow components kept the blue-chip average in positive territory.

Investors also kept an eye on Greece, where a debt deal appeared to be close.

IBM and other technology names lifted the Dow a day after IBM offered a strong outlook and results from several big-tech names signaled they were shaking off nervousness about economic growth and boosting technology spending.

But weakness at both GE and Google pressured the broader indexes.

Google Inc (GOOG.O) slid 8.2 percent to $587.44 as the biggest drag on the benchmark S&P 500. The Internet search giant's quarterly profit and revenue missed expectations on declining search advertising rates.

General Electric Co (GE.N) lost 0.5 percent to $19.05 after the conglomerate's revenues missed consensus forecasts. Fellow Dow component American Express Co (AXP.N) dropped 2 percent to $49.94 as it set aside more money to cover bad loans.

"There's an underlying concern that some names may have moved too far, meaning that any trip-up in earnings could bring a short-term pullback, which is what we're seeing with GE and Google," said Lawrence Glazer, managing partner at Mayflower Advisors in Boston.

"The valuations in an old-tech name like IBM support more appreciation, while a higher-growth name like Google had higher expectations to outshine."

International Business Machines Corp (IBM.N) gained 4.3 percent to $188.28. Intel Corp (INTC.O) rose 1.9 percent to $26.11, while Microsoft Corp (MSFT.O) advanced 4.8 percent to $29.47.

Microsoft said earnings fell slightly, while Intel shook up its executive suite and named a new chief operating officer as its profits topped scaled-back estimates. All three companies are Dow components, along with GE and AmEx.

The Dow Jones industrial average (.DJI) was up 63.88 points, or 0.51 percent, at 12,687.86. The Standard & Poor's 500 Index (.SPX) was down 2.51 points, or 0.19 percent, at 1,311.99. The Nasdaq Composite Index (.IXIC) was down 5.57 points, or 0.20 percent, at 2,782.76.

The euro zone remained on investors' radar. Greece and its private bondholders were close to an initial bond-swap deal, sources said, with agreement possible by late Friday. Creditors could lose up to 70 percent of the loans given to the fiscally troubled nation.

Hopes are an agreement would prevent the nation from spiraling into bankruptcy and bring some stability to the debt-strained euro zone.

Improving economic data in the United States along with signs of European stability have helped push the S&P 500 up 4.2 percent to start the year.

The National Association of Realtors said sales of previously owned U.S. homes rose to an 11-month high in December, adding some weight to the belief the sector may be starting to recover.

Parker Hannifin Corp (PH.N) fell 4.5 percent to $81.13 after the industrial parts maker reported a lower-than-expected quarterly profit and cut its full-year forecast.

Of the 72 S&P 500 companies that have reported results, 60 percent have beaten profit expectations, according to the Thomson Reuters Director's Report, a lower rate than in recent quarters.

(Reporting By Ryan Vlastelica; Editing by Jan Paschal and Jeffrey Benkoe)

NEW YORK (Reuters) – The S&P 500 and Nasdaq edged lower on Friday after GE and Google results fell short of expectations, while investors awaited a resolution in the latest round of Greek debt talks.

The Dow advanced, lifted by IBM, which offered a strong outlook late Thursday. Results from several big technology companies signaled corporate leaders were shaking off nervousness about economic growth and boosting technology spending.

Google Inc (GOOG.O) shares slumped 7.7 percent to $590.51 as the biggest drag on the benchmark S&P. Quarterly profit and revenue for the No. 1 Internet search engine missed Wall Street expectations on declining search advertising rates.

General Electric Co (GE.N) lost 1.5 percent to $18.87 after the largest U.S. conglomerate's revenues missed Wall Street estimates. Fellow Dow component American Express Co (AXP.N) dropped 2.1 percent to $49.87 as it set aside more money to cover bad loans.

"At this point, we are still at the starting line on earnings season. The good news is that the market has not reacted to the slow start," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.

International Business Machines Corp (IBM.N) gained 3.7 percent to $187.18.

Intel Corp (INTC.O) rose 1.5 percent to $26.02, while Microsoft Corp (MSFT.O) was up 3.5 percent to $29.11. Microsoft said earnings fell slightly, while Intel's profits topped scaled-back estimates.

Greece and its private bondholders were close to an initial bond swap deal, sources said, with agreement possible by late Friday. Investors could lose up to 70 percent of the loans given to the fiscally troubled nation.

Hopes are that an agreement would prevent the nation from spiraling into bankruptcy and bring some stability to the debt-strained euro zone.

"Economic news has been a little better than expected, and we've had a lack of bad news from Europe, so investor interest has been buoyed by a little more optimism in terms of investor acceleration, but today just looks like a consolidation day," said Dickson.

Improving economic data in the United States along with signs of European stability has helped push the S&P 500 up 4.2 percent to start the year.

The Dow Jones industrial average (.DJI) was up 65.77 points, or 0.52 percent, at 12,689.75. The Standard & Poor's 500 Index (.SPX) was down 2.03 points, or 0.15 percent, at 1,312.47. The Nasdaq Composite Index (.IXIC) dipped 3.11 points, or 0.11 percent, at 2,785.22.

The National Association of Realtors said sales of previously owned U.S. homes rose to an 11-month high in December, adding some weight to the belief the sector may be starting to recover.

Parker Hannifin Corp (PH.N) dipped 4.1 percent to $81.50 after the industrial parts maker reported a lower-than-expected quarterly profit and cut its full-year forecast.

(Reporting By Chuck Mikolajczak; editing by Jeffrey Benkoe and Padraic Cassidy)

NEW YORK (Reuters) – Stocks were set for a slightly lower open on Friday after GE and Google results fell short of expectations and as investors looked for a resolution in the latest round of Greek debt talks.

Google Inc (GOOG.O) shares slumped 7.7 percent to $590.16 in premarket trading after quarterly profit and revenue for the No. 1 Internet search engine missed Wall Street expectations on declining search advertising rates.

General Electric Co (GE.N) lost 2.4 percent to $18.68 after the largest U.S. conglomerate reported roughly flat profit from continuing operations, but revenues missed estimates.

"At this point, we are still at the starting line on earnings season. The good news is that the market has not reacted to the slow start," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.

Greece and its private bondholders were "converging toward" a long-awaited debt swap deal, sources said, with an initial agreement possibly coming late Friday.

Hopes are that an agreement would prevent the nation from spiraling into bankruptcy and bring some stability to the debt-strained euro zone.

"Economic news has been a little better than expected and we've had a lack of bad news from Europe so investor interest has been buoyed by a little more optimism in terms of investor acceleration, but today just looks like a consolidation day," said Dickson.

Improving economic data in the United States along with signs of euro zone stability has helped push the S&P 500 up 4.5 percent to start the year.

A strong outlook from International Business Machines Corp (IBM.N) and decent results from Intel Corp (INTC.O) and Microsoft Corp (MSFT.O) signaled that corporate leaders were shaking off nervousness about economic growth and boosting technology spending.

Microsoft shares were up 2.4 percent to $28.78, and Intel edged up 1 percent to $25.88 premarket. IBM gained 2.7 percent to $185.34.

S&P 500 futures fell 2.7 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures were off 17 points, and Nasdaq 100 futures dipped 1 point.

Parker Hannifin Corp (PH.N) dipped 4.7 percent to $81 after the industrial parts maker reported a lower-than-expected quarterly profit and cut its full-year forecast.

Economic data on existing home sales was due from the National Association of Realtors for December at 10 a.m. (1500 GMT). Economists forecast a 4.65 million annual rate in December, versus 4.42 million in November.

Chinese factory activity likely fell for a third successive month in January, an early indicator showed, suggesting Beijing's pro-growth policies will remain in place despite early signs a downward drift was slowing.

(Reporting By Chuck Mikolajczak; editing by Jeffrey Benkoe)

NEW YORK (Reuters) – Stocks rose for the third straight day on Thursday, sparked by results from Bank of America and Morgan Stanley and as the latest jobless claims dropped to a near four-year low.

The S&P 500 hit a fresh five-month high, with the industrials, consumer discretionary stocks and financials leading gains.

Tech shares advanced ahead of earnings from a number of bellwethers expected after the close.

But reports after the bell were mixed. Google (GOOG.O) fell short of Wall Street's lofty expectations, and its shares dropped 10 percent to $575.50.

"Google was the big disappointment because so much of their emphasis is developing products, specifically Android, where more dollars are going out than they anticipated," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

In the regular session, Bank of America Corp (BAC.N) climbed 2.4 percent to $6.96 after it reported it swung to a fourth-quarter profit from a year-ago loss. Morgan Stanley (MS.N) reported a loss that was narrower than expected, sparking a 5.4 percent jump in its stock to $18.28.

"We think (financials) have pretty much bottomed here in the U.S.," said Paul Simon, chief investment officer at Tactical Allocation Group in Birmingham, Michigan.

"They represent some compelling value. We think a lot of the bad news has been discounted, and you've seen stock prices rallying in the beginning of the year," said Simon, whose firm has been buying financials.

Financial shares have rallied since the start of the year. The S&P financial index (.GSPF) is up 8.1 percent so far for 2012, helping to push the S&P 500 up 4.5 percent for the year.

In the latest snapshot of the U.S. economy, data showed the number of Americans filing for new jobless benefits dropped to nearly a four-year low last week. It added to views that the economy is slowly moving forward.

The Dow Jones industrial average (.DJI) rose 45.03 points, or 0.36 percent, to end at 12,623.98. The Standard & Poor's 500 Index (.SPX) gained 6.46 points, or 0.49 percent, to 1,314.50. The Nasdaq Composite Index (.IXIC) climbed 18.62 points, or 0.67 percent, to close at 2,788.33.

Semiconductor stocks also advanced, with the PHLX SOX Index (.SOX) rising 1.9 percent. Xilinx Inc (XLNX.O) shot up 1 percent to $35.64 a day after issuing an upbeat forecast.

IBM UP LATE, AMEX SLIPS

Among other major tech companies reporting after the close, IBM (IBM.N) said it sees 10 percent earnings growth in 2012, and its shares rose 2.5 percent to $184.94.

Shares of Microsoft (MSFT.O) gained 1.9 percent to $28.64 in extended trading, and shares of Intel (INTC.O) added 0.5 percent to $25.75, both after reporting results.

American Express (AXP.N) also posted results after the bell, and its shares slid 1.9 percent in extended trading to $49.98.

In a sign of optimism about Europe, both Spain and France drew strong demand at government debt auctions.

With the S&P 500 having broken above the 1,300 level, it looks set to hit the 1,360-1,370 area, said Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston.

"That (area) represents the May 2011 high … and I believe we will see that during this earnings season," Zaro said.

The Dow Jones Transportation Average (.DJT) gained 1.6 percent, with shares of Union Pacific Corp (UNP.N) rising 2.2 percent to $112.18 after reporting quarterly profit and revenue that beat estimates.

Volume totaled about 7.6 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, above the daily average of 6.68 billion, and the highest since December 16.

Advancing stocks outnumbered declining ones by a ratio of about 2 to 1 on the New York Stock Exchange. On the Nasdaq, nearly three stocks rose for every two that fell.

(Reporting By Caroline Valetkevitch; Additional reporting by Ryan Vlastelica and Rodrigo Campos; Editing by Jan Paschal)

NEW YORK – Stronger retail sales and surging profits from Google sent stocks higher Friday. The Dow Jones industrial average turned positive for the year and the S&P 500 index had its best week in more than two years.

Retail sales increased 1.1 percent in September, the biggest gain in seven months and double what economists projected. Retail sales are a key barometer of consumer spending, which helps drive economic growth. It was the latest positive report on the U.S. economy and added to a growing body of evidence that another U.S. recession isn’t as likely as many had feared.

“The market’s decline was predicated on the collapse of the euro zone and a U.S. recession,” said Dan Greenhaus, chief global strategist at the broker BTIG in New York. “Neither seems likely now.”

The Dow rose 166.36 points, or 1.4 percent, to close at 11,644.49. The average of 30 large companies has shot up 9.3 percent after hitting 10,655 on Oct. 3, its lowest level of the year.

The Standard & Poor’s 500 rose 20.92, or 1.7 percent, to 1,224.58. The index gained 6 percent this week, the best week since July 2009. It was the highest close for the S&P since Aug. 3, when Washington was in paralysis over raising the country’s borrowing limit.

The dollar and U.S. Treasury prices fell as investors moved money into assets that perform better when the economy picks up. The yield on the 10-year Treasury note rose to 2.25 percent, the highest level since August.

Oil and other commodities rose sharply. Energy industry stocks jumped. Exxon Mobil Corp. jumped 2.3 percent to $78.11; Chevron Corp. rose 2.7 percent to $100.47.

Stock indexes have reversed a long slide in recent weeks, helped by better news on the U.S. economy and progress in Europe toward resolving that region’s debt crisis. Hiring has picked up, although modestly, and manufacturing continued to grow. The Dow soared 330 points Monday after the leaders of France and Germany pledged to come up with a far-reaching solution to the region’s debt crisis by the end of October.

Google Inc. shot up 5.8 percent to $591.68 after its quarterly income jumped 26 percent. Apple Inc. rose 3.3 percent to $422 as its new iPhone went on sale. Record-setting iPhone sales have helped Apple thrive this year even as the economy slowed.

The two tech leaders helped the Nasdaq gain 7.6 percent this week. That’s the best week since July 2009. The Nasdaq rose 47.61 points Friday, or 1.8 percent, to 2,667.85.

Navistar International Corp. jumped 7.3 percent to $41.51 on news that the billionaire investor Carl Icahn bought a stake in the maker of military trucks and recreational vehicles.

Retail sales are the government’s first look at consumer spending each month. Household spending on everything from clothes to health care accounts for 70 percent of the U.S. economy. If that spending falls sharply, a recession is more likely.

European markets extended an eight-day rally despite an overnight downgrade of Spain by Standard & Poor’s and warnings from Fitch about big banks. Food and soap company Unilever PLC announced a major acquisition, and Swiss agrochemicals firm Syngenta reported strong third-quarter sales.

Google reported late Thursday that its third-quarter revenue was one-third higher than last year. It was Google’s fourth consecutive quarter of year-over-year revenue growth. Google is doing well because of the reach of its search engine and the effectiveness of its ads.

The government also said Thursday that businesses added to their stockpiles for the 20th consecutive month while sales rose for a third straight month. The increase suggests businesses remained confident enough to keep stocking their shelves.

Five stocks rose for every one that fell on the New York Stock Exchange. Trading volume was below average, 3.7 billion shares.