NEW YORK (AP) — The stock market closed out its best week in nearly two years on a positive note Friday, helped by strong quarterly earnings from Microsoft and other big U.S. companies.
Investors were able to set aside dismal third-quarter results from Amazon. The giant online retailer's shares took a beating, but that wasn't enough to drag the rest of the market down.
After weeks of speculation over the fate of Europe's economy, Ebola fears and plunging oil prices, investors were able to get back to basics. Wall Street is in the midst of one of the busiest times of the year, when companies report their quarterly results. Ultimately what drives stock prices higher is the potential for that company to earn more profits, so higher profits generally mean higher stock prices.
"What matters most to the market are earnings expectations and corporate fundamentals, and so far they're looking pretty good," said Michael Arone, chief investment strategist at State Street Global Advisors.
Profits for S&P 500 companies are up 5.6 percent from a year ago so far this earnings season, according to FactSet, which is better than the 4.6 percent growth the market was looking for before the season began.
Quarterly results from Microsoft and UPS helped lift the market Friday, but there have been other strong earnings reports all week. Caterpillar, 3M, Apple and others have all came in well above expectations.
Microsoft reported sales and profits that were well above analysts' expectations. Cloud services, a business that Microsoft has been focusing on, also grew. Microsoft's stock rose $1.11, or 2.5 percent, to $46.13.
UPS also reported strong quarterly results and expects December shipments to be up 11 percent from a year ago. Many investors consider UPS a bellwether for how the U.S. economy is doing, particularly during the crucial holiday shopping season. UPS rose 11 cents, or 0.1 percent, to $100.59.
The Dow Jones industrial average rose 127.51 points, or 0.8 percent, to 16,805.41. The Standard & Poor's 500 index added 13.76 points, or 0.7 percent, to 1,964.58 and the Nasdaq composite rose 30.92 points, or 0.7 percent, to 4,483.72.
With Friday's gains, U.S. stocks had their best week in nearly two years. The S&P 500 rose 4.1 percent for the week, the biggest gain since January 2013. But volatility can go both ways. Just as the market jumped sharply this week, it plunged just as sharply last week. Even with this week's gains, the S&P 500 is still down 0.4 percent for October.
"We've seen the market sell-off and we saw people buy on the bounce, and that looks like it will continue," said Brad McMillan, chief investment officer at Commonwealth Financial.
One company that fell well short of investors' expectations was Amazon. The company reported a steeper-than-expected quarterly loss despite soaring sales. Investors have grown impatient with Amazon, which has been unable to deliver profits even as it gains ground as one of the world's largest retail companies. Amazon fell $26.12, or 8 percent, to $287.06.
Investors are turning their focus to next week's Federal Reserve policy meeting for hints about the future of the central bank's bond purchases. The program has kept long-term interest rates extremely low to keep markets fluid and to encourage investment and hiring. Recent mixed signals about the strength of the U.S. recovery have prompted speculation that the Fed might let the program continue for longer than previously anticipated.
Investors will also get another large batch of quarterly results from U.S. companies next week, when 159 members of the S&P 500 index report results, including Merck, Exxon Mobil, Chevron and Visa.
The price of oil fell Friday on further evidence of ample supplies and weak demand. Benchmark U.S. crude fell $1.08 to close at $81.01 a barrel on the New York Mercantile Exchange.
Brent crude, a benchmark for international oils used by many U.S. refineries, fell 70 cents to close at $86.13 on the ICE Futures exchange in London. In New York, wholesale gasoline fell 2.5 cents to close at $2.182 a gallon, heating oil fell 1.7 cents to close at $2.482 a gallon and natural gas rose 0.1 cent to close at $3.623 per 1,000 cubic feet.
The price of gold rose $2.70 to $1,231.80 an ounce, silver rose two cents to $17.18 an ounce and copper was flat at $3.04 a pound.
WASHINGTON (AP) — Transportation officials are reviewing the "safety culture" of the federal agency that oversees auto recalls, a senior Obama administration official said Friday. The National Highway Traffic Safety Administration has been criticized by lawmakers and safety advocates for not acting aggressively enough regarding millions of vehicles with defective air bags or faulty ignition switches.
A special Transportation Department team is examining whether "we have the dial set correctly on risk management and our safety posture in general" throughout the department, especially at the safety administration, said the official, who asked that he not be named as a condition of briefing reporters. The safety agency is part of the Transportation Department.
Announcements related to the review are expected in the coming weeks, the official said. The White House is expected to nominate a new administrator to run the troubled agency within the next two weeks, he said.
Further action also is possible involving air bag inflators made by Takata Corp., the official said. The inflators can rupture, ejecting shrapnel in a crash. Safety advocates say the problem has caused four deaths and multiple injuries. So far automakers have recalled about 12 million vehicles worldwide due to the problem, but recalls in the U.S. have been limited to vehicles registered in regions with high humidity. Millions more vehicles could be affected if the air bag recalls are extended nationwide, according to safety advocates.
No firm cause of the problem has been identified. Takata and the safety administration are investigating the impact of prolonged absolute humidity, which is a measure of the moisture content in the air, on chemicals that propel the air bags in a crash. They're looking into whether moisture in the air can cause the chemicals to explode with too much force, causing metal parts to fracture.
On Wednesday, the safety administration warned the owners of an additional 3.1 million vehicles to get their air bags checks repaired because of the potential danger to drivers and passengers. The agency has previously issued a warning covering 4.7 million cars and SUVs.
"The investigation is not over," the official said. "What has happened this week is an initial round of actions, but I wouldn't assume there wouldn't be future actions related to it."
DALLAS (AP) — Facing an even bigger mountain of packages this holiday season, FedEx and UPS are hiring more workers to avoid the delays that frustrated shoppers and gift-recipients a year ago.
Last December, the delivery giants were caught off-guard by bad weather and a surge in last-minute online shopping. An estimated 2 million packages were late at Christmas.
On Wednesday, FedEx Corp. said it expects deliveries between Thanksgiving and Christmas Eve to rise 8.8 percent over last year, to 290 million shipments. Volume is expected to surge on each of the first three Mondays in December, with FedEx predicting a peak of 22.6 million shipments on Monday, Dec. 15.
The delivery companies and Internet retailers are benefiting from a strengthening economy and optimism about consumer spending. At the same time, they're dealing with consumers who increasingly enjoy the ease of shopping on computers and mobile devices but expect the goods to show up almost as quickly as if they had shopped at a store. That expectation is often fed by online retailers, who hold out the promise of free delivery until right before Christmas.
About 1.3 million express packages handled by UPS and 618,000 carried by FedEx failed to get delivered on time last Christmas Eve, according to ShipMatrix Inc., which makes software for shipment tracking. The firm's president, Satish Jindel, said UPS and FedEx were at fault only 30 percent of the time.
In most cases, retailers promised guaranteed express delivery but tried to save money and didn't pay the delivery companies for that speedier service, Jindel said.
The merchants face tough competition for consumers who base purchases first on price, and second on free shipping, and the faster the better.
"Every single year the percentage of retailers offering free shipping goes up," said Vicki Cantrell, senior vice president at the National Retail Federation. "The consumer expects it. The retailer may or may not be able to afford it."
Target Corp. has started offering free holiday shipping for any item on its website, a first for the retailer as it tries to compete better against online rivals such as Amazon.com Inc. The timing of the offer was stunning — weeks before the unofficial kickoff of holiday shopping.
Cantrell said Target, Wal-Mart Stores Inc. and other retailers are getting better at the shipping game. They will ship items from stores instead of a central warehouse if that is faster, or tell online customers when the product they want can be picked up at a store near their home. Those strategies could relieve pressure on the delivery companies and satisfy the shopper more quickly.
The retail federation's online division, Shop.org, predicts that online sales in November and December will rise 8 to 11 percent over last year. To meet that demand, online retailers such as Amazon and the delivery companies are hiring more.
FedEx plans to hire 50,000 seasonal workers, up from 40,000 last year. United Parcel Service Inc. says it will add up to 95,000 people, up from 85,000. Last year, both companies wound up scrambling to hire more seasonal employees than they had planned, which increased costs and cut into profits.
FedEx also expects to invest $1.2 billion in its ground-shipping network in its current fiscal year, with most of that going to increase capacity and automation. The company said that the improvements have sped up ground delivery by a day or more in more than two-thirds of the U.S.
UPS has also invested to boost shipping capacity during the holidays, said the company's chief commercial officer, Alan Gershenhorn. He said that UPS had improved it forecasting and package tracking. UPS has not issued a holiday forecast.
Shares of FedEx fell $1.41 to $158.47; UPS shares fell $1.69 to $99.06.