Stocks pare losses to finish mixed after oil spikes

Investors hoping for an economic rebound in the second half of the year and searching for signs that the housing market is bottoming got some relief before the market opened: the Commerce Department's report that home construction jumped 8.2 percent in April.

But investors were clearly sidetracked for much of the session by energy prices and their effect on consumer spending, which accounts for more than two-thirds of U.S. economic activity. The price of a barrel of oil spiked to $127.82 for a new trading record on Friday.

The market's concerns appeared well-founded, with news that the continuing rise in energy and food costs is weighing on the mood of consumers. The Reuters/University of Michigan consumer sentiment reading fell to 59.5 in May -the weakest reading since June 1980.

Steve Neimeth, portfolio manager for AIG SunAmerica mutual funds, said investors are worried that rising energy prices could derail any rebound in the economy.

"Although the housing numbers today were generally positive, the Michigan survey was quite poor and, more importantly, a continued spike in energy and commodities is causing investors to second-guess the second-half recovery," he said. "If oil and gas prices continue to go up consumers are unlikely to have the spending ability in the second half."

But despite the uneasiness over energy prices, stocks posted strong gains for the week. The broader market, as measured by the Standard & Poor's 500 index, rose 2.7 percent for the week. The S&P 500 index ticked up 1.78, or 0.13 percent, to 1,425.35 on Friday.

The Dow Jones industrial average slipped 5.86, or 0.05 percent, Friday, closing at 12,986.80. For the week, the Dow rose 1.89 percent.

The Nasdaq composite index fell 4.88, or 0.19 percent, to 2,528.85 Friday, but still jumped 3.41 percent for the week. The S&P 500 and Nasdaq remain at five-month highs.

Advancing issues outnumbered decliners by about 8 to 7 on the New York Stock Exchange, where consolidated volume amounted to 3.74 billion shares, up from 3.73 billion Thursday.