Stocks showed a lack of direction throughout the trading day on Friday, with the major averages bouncing back and forth across the unchanged line before ending the day modestly higher. The lackluster performance came as traders digested some mixed earnings and economic news.

On the economic front, the Institute for Supply Management released its report on manufacturing activity in the month of April, showing that activity continued to contract for the month but at a much slower than expected pace.

The ISM said its index of activity in the sector rose to 40.1 in April from 36.3 in March, although a reading below 50 indicates a continued contraction in the sector. Economists had been expecting a more modest increase to a reading of 38.4.

Separately, the Reuters/University of Michigan's consumer sentiment index for the month of April was unexpectedly upwardly revised to a reading of 65.1 from the previously reported reading of 61.9. The index was unexpected to be unrevised.

The Commerce Department also released its report on factory orders in the month of March, showing that orders fell by a bigger than expected 0.9 percent following a downwardly revised 0.7 percent increase in February.

In earnings news, Chevron (CVX) closed notably higher after the oil giant reported first quarter earnings that fell sharply year-over-year but came in better than analysts had expected. Shares of Chevron ended the day up 1.2 percent.

Chevron reported first quarter earnings of $1.84 billion or $0.92 per share compared to $5.17 billion or $2.48 per share in the year-ago quarter. Analysts had been expecting the company to report earnings of $0.81 per share.

Meanwhile, MetLife (MET) saw considerable weakness on the day after reporting a first quarter loss of $574 million or $0.71 per share compared with a profit of $615 million or $0.84 per share in the same quarter last year. Shares of MetLife closed down 7.7 percent.

In an interview with RTT News, Sam Stovall, chief investment strategist at Standard & Poor's Equity Research suggested that investors turn a deaf ear to the old adage sell in May and go away this year.

Stovall pointed to the fact that since 1932, the market has gained an average of 12.2 percent in the May to October period following bear market bottoms.

There's a good chance we are in the beginning of a bull market, Stovall added, although he warned that history points to a likely digestion of the recent gains over the next month or two.

The major averages showed a notable upward move going into the close, ending the day in positive territory. The Dow closed up 44.29 points or 0.5 percent at 8,212.41, the Nasdaq closed up 1.90 points or 0.1 percent at 1,719.20 and the S&P 500 closed up 4.71 points or 0.5 percent at 877.52.

With the gains on Friday, the major averages all closed higher for the week, with the Nasdaq setting a nearly six-month closing high. While the Nasdaq rose 1.5 percent for the week, the Dow and the S&P 500 posted weekly gains of 1.7 percent and 1.3 percent, respectively.

Sector News

Despite the lack of direction that was shown by the broader markets, oil service stocks saw considerable strength, pushing the Philadelphia Oil Service Index up 3.8 percent. With the gain, the index ended the session at a nearly six-month closing high.

The gains by oil service stocks came amid a notable increase by the price of crude oil, with crude for June delivery closing up $2.08 at $53.20 a barrel. Optimism about the outlook for demand contributed to the price increase.

Most other resource stocks also showed strong upward moves, with steel stocks posting particularly strong gains. The Amex Steel Index closed up 5.7 percent, rising to its best closing level in over six months.

Airline stocks also turned in a strong performance despite the increase by the price of oil, resulting in a 3.6 percent gain by the Amex Airline Index. Some utilities, defense, and telecommunications stocks also posted notable gains.

On the other hand, significant weakness was visible among real estate stocks, as reflected by the 4.4 percent loss posted by the Morgan Stanley REIT Index. Within the sector, Pennsylvania Real Estate Investment Trust fell 15.1 percent after being downgraded by Stifel Nicolaus.

Retail stocks also came under pressure over the course of the trading day, dragging the S&P Retail Index down 2.3 percent. With the loss, the index pulled back well off the nearly seven-month closing high it set on Thursday.

Moving further off their recent highs, banking and housing stocks also saw notable weakness, with the S&P Banks Index and the Philadelphia Housing Index both falling more than 2 percent.

Dow Components

A majority of the Dow components ended the day in positive territory, contributing to the higher close by the blue chip index.

Construction equipment maker Caterpillar (CAT) turned in one of the Dow's best performances, ending the session up 4.7 percent. With the gain, Caterpillar ended the session at its best closing level in over three months.

Alcoa (AA) also showed a strong upward move, with the aluminum producer rising 6.8 percent to reach a three-month closing high. The gain by Alcoa came after the company agreed to sell its wire harness and electrical distribution business.

Boeing (BA), Exxon Mobil (XOM), Pfizer (PFE) are among the other Dow components that ended the day notably higher. Shares of Boeing closed up 2.9 percent, at their best closing level in well over two months.

At the other end of the spectrum, shares of General Motors (GM) closed down 5.7 percent after the auto giant reported a 34 percent year-over-year decrease in April sales. Financials American Express (AXP), Citigroup (C), and Bank of America (BAC) also posted notable losses.

Other Markets

In overseas trading, most of the major markets in both the Asia-Pacific region and Europe were closed for May Day holidays. Nonetheless, Japan's benchmark Nikkei 225 Index closed up 1.7 percent, while the U.K.'s FTSE 100 Index closed nearly flat.

Meanwhile, treasuries saw considerable weakness on the day, extending a recent downward move. Subsequently, the yield on the benchmark ten-year note closed up 5 basis points at 3.174 percent, a five-month closing high.

Looking Ahead

With the earnings season starting to wind down, economic news is likely to be in focus next week. Traders are likely to pay particularly close attention to the Labor Department's monthly employment report due to be released on Friday.

Reports on construction spending, pending home sales, labor productivity, and wholesale inventories are also likely to attract some attention.

Additionally, several big-name companies are still due to report their quarterly results, including Sprint Nextel (S), Tyson (TSN), Disney (DIS), Tenet Healthcare (THC), and AIG (AIG).

For comments and feedback: contact editorial@rttnews.com