Earlier selling pressure was generated by disappointing earnings from Microsoft, which reported weaker than expected quarterly sales, while American Express (AXP), Amazon.com (AMZN), Black & Decker (BDK), Schlumberger (SLB) and others offered a mixed bag of results.
Traders largely shrugged off a mixed report from Reuters and the University of Michigan, which showed that their reading on consumer sentiment for the month of July was upwardly revised from the preliminary reading but still came in well below the previous month.
The report said that the consumer sentiment index for July came in at 66.0 compared to the preliminary reading of 64.6, although it remained below a reading of 70.8 for June. Economists had expected the index to be revised up to 65.0.
Meanwhile, some traders looked to Capitol Hill, where Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke were among government officials testifying before the House Financial Services Committee regarding financial service regulatory reform.
Notably, the Fed chief indicated that the government is winding down its unprecedented intervention in the U.S. financial system.
The major averages eventually ended the session on opposite sides of the unchanged line, with the Nasdaq stuck in the red. While the Nasdaq slipped by 7.64 points or 0.4 percent to 1,965.96, the Dow climbed 23.95 points or 0.3 percent to 9,093.24 and the S&P 500 rose by 2.97 points or 0.3 points to 979.26.
Despite the mixed performance for the session, the major averages all posted strong gains for the week. The Dow rose 4 percent for the week, while the Nasdaq and the S&P 500 posted weekly gains of 4.2 percent and 4.1 percent, respectively.
Airline stocks turned in some of the day's strongest performances, with the NYSE Arca Airline Index rising by 4.6 percent. The day's gain lifted the index to its best closing level in well over five months. US Airways (LCC) posted a standout gain after reporting a second quarter profit including one-time gains.
Biotechnology stocks also moved higher by a notable margin, as reflected by the 2.4 percent gain posted by the NYSE Arca Biotechnology Index on the day. The index was able to resume its upward move, finishing at its highest closing level in over eleven months.
The biotechnology index was boosted by shares of Sequenom (SQNM), which surged up by 9 percent. The upward move propelled the stock to its best closing price in nearly three months.
While healthcare provider, utility and pharmaceutical stocks also saw strong gains, semiconductor and software stocks retreated, reflecting weakness in the tech sector.
Banking and railroad stock also turned in disappointing performances, with the Dow Jones Banking Index and the Dow Jones Railroads Index falling by 1.1 percent and 1 percent, respectively. Notably, the railroads index pulled back off of an eight-month closing high set in the previous session.
One of the Dow's strongest performers was Merck (MRK), which rose by 2.5 percent. With the gain, the drug giant ended the session at its best closing level in well over six months.
Shares of Johnson & Johnson (JNJ) also advanced by a notable margin, posting a gain of 2.1 percent on the day. The stock was able to close at its best level in well over nine months.
While Pfizer (PFE), Alcoa (AA) and Caterpillar (CAT) also saw considerable moves to the upside, the blue chip index was limited by shares of Microsoft, which plunged by 8.3 percent. The drop dragged the stock well off its best closing level in over nine months.
Shares of United Technologies (UTX) also retreated, posting a loss of 2.2 percent, while Bank of America (BAC) slid by 1.4 percent. Despite the downward move, both stocks remained stuck in recent trading ranges.
In overseas trading, stock markets across the Asia-Pacific region finished on the upside on Friday. While Japan's benchmark Nikkei 225 Index posted a 1.6 percent gain, Hong Kong's Hang Seng Index rose by 0.8 percent.
Meanwhile, the major European markets closed on a mixed note, with the German DAX Index and the French CAC 40 Index finishing down by 0.4 percent and 0.2 percent, respectively, while the U.K.'s FTSE 100 Index rose by 0.4 percent.
In the bond markets, treasuries saw modest strength amid some bargain hunting. Subsequently, the yield on the benchmark ten-year note closed at 3.67 percent, posting a loss of 3.9 basis points on the day.
Traders will look to results from RadioShack (RSH), Verizon (VZ), Tellabs (TLAB) and Honeywell (HON) amongst others on Monday, while bracing for a report on new home sales.
Meanwhile, data on consumer confidence, durable goods orders, jobless claims and an advanced reading on gross domestic product for the second quarter are likely to dominate the headlines later in the week along with more earnings reports.
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