(FT) - Wall Street ended the week on a high note on Friday with technology stocks leading the charge after some strong results from Research In Motion cheered the market.
The banking sector rallied on reports that Merrill Lynch is seeking a multi-billion-dollar capital injection and financials appeared untroubled by reports that plans for a "superfund" to bail out troubled structured investment vehicles were being dropped for lack of demand.
Energy and materials were the pick of the S& P's leading sectors as commodity prices surged and retailers rebounded after the Commerce Department revealed a sharp rise in consumer spending.
The S& P 500 closed up 1.7 per cent at 1,484.46 on Friday for an increase of 1.1 per cent this week. The Dow Jones Industrial Average rose 0.8 per cent on the week to 13,450.65 while the Nasdaq Composite fared better, gaining 2.1 per cent to 2,691.99 over the period. The Russell 2000 small cap index climbed 4.2 per cent to 785.60 this week, helped by an increase in deal-making.
The New York Stock Exchange set a volume record in the first hour on Friday as traders settled positions before the holidays and as several types of derivative contracts expired - a quarterly event known as "quadruple witching". However, volatility as measured by the CBOE Vix index - Wall Street's so-called "fear barometer" - fell to its lowest level since the end of October, down 19.7 per cent for the week at 18.68.
Research In Motion, the maker of the BlackBerry e-mail device, capped a good week for technology after it said third-quarter net in-come more than doubled to $370.5m and revenues soared. The company's up-beat fourth-quarter guidance exceeded analysts' estimates and the shares jumped 11.9 per cent on the week to $118.63. UBS raised its price target to $155.
RIM's stellar results came in the same week that Oracle (NASDAQ:ORCL) increased second-quarter profit by 35 per cent, helped by strong software licence sales. Its shares rose 7.1 per cent to $22.71 this week.
Adobe Systems (NASDAQ:ADBE), the software company, beat estimates with a 21 per cent rise in fourth-quarter profits and the shares edged up 0.2 per cent to $42.18.
"There's been no crisis in technology. The momentum has been phenomenal," said Jim Paulsen, chief investment strategist at Wells Capital Management.
Financials had a mixed week as investors were forced to weigh up whether to avoid the sector because of more mortage -related losses or buy into the stocks because of the prospect of big capital infusions from abroad.
Reports that Merrill Lynch is in talks with Temasek , Singapore's state investment agency, about a potential multi-billion-dollar investment moved the shares higher on Friday.
Like many US banks, Merrill could benefit from a boost to its capital reserves after it took $8.4bn in writedowns in October. The shares fell 2.3 per cent on the week to $55.54 after an analyst at Fox-Pitt Kelton forecast Merrill would take another $8.6bn in writedowns this quarter.
Morgan Stanley (AMEX:MWD) this week tapped China Investment Corp for $5bn as it an- nounced a total of $9.4bn in writedowns for the fourth quarter and posted the first loss in its history. The shares ended the week up 8.1 per cent at $54.37.
Bear Stearns (NYSE:BSC), which in October took a $1bn investment from China's Citic Securities, fell to its first loss this week, after it wrote down $1.9bn for the quarter. The shares fell 5.6 per cent to $89.95 on the week.
Investors were rocked by the threat of credit downgrades on monoline bond insurers.
A downgrade of bond insurers could seriously affect world credit markets, triggering sharp losses on insured securities.
MBIA (NYSE:MBI), fell 27.4 per cent to $20.03 this week after it revealed $30.6n in exposure to complex debt securities. Fitch Ratings warned it could cut MBIA's triple-A rating unless it raised $1bn in capital.
Fitch issued the same warning to Ambac Financial on Friday after identifying $32.2bn in exposure to collateralised debt obligations backed by subprime collateral.
However, Ambac's shares rose 16.9 per cent to $26.66 on the week after Moody's affirmed its triple-A rating.
Transport stocks were disappointing after FedEx (NYSE:FDX), the logistics company, and Union Pacific (NYSE:UNP), rail operator, issued weak earnings guidance, citing rising fuel costs. The shares fell 1.7 per cent to $94.29 and 3.5 per cent to $126.02 respectively.