Stocks end week with a draw

By Charley Blaine and Elizabeth Strott

Wall Street wrapped up a mildly positive week with a draw today as investors mulled signs of increased consumer spending along with higher prices for necessities like food and fuel.

Meanwhile a decline in energy prices helped soothe worries pricey oil could hurt consumers.

Crude oil, which had set a record high of nearly $135 a barrel, fell $4.41 on Thursday, its biggest single-day decline in more than two months. It finished the week at $127.40.

The Dow Jones Industrial Average was down nearly 8 points to close at 12,638. The Nasdaq Composite Index gained more than 14 points and ended at 2,522, and the Standard & Poor's 500 Index added more than 2 points to close at 1,400.

The Commerce Department said consumer spending rose 0.2% in April and that incomes were also slightly higher, thanks to the first round of economic stimulus checks aimed at keeping the economy from slipping into recession.

The government also said much of the wage gains were eroded by inflation, which ticked up 0.1%, excluding food and energy costs. Rising food and fuel prices have helped send consumer sentiment to recessionary levels. The Reuters/University of Michigan survey of consumer sentiment dropped for a fourth straight month in May, hitting a 28-year low of 59.8, down from a reading of 62.6 in April. The May level was the lowest since June 1980.

Dell's turnaround on track?

Dell (DELL, news, msgs) was forced to launch a restructuring last year after it fell behind rival Hewlett-Packard (HPQ, news, msgs) as the nation's No. 1 PC maker. The company's first-quarter results suggest the plan, which involved the return of founder Michael Dell as chief executive, might work. Dell said notebook sales rose 43%, and product shipments jumped 22%. The stock gained 5.7% on the session to close at $23.06.

"Michael Dell had a very slow start (to the turnaround). One quarter doesn't a trend make, but I'm willing to sit back and wait because it looks like he has gotten some traction, especially on costs," Kim Caughey, senior analyst with Fort Pitt Capital Group, told Reuters.

Another analyst was equally optimistic. "They accelerated the profitable parts of their business, particularly notebooks and enterprise," Morgan Stanley analyst Katy Huberty told The Wall Street Journal. "It's the first example in the last year-and-a-half or two years that the company delivered on its promises."

But Dell Chief Financial Officer Don Carty was cautious about the prospects for corporate tech spending later this year. "People are holding back," Carty said on a conference call with analysts. "We continue to see conservatism in the U.S., especially in the financial sector." Dell did not give a forecast for the second quarter.

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Marvel Technology Group (MRVL, news, msgs), a maker of chips for hard-disk drives and Internet networking gear, reported better-than-expected revenue and said its cost-cutting campaign helped it swing to a fiscal first-quarter profit.

The Silicon Valley company relies on third-party contractors to assemble and test functions. This arrangement lets Marvell focus on designing, developing and marketing its products. The stock gained more than 23% today to end at $17.36.

Tiffany's bright quarter

The consumer slowdown in the United States didn't seem to affect luxury retailer Tiffany (TIF, news, msgs). The New York company this morning reported first-quarter profit of $64.4 million, or 50 cents per share, up from $54.1 million, or 39 cents per share, in the same quarter last year. Analysts had expected earnings of 40 cents per share.

Sales jumped on strong global demand and distribution, the company said. Same-store sales rose 16% in Tiffany's New York flagship store due to increased foreign tourist spending, but same-store sales at branch stores fell 4%. Combined catalog and Internet sales in the U.S. rose 1%.

The jewelry retailer also said it does not see a pickup in U.S. demand any time soon. Tiffany shares were up 2.7% today and closed at $49.03.

Investors were heartened earlier this week by word that credit and debit card processor MasterCard (MA, news, msgs) was lifting its long-term profit outlook, saying more consumers continue turning to plastic over cash. The company also forecast double-digit revenue growth for 2008 and boosted its long-term profit outlook.

And the government on Thursday revised its estimate of first quarter GDP growth up to a rate of 0.9%, slightly better than the 0.6% original forecast.

Treasury prices rebounded Friday after moving sharply lower in recent days on worries about economic jitters and hunt for higher-yielding investments. The benchmark 10-year yield note gained 9/32, pushing its yield down to 4.04%, The Associated Press reported.

No deal between US Airways, United

The chiefs of UAL's (UAUA, news, msgs) United Airlines and US Airways (LCC, news, msgs) have formally shelved their effort to create the world's biggest airline. United's Glenn Tilton and US Airways' Doug Parker backed off a deal that could have saved both companies money but resulted in fewer routes and higher ticket prices for fliers.

The carriers had been exploring a combination for more than two months, but formidable hurdles -- including the reluctance of banks to provide capital and labor unions to accept the inevitable job cuts -- finally killed the deal.

A union of United, the nation's second-biggest carrier, with US Airways, the seventh-biggest, could have created an airline with the most world's most extensive route network.

The airline industry has been hit hard by the surge in oil prices, forcing companies to consider consolidation and other steps to relieve the pressure on earnings. AMR's (AMR, news, msgs) American last week announced plans to start charging for the first checked bags, and US Airways on Wednesday said it is cutting out free snacks for coach travelers.

Silverjet stops flights

Business-class airline Silverjet is the latest to stop flights. The airline, which operates between New York, London and Dubai, said it failed to get $5 million in emergency funding from Viceroy Holdings, an investment group from the United Arab Emirates.

"Silverjet was the last of a particular breed," John Strickland, director of aviation specialist JLS Consulting, told Bloomberg News. "But I think we'll see other failures across different parts of the market in the next 12 months."

At least 10 airlines have gone under because of rising oil prices.

A survey released Thursday suggested that nearly half of American air travelers would fly more if it were easier, and more than one-fourth said they skipped at least one air trip in the past 12 months because of the hassles involved, The Associated Press reported. The Travel Industry Association, which commissioned the survey, estimated that the 41 million forgone trips cost the travel industry $18.1 billion and cost federal, state and local authorities $4.2 billion in taxes in the past 12 months.

Charley Blaine is on vacation.