Dow jumps 166 on a late-day surge

By Charley Blaine and Elizabeth Strott

A big push in the last half-hour of trading pushed stocks sharply higher on Friday, offering relief to investors wearied by a week of big volatility.

The Dow Jones industrials closed up 166 points, or 1.4%, to 12,307. The Nasdaq Composite Index was up 50 points, or 2.1%, to 2,455 and the Standard & Poor's 500 Index closed up 20 points, or 1.5%, to 1,360.

The big finish saw the Dow pick up 83 points in the last half-hour of trading and brought the U.S. stock market just about to break even for the week after losing about 3% the week before. It was the Dow's fourth gain in six sessions, but the two losing sessions were big: 206 points on Wednesday and 395 on June 6.

The rally was powered by strength in brokerage (thanks to a 13.7% gain to $25.81 in shares of troubled investment bank Lehman Bros. (LEH, news, msgs)), steel, semiconductor and airline stocks.

The Dow was up nearly 1% for the week, with the S&P 500 unchanged and the Nasdaq off about 1%. For the year, the three indexes are down 7.2%, 7.4% and 7.5% respectively.

Twenty-eight of the 30 Dow stocks were higher, led by Alcoa (AA, news, msgs), up 4.6% to $39.46 on takeover speculation, and General Motors (GM, news, msgs), up 4.4% to $16.45.

Lehman Bros. was the top S&P 500 stock; 441 S&P 500 stocks were higher.

And 93 Nasdaq-100 ($NDX.X) stocks finished with gains, led by United Airlines parent UAL (UAUA, news, msgs), up 8.7% to $6.86.

Crude oil, which is the dominant factor affecting stocks right now, closed down 1.4% on the day to $134.86 a barrel after briefly topping $137. For the week, crude was down 2.7%. A week ago, crude closed at a record $138.54 and briefly hit $139.12.

Crude slipped back partly because of a rising dollar, which was up against the euro, the Japanese yen and the Canadian dollar. The U.S. Dollar Index, which measures the dollar against a basket of currencies was up 0.3% to 74.50.

The dollar closed up 2.6% against the euro this week, and the dollar index had a 3% gain this week. The dollar is still down 5% against the euro for the year; the dollar index is off 3%.

Corn closed up 3.2% to $7.3175 a bushel in Chicago because of continued flooding in the Midwest. Corn was up 12.5% on the week and is up nearly 61% this year.

For those who watch technical indicators, the S&P 500 finished above 1,350, which had been a closely-watched support level. When the index fell under 1,350, there was great fear the index could fall much further.

Next week will be another test of investors' fortitude. There are important earnings from Goldman Sachs (GS, news, msgs) and Best Buy (BBY, news, msgs) on Tuesday, Morgan Stanley (MS, news, msgs) and FedEx (FDX, news, msgs) on Wednesday and Circuit City (CC, news, msgs) on Thursday.

Lehman Bros. will officially report a second-quarter loss of $2.8 billion on Monday; the company had pre-announced the loss this week. The stock was up 14% on Friday after getting clobbered for most the week. After ousting its chief operating and chief financial officers on Thursday, Lehman ended the week with a 20% loss. How the company discusses its prospects on Monday will be important.

In addition, several important economic reports are due, including the Producer Price Index and housing starts on Tuesday and leading economic indicators on Thursday.

The markets for the week

	Close for week	Wk. ago close	% chg.	YTD. chg.
Dow Jones industrials	12,307.35	12,209.81	0.80%	-7.22%
S&P 500	1,360.03	1,360.68	-0.05%	-7.38%
Nasdaq Composite	2,454.50	2,474.56	-0.81%	-7.46%
Russell 2000	733.61	740.37	-0.91%	-4.23%
Crude oil per barrel	$134.86	$138.54	-2.66%	40.51%
10-yr. Treasury yield	4.26%	3.94%	8.20%	5.60%
Gold per troy ounce	$873.10	$899.00	-2.88%	4.19%

Oil rules stocks

The market proved this week how tied it is now to the price of oil.

The stock market was hit by a dreadful consumer price index report this morning.

But the price of crude oil in New York opened at $133.46 a barrel, down 2.4% from Thursday, after the Organization of Petroleum Exporting Countries trimmed its growth estimate for 2008 crude demand. Plus, a report said Saudi Arabia may raise production in coming weeks.

Result: traders ignored the CPI report, seized on crude oil and sent stocks jumping. By 10:15 a.m. ET, the Dow was up 168 points to 12,309.

Slowly, however, crude moved higher, reaching $135.36 at 2:15 p.m., trimming its loss to 1%. The Dow's gain was trimmed back to 71 points.

When crude fell back at the close, stocks moved higher again.

OPEC trimmed its 2008 oil demand forecast, predicting demand will rise by 1.1. million barrels a day this year to 86.88 million barrels -- 60,000 barrels a day lower than its previous forecast.

Also, a Middle East economic survey reported that Saudi Arabia may raise production in coming weeks.

Financial stocks broke even overall. While Lehman and other investment banks jumped, heavy selling hit a number of regional bank stocks. Fifth Third Bancorp (FITB, news, msgs) was off 10.4% to $13.17 after an analyst downgraded the stock. Peter Winter of BMO Capital Markets said the Cincinnati company may have to cut its dividend and raise new capital to cope with loan losses.

Also falling: Wachovia (WB, news, msgs), down 5.8% to $18.19, Comerica (CMA, news, msgs), down 3.6% to $30.77 and Zions Bancorp (ZION, news, msgs), down 2.5% to $34.94.

Merrill Lynch (MER, news, msgs) was up 4.7% to $38, and Morgan Stanley rose 6.9% to $41.04.

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Energy prices -- New York close

	Fri.	Thur.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$134.86	$136.74	-$1.88	5.90%	40.51%
Heating oil (per gallon)	$3.8368	$3.9427	-$0.1059	4.64%	44.82%
Natural gas (per million BTU)	$12.6250	$12.7980	-$0.1730	7.88%	68.72%
Unleaded gasoline (per gallon)	$3.4626	$3.5260	-$0.0634	3.42%	39.02%

Consumer prices move higher

The Labor Department said the Consumer Price Index rose 0.6% last month -- higher than the 0.5% increase economists had expected. Year over year, consumer prices are up 4.2%.

Excluding food and energy, the core CPI was up 0.2% in May, in line with expectations; core prices are up 2.3% year over year.

The Federal Reserve has turned its focus back to inflation in recent weeks, as energy prices have hit record highs.

Energy prices rose 4.4% in May, the CPI report showed, and gasoline prices rose 5.7%.

The increase was due partly to the jump in gasoline prices last month. The average price of regular gasoline hit another record Friday: $4.066 a gallon, according to the AAA Fuel Gauge report.

A separate report showed that consumers are still concerned about the economy.

The University of Michigan/Reuters index on consumer confidence fell to a reading of 56.7 in June -- the worst level since May 1980 -- from a reading of 59.8 in May. By comparison, the index averaged 85.6 last year.

U.S. Airways to cut jobs, capacity

Soaring crude oil sky-high gains have battered the airline industry, and U.S. Airways (LCC, news, msgs) became the latest company to take steps to try to offset those prices.

The airline said Friday it will cut 1,700 jobs and cut capacity by as much as 8%. It will even charge passengers for beverages .

Jet fuel prices have nearly doubled in the past year, and fuel now accounts for about 39% of U.S. Airways' total expenses -- a huge increase from the 14% the company devoted to jet fuel in 2000, the company said.

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"Our industry is profoundly challenged by the dramatic increase in fuel prices, and we must write a new playbook for running a profitable airline in this new and challenging environment," CEO Doug Parker said in a statement.

Other airlines -- including Continental (CAL, news, msgs) and AMR Corp.'s (AMR, news, msgs) American Airlines -- have taken similar measures.

U.S. Airways shares rose 6.3% to $2.86 on the news.

Foreclosure filings jump

The housing slump is still taking a toll on U.S. homeowners.

The number of foreclosure filings rose 7% in May from April, according to RealtyTrac, and were 48% higher than in May 2007.

One out of every 483 households in the U.S. received a foreclosure filing in May, including default notices, auction sale notices and bank repossessions, RealtyTrac said. Nevada, California and Arizona had the highest statewide foreclosure rates.

"I think a lot of people are waiting to see if we really have hit the bottom," said Rick Sharga, RealtyTrac's vice president of marketing, in a press release.

On Thursday, Freddie Mac (FRE, news, msgs) said 30-year fixed-rate mortgages rose to an average of 6.32% this week, the highest level in eight months.

Anheuser-Busch talking to Grupo Modelo

Just days after Belgian brewer InBev offered $46 billion, or $65 per share, for U.S. brewing giant Anheuser-Busch (BUD, news, msgs), the St. Louis company has turned to Mexican brewer Grupo Modelo to talk about a possible deal.

Anheuser-Busch CEO August Busch IV is opposed to an InBev deal and would rather develop closer ties to Grupo Modelo, in which Anheuser-Busch already owns a 50% stake, The Wall Street Journal reported.

Buying Grupo Modelo could make Anheuser-Busch too expensive for InBev, Mariann Montagne, an analyst at Thrivent, told Bloomberg News. "This is a card Anheuser-Busch is going to play. It is very logical."

Anheuser-Busch shares were down 0.5% to $61.12. InBev closed down 1.6% to 49.43 euros in Brussels.

ExxonMobil exits retail business

The soaring price of crude oil has taken a toll on profits at gasoline retailers. Now ExxonMobil (XOM, news, msgs) has said it will get out of the retail gasoline business.

Because oil prices are so high, refiners are paying more for the crude they process into gasoline. Meanwhile, demand for gasoline has been falling, hurting refiners' ability to pass along the full price increase to customers.

• Read more: The hidden costs behind gas prices

ExxonMobil will sell the 820 service stations it owns and operates, as well as an additional 1,400 outlets operated by dealers, to gasoline distributors across the country.

Drivers will still be able to fill up at gas stations with Exxon and Mobil signs, however. There are about 12,000 privately owned gas stations in the U.S. that use the brand names.

ExxonMobil shares were up 1.5% to $88.36.

Yahoo gets a deal with Google; investors sell

Yahoo (YHOO, news, msgs)just can’t make its shareholders happy.

The stock finished Friday down 0.2% to $23.47 and was just one of seven stocks in the Nasdaq-100 Index to show a loss on the day. But it needed the big rally save the day from being a disaster. In the morning, it had been down as much as 7.5% to $21.75.

Yahoo late Thursday announced a 10-year advertising deal with Google (GOOG, news, msgs), after ending talks with Microsoft (MSFT, news, msgs).

The shares were off an additional Shares of Yahoo plunged 10% after the company said it scrapped merger talks with Microsoft, which said it would not pay $47.5 billion for Yahoo. (Microsoft is the publisher of MSN Money.)

• Top Stocks blog: Yahoo's dark day

The Google deal will allow Yahoo to run ads supplied by Google on Yahoo search returns and some other pages. Yahoo said the deal could be worth $800 million in annual revenue, but the deal must first get regulatory approval from the Justice Department.

Google shares were up 3.4% to $571.51. Microsoft was up 2.9% to $29.07.

Analysts were skeptical about whether the deal would help Yahoo. "When Microsoft walked, it was a real walk," Colin Gillis of Canaccord Adams told Bloomberg News. "This (Google) deal has the perception of damaged goods."

"While Yahoo believes it can remain a viable principal in search, the deal could lead to advertiser and publisher defections to Google and we point to the examples of Ask.com and Time Warner's (TWX, news, msgs) AOL, which have had challenges selling their own search ads," Bank of America analyst Brian Pitz wrote in a note to clients.

Yahoo must still face billionaire investor Carl Icahn, who is leading a charge to oust Yahoo Chief Executive Jerry Yang in a proxy fight.

Short hits from the markets -- 4 p.m.

	Fri.	Thur.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.930%	1.950%	-0.020	4.32%	-38.54%
5-year Treasury note yield	3.728%	3.663%	0.065	9.42%	7.90%
10-year Treasury note yield	4.261%	4.205%	0.056	5.31%	5.60%
30-year Treasury bond yield	4.802%	4.764%	0.038	2.02%	7.69%
Currencies
U.S. Dollar Index	74.170	74.290	-0.120	1.67%	-3.29%
British pound in dollars	$1.9459	$1.9467	-0.0008	-1.89%	-2.18%
Dollar in British pounds	£0.5139	£0.5137	0.0002	1.92%	2.23%
Euro in dollars	$1.5399	$1.5454	-0.0055	-1.03%	5.36%
Dollar in euros	€ 0.6494	€ 0.6471	0.0023	1.04%	-5.09%
Dollar in yen	108.17	107.87	0.30	1.68%	-3.29%
Canadian dollar in U.S. dollars	$0.972	$0.978	-$0.0057	-3.49%	-2.12%
U.S. dollar in Canadian dollars	$1.030	$1.023	$0.0069	3.64%	2.18%
Commodities
Gold	$873.10	$872.00	$1.10	-1.60%	4.19%
Copper	$3.5910	$3.5415	$0.05	-0.42%	18.09%
Silver	$16.5600	$16.4850	$0.07	-1.81%	10.99%
Corn	$7.3175	$7.0900	$0.23	22.11%	60.65%
Crude oil (NYMEX) (per barrel)	$134.86	$136.74	-$1.88	5.90%	40.51%