Financial Markets                      04/26 16:05

   

   NEW YORK (AP) -- The best week for U.S. stocks since November closed out 
with more gains thanks to Alphabet and Microsoft on Friday.

   The S&P 500 rallied 1% to finish its first winning week in the last four. 
The Dow Jones Industrial Average rose 153 points, or 0.4%, and the Nasdaq 
composite jumped 2%.

   Alphabet leaped 10.2% after breezing past analysts' expectations for profit 
last quarter. The parent company of Google also said it will start paying a 
dividend to investors and authorized a program to buy back up to $70 billion of 
its stock, a signal of how much cash it's generating.

   Microsoft, meanwhile, climbed 1.8% after reporting stronger profit and 
revenue than expected. It cited strong growth in its cloud-computing business 
as it pushes artificial-intelligence technology to its customers.

   They helped offset a 9.2% drop for Intel. It reported stronger profit for 
the latest quarter than expected, but its revenue fell short of analysts' 
estimates. So did its forecast for profit in the current quarter.

   Stocks have broadly been under pressure this month after hopes withered for 
multiple cuts to interest rates this year by the Federal Reserve. A series of 
reports this year showing inflation remaining worse than forecast has traders 
expecting maybe one cut this year, down from forecasts for six or more at the 
start of the year.

   Yet another report on Friday showed inflation remaining stubbornly high. 
This time it was the measure of prices for March that the Federal Reserve 
prefers to use, but it wasn't much worse than forecasts. Financial markets took 
it much more in stride than a report from the day before that suggested the 
same measure of inflation rose quickly from January through March.

   Treasury yields largely eased in the bond market following Friday morning's 
report. The yield on the 10-year Treasury fell to 4.66% from 4.71% late 
Thursday. The two-year Treasury yield, which more closely tracks expectations 
for the Fed, held steadier. It edged down to 4.99% from 5.00%.

   While inflation has remained hotter than forecast, EY Chief Economist 
Gregory Daco expects it to cool in coming months as shoppers pressured in part 
by slowing growth in wages tamp down their purchases, which is the fuel that 
gives inflation energy.

   "Consumers remain willing to spend, but not on anything, nor at any price," 
he said.

   Economists also said the weaker-than-expected reading on the overall U.S. 
economy from Thursday, which helped send stocks sliding, may not be as bad as 
it seemed on the surface.

   "The economy remains on solid footing," Bank of America economists said in a 
report, pointing to solid buying trends from U.S. customers. Such an 
interpretation calms worries that the U.S. economy could be heading for a toxic 
mix of stagnating growth and high inflation, something that the Federal Reserve 
doesn't have great tools to fix.

   Still, the higher-than-expected inflation readings will likely keep the Fed 
on hold at its next policy meeting on Wednesday. Its main interest rate has 
been sitting at the highest level since 2001 in hopes of undercutting inflation 
by putting downward pressure on the economy and financial markets.

   After earlier indicating that three cuts to interest rates could be on the 
way this year, top Fed officials have since said they could hold its main 
interest rate high for a while to ensure inflation heads down toward their 2% 
target.

   Friday's report on sticky inflation "underscores Vanguard's belief that the 
Federal Reserve may find it's unable to cut interest rates this year," 
according to the investment giant's global head of portfolio construction, 
Roger Aliaga-Diaz.

   If interest rates stay high, companies will need to produce stronger profits 
for their stock prices to rise. So far this reporting season, the trend has 
bene better than expected.

   Roughly three out of four companies have been topping analysts' forecasts 
for profit, according to FactSet. That includes ResMed, which reported 
healthier profit and revenue than expected late Thursday. Its stock jumped 
18.9% for Friday's biggest gain in the S&P 500.

   All told, the S&P 500 rose 51.54 points to 5,099.96. The Dow added 153.86 to 
38,239.66, and the Nasdaq gained 316.14 to 15,927.90.

   In stock markets abroad, Japan's Nikkei 225 rose 0.8% after the Bank of 
Japan ended a policy meeting with no major changes to interest rates. Indexes 
also rose across much of the rest of Asia and Europe.

   ___

   AP Business Writer Yuri Kageyama contributed.

   ---------

   itemid:4775e405f59a664add5dd9daf995dcd5