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Thursday May 26th, 2016 1:09AM

Stocks rise on profit gains from Microsoft, others

By The Associated Press
NEW YORK - Strong earnings from technology companies are pushing the stock market slightly higher Friday.

Microsoft drove the Dow Jones industrial average up after reporting solid sales of tablet computers.

The Dow was up 28 points, or 0.2 percent, at 15,537 as of 2:55 p.m. Eastern Daylight Time. The Standard & Poor's 500 index was up four points, or 0.3 percent, at 1,756, two points above its record close on Tuesday. The Nasdaq composite rose 11 points, or 0.3 percent, to 3,939.

The Dow and the S&P 500 are heading for their third straight week of gains. Some market watchers are calling for caution, saying that a significant part of the profit growth companies have been reporting has come from cutting expenses, not increasing revenue, as the global economy remains sluggish.

"The question is: What is the outlook for earnings?" Steven Ricchiuto, chief economist at Mizuho Securities, said. "There is only so much you can do with cost-cutting."

Major U.S. stock indexes have soared this year. The S&P 500 is up 23 percent, the Nasdaq composite 30 percent. In addition to higher earnings, investors have been encouraged by continued economic stimulus from the Federal Reserve. Many had expected the Fed to pull back from its stimulus before the end of year, but now think the central bank will hold off until next year, possibly until March.

The Fed is buying $85 billion worth of U.S. government and other bonds with the aim of keeping interest rates low.

The yield on the 10-year Treasury note, a benchmark for mortgages and many other kinds of loans, edged down to 2.51 percent from 2.52 percent. The yield has fallen sharply since Sept. 5, when it hit 3 percent, and is the lowest it's been in three months.

Most companies that have reported third-quarter earnings are beating analysts' estimates. Still, earnings for the S&P 500 are expected to grow just 4.5 percent over the same period a year ago, according to S&P Capital IQ, a research firm. At the start of the year, earnings were expected to rise at more than twice that pace.

Seven of the 10 industry groups in the S&P 500 were higher on Friday. Telecommunications stocks rose the most, 0.9 percent.

The tech-heavy Nasdaq is at a 13-year high.

Microsoft beat analysts' forecasts for revenue and earnings, giving hope to investors that its shift to devices and services from PC-based software will be successful. The company rose $2.18 to $35.90, a gain of 7 percent, after reporting a 17 percent increase in third quarter net income late Thursday.

Amazon.com was up $29.55, or 9 percent, to $362 as investors continue to shrug off its losses. The online retailer reported late Thursday that its revenue surged 24 percent to $13.8 billion in the third quarter, more than financial analysts had expected.

Zynga rose 28 cents, or 8 percent, to $3.82 after the Internet gaming company reported it had cut its losses in the third quarter. The maker of "Farmville" and "Mafia Wars" is trying to appeal more to users of smartphones and tablet computers under a new CEO.
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