U.S. stocks rebound to trim weekly losses

NEW YORK (MarketWatch) � U.S. stocks extended gains on Friday after better-than-expected results from personal-computer maker Hewlett-Packard Co. and an upbeat report on German business confidence.

The Dow Jones Industrial Average DJIA rallied 107 points, or 0.8%, to 13,987.24 in afternoon trade, with H-P HPQ �leading the gains a day after the company projected a second-quarter profit and reported quarterly revenue that topped estimates. Shares of H-P surged more than 12%, accelerating gains in afternoon trade. See more on H-P�s signs of revival..

Wall Street also found support from a survey of German business executives showing sentiment in February rose to its highest reading since April. Read more about how data prompts rise in European stocks..

Recovering some of the losses sustained during the past two sessions�its worst two-day drop since early November�the Standard & Poor�s index SPX �climbed 9.72 points, or 0.7%, to 1,512.17.

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The sequester spending cuts will go into effect next Friday, and Apple holds a shareholder meeting. Photo: Getty Images

Materials and technology led gainers among its 10 major industry groups.

�The general advice is to watch for a shorter-term correction, but recognize we may not be there yet. This market may not be ready yet to give up the ghost,� said Bruce McCain, chief investment strategist at Key Private Bank.

McCain is among the market strategists who believe equities are in need of a pullback to digest recent gains, saying a return by the S&P 500 SPX to 1,400 or below would be reasonable, and which would allow the benchmark index to move on to yearly gains of 10% to 15%.

The Nasdaq Composite COMP gained 23 points, or 0.7%, to 3,154.

For every stock sliding, two rose on the New York Stock Exchange, where 298 million shares traded as of 1:15 p.m. Eastern. Composite volume exceeded 1.8 billion.

The exchange-traded funds DIA SPY QQQ that track the benchmark indexes also gained.

The underlying trend for equities in the U.S. and globally is anticipating what monetary authorities will be doing, according to McCain and other market strategists.

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�We�re back to reading Federal-Reserve tea leaves, trying to figure the amount of money they are going to pump in both here and overseas,� said McCain.

Federal Reserve Chairman Ben Bernanke brushed off talk the central bank�s ultra-easy monetary policy is creating asset bubbles, Bloomberg News reported Friday, citing unnamed people who went to a meeting Bernanke held this month with dealers and investors. Read more on Bernanke reportedly brushing off bubble talk..

Bernanke�s reported comments to the 15-member Treasury Borrowing Advisory Committee dismiss a key concern coming out of the minutes of the last Fed meeting, namely varying views that hinted �our Fed is going to ease up on its easing,� said McCain, who discounted such a move anytime this year.

Bernanke will testify on monetary policy to Congress next week.

Friday�s rise follows two straight days of declines that had the Dow industrials losing 155.05 points, or 1.1%, its biggest two-day drop since late December.

The Dow is currently on track to finish the week little changed, erasing weekly losses.

For the week, the S&P 500 is off 0.5% and the Nasdaq has lost 1.2%. A weekly drop would halt the S&P 500�s winning streak at seven consecutive weeks, its longest such stretch since the one that ended Jan. 14, 2011.