NEW YORK (AP) - Wall Street capped a week of big gains with modest moves Friday as investors grappled with surging energy prices that overshadowed news of a surprise increase in home construction.
Investors hoping for an economic rebound in the second half of the year and searching for signs that the housing market is bottoming got some relief before the market opened: the Commerce Department's report that home construction jumped 8.2 percent in April.
But investors were clearly sidetracked for much of the session by energy prices and their effect on consumer spending, which accounts for more than two-thirds of U.S. economic activity. The price of a barrel of oil spiked to $127.82 for a new trading record on Friday.
The market's concerns appeared well-founded, with news that the continuing rise in energy and food costs is weighing on the mood of consumers. The Reuters/University of Michigan consumer sentiment reading fell to 59.5 in May - the weakest reading since June 1980.
Steve Neimeth, portfolio manager for AIG SunAmerica mutual funds, said investors are worried that rising energy prices could derail any rebound in the economy.
"Although the housing numbers today were generally positive, the Michigan survey was quite poor and, more importantly, a continued spike in energy and commodities is causing investors to second-guess the second-half recovery," he said. "If oil and gas prices continue to go up consumers are unlikely to have the spending ability in the second half."
But despite the uneasiness over energy prices, stocks posted strong gains for the week. The broader market, as measured by the Standard & Poor's 500 index, rose 2.7 percent for the week. The S&P 500 index ticked up 1.78, or 0.13 percent, to 1,425.35 on Friday.
The Dow Jones industrial average slipped 5.86, or 0.05 percent, Friday, closing at 12,986.80. For the week, the Dow rose 1.89 percent.
The Nasdaq composite index fell 4.88, or 0.19 percent, to 2,528.85 Friday, but still jumped 3.41 percent for the week. The S&P 500 and Nasdaq remain at five-month highs.
Advancing issues outnumbered decliners by about 8 to 7 on the New York Stock Exchange, where consolidated volume amounted to 3.74 billion shares, up from 3.73 billion Thursday.
Government bond prices slipped Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.85 percent from 3.82 percent late Thursday.
Gold prices rose, while the dollar fell against other major currencies.
Investors have been tracking energy prices closely, with the average U.S. retail price of gasoline around $3.787 per gallon and the average price of diesel fuel near $4.482 a gallon. Consumers and businesses alike are struggling with high commodities costs, despite mild overall readings on inflation, so Wall Street remains concerned about spending on discretionary items.
Light, sweet crude rose $2.17 to settle at a record close of $126.29 per barrel ahead of the start of the summer driving season and following supply disruptions in China. Oil held to gains even after Saudi Arabia's Oil Minister said the country boosted production by 300,000 barrels a day last week in response to requests from customers. And the Energy Department said it would stop adding to the nation's Strategic Petroleum Reserve for six months starting July 1.
David Kelly, chief market strategist at JPMorgan Funds, said investors will likely continue to worry about oil prices but that there is a sense that if the economy is in a recession it likely will prove to be a mild one. He said stocks have been able to advance from their mid-March lows because fears of worsening troubles in the credit market have receded somewhat.
"I think oil is still the worrying wild card in all of this but the central theme of this year is that we are gradually moving from the credit storm to the economic storm. At this stage the economic storm is essentially getting downgraded from a hurricane to a nor'easter," he said.
Kelly said the government's economic stimulus checks that have begun arriving in mailboxes this month should help consumers absorb increased energy prices and that the rebates are leaving consumers with extra money, even with higher gas prices.
The Russell 2000 index of smaller companies fell 2.21, or 0.30 percent, to 741.17.
Overseas, Japan's Nikkei stock average slipped 0.23 percent. Britain's FTSE 100 finished up 0.84 percent, Germany's DAX index rose 1.07 percent, and France's CAC-40 rose 0.41 percent.
The Dow Jones industrial average ended the week up 240.92, or 1.89 percent, at 12,986.80. The Standard & Poor's 500 index finished up 37.07, or 2.67 percent, at 1,425.35. The Nasdaq composite index ended the week up 83.33, or 3.41 percent, at 2,528.85.
The Russell 2000 index finished the week up 21.12, or 2.93 percent, at 741.17.
The Dow Jones Wilshire 5000 Composite Index _ a free-float weighted index that measures 5,000 U.S. based companies _ ended Friday at 14,423.77, up 383.72 points, or 2.73 percent, for the week. A year ago, the index was at 15,223.89.
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