(RTTNews) - After seeing moderate declines throughout much of Friday’s trading, stocks ended the session mixed as investors digested some mixed economic news. Higher energy prices once again kept buying interest to a minimum.

Higher energy costs were once again in focus on Friday, with the price of oil reaching record levels once again after Goldman Sachs boosted its forecast to $141 a barrel in the second half of this year. The record high oil prices have raised concerns that consumers may cut back on discretionary spending. Consumer spending makes up two thirds of the economy.

On the economic front, U.S. consumer confidence fell to its lowest since the summer of 1980 in May, a survey showed earlier in the day. Just as the price of oil surged to a new record above $127 a barrel, the survey confirmed that surging food and energy prices continued to weigh on consumer sentiment.

The Reuters/University of Michigan Survey of Consumers said its preliminary index of confidence fell to 59.5 in May from 62.6 in April. This was well below economists’ median expectation of a reading of 62.5.

Meanwhile, housing starts unexpectedly showed a significant increase in the month of April, according to a report released by the Department of Commerce on Friday, although the report showed a continued decline in single-family housing starts.

The major averages showed a dramatic turnaround in late day trading, although only the S&P 500 could break above the unchanged line. While the S&P 500 closed up 1.78 points or 0.1 percent at 1,425.35, the Dow closed down 5.86 points or 0.1 percent at 12,986.80 and the Nasdaq closed down 4.88 points or 0.2 percent at 2,528.85.

Despite Friday’s mixed performance, the major averages all posted strong weekly gains. The Dow closed up 1.9 percent for the week, while the Nasdaq rose 3.4 percent and the S&P 500 posted a weekly gain of 2.7 percent.

Sector News

Bank stocks turned in some of the worst performances, with the KBW Bank Index ending the day down 2.3 percent. The selling pressure came after a Merrill Lynch analyst downgraded Regions Financial (RF) and KeyCorp (KEY) to Sell ratings.

Additionally, the higher oil prices dragged airline stocks sharply lower. The Amex Airline Index closed down 2.3 percent, reversing the gain posted in the previous session. The index had been trending higher for the past week, setting a nearly two-week closing high on Thursday.

Following a downgrade on the entire sector, retail stocks also saw significant selling pressure. The S&P Retail Index dropped 1.1 percent, pulling back from the three month closing high set in the previous session. Earlier in the day, Goldman Sachs lowered its rating on the sector to Neutral on concerns that higher gasoline prices will cut further into consumer spending on discretionary items.

Among retail stocks, Dillard’s (DDS) and Gap Inc. (GPS) saw two of the biggest declines. Dillard’s closed down 4 percent, compared to a 3.9 percent decline by Gap.

Other stocks that ended the day notably lower include brokerage and real estate stocks. The Amex Securities Broker/Dealer Index closed down 1.2 percent, while the Morgan Stanley RIET Index ended the day down 0.8 percent.

On the other hand, resource stocks saw considerable buying interest, boosted by rising commodity prices. Oil and oil service stocks saw some of the biggest gains as the price of oil closed at $126.29 a barrel, up $2.17 on the day. The Amex Oil Index closed up 2.7 percent, compared to a 3 percent gain by the Philadelphia Oil Service Index. Both indexes set record closing highs.

Other resource stocks closed sharply higher as well, including gold, natural gas and steel stocks. The Amex Gold Bugs Index closed up 2.9 percent, the Amex Natural Gas Index closed up 2.8 and the Amex Steel Index closed up 2.7 percent.

Telecommunications stocks also posted substantial gains, with the Amex Telecommunications Index climbing 1.8 percent to set a three-month closing high. Networking and health insurance stocks ended the day showing notable strength as well.

Dow Components

The Dow components pared most of their losses in afternoon trading, lifting the blue chip index well off of its worst level of the day. Nonetheless, the index ended the day lower, with 7 of its stocks still losing in excess of 1 percent.

General Motors (GM) posted one of the biggest losses a day after the automaker closed up more than 5 percent after the company reached a tentative agreement with a Canadian autoworkers union. General Motors’ shares ended the day down 2.6 percent.

Financial stocks also saw significant selling pressure, including Citigroup (C), American Express (AXP), Bank of America (BAC) and JP Morgan Chase (JPM). Citigroup closed down 2.6 percent, while American Express fell 2.4 percent. Bank of America ended the day 1.5 percent lower and JP Morgan Chase closed down 1 percent.

Microsoft (MSFT) ended the day sharply lower as well after Yahoo! (YHOO) responded to Billionaire investor Carl Icahn’s letter, saying he has misunderstood the Microsoft offer and that the current ten-member board of Yahoo remains the best and most qualified group to maximize value for all Yahoo shareholders. Microsoft closed down 1.5 percent.

Other Dow components that posted notable losses include Home Depot (HD), AIG (AIG) and General Electric (GE). Home Depot closed down 1.5 percent, compared to a 0.6 percent decline by AIG, while General Electric slid 0.7 percent.

On the other hand, the record higher price of oil pushed oil producers Chevron (CVX) and Exxon Mobil moderately higher. Exxon Mobil ended the day up 1.5 percent, while Chevron closed up 1.9 percent, setting a record closing high.

Hewlett Packard (HPQ) saw considerable buying interest as well. The computer maker ended the day 1.2 percent higher. Other Dow components that closed notably higher include 3M (MMM) and Alcoa (AA).

Other Markets

In overseas trading, most of the major Asian markets ended Friday’s trading in positive territory, adding to the gains that were seen in the previous session. Japan’s Nikkei 225 average bucked the uptrend, however, closing down 0.2 percent.

European stocks also moved mostly higher after ending the previous session mixed. The French CAC 40 index and the German DAX index closed up 0.4 percent and 1.1 percent, respectively, while the U.K.’s FTSE 100 index ended the day up 0.8 percent.

Meanwhile, treasuries ended the session modestly lower after showing strength for most of the day. The benchmark ten-year note spent most of the session in positive territory, but it pared all of its gains in the final 90 minutes of the day to close just below the unchanged line. Subsequently, the yield on the ten-year note closed up less than a basis point at 3.85 percent.

Looking Ahead

Looking ahead to next week, the economic calendar is relatively light, with the release of the Labor Department’s producer price index the highlight of the week. Investors may also take a close look at the minutes of the Federal Reserve’s April meeting and the National Association of Realtors’ existing home sales data.

In earnings news, Lowe’s Companies (LOW), AutoZone (AZO), Hewlett Packard (HPQ), Home Depot (HD), Medtronic (MDT), Staples (SPLS), Target (TGT), Limited Brands (LTD), GameStop (GME) and Gap Inc. (GPS) are expected to report their quarterly results throughout the week.

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