Deal talks and earnings results sparked sharp moves in individual stocks, while the broader market was steady.
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The S&P 500 was little changed Friday but was on track for a weekly gain. Major indexes have swung between relatively small losses and gains in recent sessions, and daily stock-trading volumes have been below the 2016 average.
On Friday, the Dow Jones Industrial Average rose 1 point, or less than 0.1%, to 18163. The S&P 500 rose less than 0.1% and was on pace for a 0.4% gain this week. The Nasdaq Composite rose 0.3% Friday.
Shares of Time Warner rose 7.7% after The Wall Street Journal reported that AT&T was in advanced discussions to acquire the media company. Shares of AT&T fell 3.2%. Verizon Communications, which announced lower quarterly revenue and falling subscriber growth Thursday, fell 1.7%.
Verizon and AT&T dragged down the telecommunications sector of the S&P 500, which led declines with a 2.4% drop. The consumer-discretionary sector, which includes Time Warner, led gains with a 0.8% rise.
Shares of Reynolds American added 15% after cigarette giant British American Tobacco said it made a $47 billion takeover offer for the remaining stake in its U.S. peer. Shares of British American Tobacco fell 2.9% in Europe.
Microsoft shares surged 4.5%, hovering around their record closing level of $59.56 hit during the dot-com boom in 1999, after the company beat forecasts for both sales and profit Thursday.
General Electric fell 0.5% as its oil and gas business continued to weigh on revenue growth in the most recent quarter.
Earnings season has been driving much of the action in the U.S. stock market lately. Roughly a quarter of S&P 500 companies have reported so far, and earnings are on track to decline 0.3% from a year earlier, according to FactSet. That's an improvement from the 2.1% decline projected by analysts on Sept. 30.
"The macro factors are always going to be in place but it's going to be pretty quiet between now and the elections," said Trip Miller, managing partner of Memphis-based hedge fund Gullane Capital Partners. Investors will be "paying more attention to the earnings cycle," he said.
Overseas, the Stoxx Europe 600 was unchanged Friday but rose 1.3% for the week, led by a recovery in the banking sector. Financial shares have risen in the U.S. as well, with the KBW Nasdaq Bank Index of large U.S. commercial lenders on track for a 3.5% weekly gain.
The U.S. dollar continued its rally amid expectations that the Federal Reserve would raise interest rates in December. The WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, was up 0.3% Friday.
Fed funds futures, used by investors to bet on central-bank policy, suggest a roughly 70% chance of higher rates by the end of the year, according to CME Group.
"We're in the midst of election fever, but for markets central banks are way more important," said Tina Byles Williams, chief investment officer at FIS Group.
The yield on the 10-year U.S. Treasury note was at 1.740%, according to Tradeweb, compared with 1.745% Thursday. Yields move inversely to prices.
Traders were also digesting comments from European Central Bank President Mario Draghi on Thursday, who denied reports that the bank's stimulus program could end abruptly.
"Mr. Draghi was holding his cards very close to his chest," said Salman Ahmed, chief investment strategist at Lombard Odier Investment Managers. He expects the bank to announce an extension to its bond-purchase program in December.
The euro has fallen roughly 3% against the dollar so far this month.
The Chinese yuan touched a six-year low against the dollar in trading in mainland China, and a record low in trading outside of China at 6.7663.
The Shanghai Composite Index inched up 0.2% for a weekly gain of 0.9%.
Japan's Nikkei Stock Average declined 0.3% for the day but rose nearly 2% this week, while Australia's S&P/ASX 200 shed 0.2% to end the week little changed.