Thursday, April 19, 2007

Dow Higher 6th Straight Session; Google Beats Street

The Dow stocks added nearly 5 points on top of yesterday's record close to set another all-time high, but the rest of the US indices moved in the opposite direction, once again indicating the thin nature of the current rally.

After the close, internet behemoth Google reported 1st quarter profit gains of 69% over the same period a year ago. The company posted net income of $3.18 a share, up from $1.95 a share in 2006, on sales of $2.53 billion, a cool billion more than in the first quarter last year.

Shares of Google were down 4.36 during the day, but after the announcement, shares soared more than 12 points in after-hours trading.

Dow 12,808.63 -4.79; NASDAQ 2,505.35 -5.15; S&P 500 1,470.73 -1.77; NYSE Composite 9,601.69 -33.18

The Dow stocks actually showed a slight bias to the buy side, with 17 up, 12 down and 1 (Disney) unchanged. All of the moves were fractional. Boeing was the biggest loser, -0.89, followed closely by Exxon-Mobil -0.74. Honeywell was the winner on the day, gaining 0.85.

As has been the case for the past two days, declining issues outnumbered advancers, with the margin widening today to a nearly 2-1 ratio. New highs continue to come down as well, at 287 today, versus a mere 84 new lows.

The conduct of the market is somewhat suspect, especially considering that volume was the best of the week. There just doesn't seem to be much enthusiasm in the trading even as oil took a large hit today, down 1.30 to close at $61.83 per barrel.

Gold and silver both fell, again tantalizingly close to break out levels. Gold lost $5.00 to 688.30, while silver dropped 24 cents to $13.74. The metals have been stuck in a range for well over a year after hitting significant tops in 2006. Only the aspect of serious inflation - which the financial press refuses to report - seems to be enough of a catalyst to move them higher.

As for stocks, the Dow may be serving as a last vestige of worn-out money. Investors seem to have weighed the risks and are neither sold on the robustness of the world economy nor the chance that the Fed will remain on hold much longer.

The sub-prime mortgage blow-up and declining house values nationwide are also a cause for concern in the bigger picture. But the canary in the mine shaft is still breathing, so stocks continue - without much direction - drift aimlessly. The Dow's recent comeback is probably more reaction than rally, as investors re-upped when shares were cheaper a few weeks ago.

Without a significant earnings surprise - positive or negative - this market has all the features of a ship adrift on calm seas. As any good sailor knows, however, optimal conditions don't last forever and storms may arrive without much warning. Caveat Emptor.

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