Monday, April 16, 2007

Stocks Power Ahead as Dow Approaches Record

The Dow closed to within 66 points of its all-time high of 12,786.64 (Feb 20, 2007) on Monday as investors looked positively at Citigroup's somewhat questionable earnings and focused more on robust consumer spending in March, which showed retail sales improving by 0.7%.

What the market and general public may be missing here - and you know there's a caveat to every economic report - is that PPI was up 1% in March and the retail sales numbers are not adjusted for inflation, so there actually was a falloff in sales and the entire rise fueled solely by one factor - inflation.

Nevertheless, the investor class gobbled up shares like mad, boosting prices for everything under the sun.

Dow 12,720.46 +108.33; NASDAQ 2,518.33 +26.39; S&P 500 1,468.47 +15.62; NYSE Composite 9625.53 +102.67

If there's anything like an inflationary cycle, we're witnessing it in the stock market. Prices have to be higher for a number of reasons, not the least of which is the weakened position of the US Dollar in international markets. If the dollar is down, stocks have to go up, just to stay even. Pity the poor European investors who would get hit with the double whammy - if stocks ever were to go down - of a rising Euro and falling share prices.

It's official, now, that stock market moves don't have to actually have any catalyst, somebody will make one up. It seems that the only bad news could come in the form of a Fed rate increase, and they're loathe to do that. Their Wall Street masters would have their heads.

One bright spot on the day was the relative sluggishness of oil, which actually lost 2 cents to close at $63.61 per barrel. It's still overpriced, but every day it doesn't go higher is a good one.

Meanwhile, gold bugs aren't buying any of it. They see inflation raging and have boosted the yellow stuff back up near $700. Gold gained 4.60 today to move to $694.50, close to a breakout. If it goes over $700, the price could top $800 in a very short time. Sister silver, which has seen a pretty good run of its own recently, held above $14 and ounce, losing just a penny to $14.08.

Monday was a strong day for stocks, albeit for the wrong reasons.

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