Monday, February 4, 2008

Traders Take Profits; Leery Google Cries Foul

A smattering of good news appeared on Wall Street as the week opened, though the comparative numbers still indicated a slowing economy persisting.

On Monday, the Commerce Department reported that US factory orders rose by 2.3% in December, an improvement from November's 1.7% gain and the largest increase since July.

Orders for big-ticket goods were up 5%, but "nondurable" goods, including clothing, textiles and beverages slipped 0.4%.

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For the year, total orders were up just 1.4%, the worst annual performance since 2002. That was a large fall from 2006, when total factory orders rose by 5.1%.

Taken together, the annual numbers carry more weight than the one-month bump in December and investors responded by taking some profits from the previous week off the table.

By 10:00 am, the Dow Industrials were off 75 points and stocks continued to trade in a narrow, lower range for the balance of the session.

Dow 12,635.16 -108.03; NASDAQ 2,382.85 -30.51; S&P 500 1,380.82 -14.60; NYSE Composite 9,202.11 -75.47

Volume was extremely light, an indication that investors are in a wait-and-see mood, with earnings season winding down and only minor economic news scheduled for release this week.

On Wednesday, preliminary 4th quarter productivity figures and crude oil inventories will be released. On Thursday, traders will be watching the initial unemployment claims after a big jump last week. Pending home sales and consumer credit figures are also due for release on Thursday.

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Topping the news is Microsoft's (MSFT) hostile takeover bid for Yahoo (YHOO) and Google's (GOOG) scathing criticism of the potential union of two of the internet's larger players.

The response, penned by one of Google's lawyers, smacks of hypocrisy and fear. Google owns a domineering position in search that borders on a monopoly, though the combination of their two main rivals could pose a serious threat to that dominance.

Yahoo has yet to respond to the roughly $31 per share offer by Microsoft, but analysts are saying it will be difficult to refuse as it represents a 62% premium over Yahoo's price prior to the offer.

With little to move stocks, decliners took command over advancing issues, 3663-2598, though the gap between new lows and new highs continued eroding. New lows held a slim edge on the day, 121-98.

Crude oil priced $1.06 higher, at $90.02, while gold fell $4.10 to $909.40 and silver dropped 9 cents to $16.78. The reduced prices in the precious metals may indicated a prime buying opportunity in these supercharged markets which should only trend higher over the coming months.

NYSE Volume 3,290,565,000
NASDAQ Volume 2,027,786,875

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