Friday, April 25, 2008

Stocks Gain on Uneven News

Foreclosures are up 57%. In March, new home sales fell to their lowest levels in 16 1/2 years. Durable goods orders were off 0.3% in March. Stocks were up, though the gains were not spread equally across the indices. While the Dow, NASDAQ and S&P were up healthy percentages, the NYSE Composite, the broadest of the indices, was up a mere 0.14%.

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The main drivers for the hefty gains on the Dow came from sizable gains in five stocks - American International Group (AIG), Merck (MRK), Citigroup (C), JP Morgan Chase (JPM) and General Motors (GM) - all up by more 3.5% or more. Much of the rise was attributed to a stronger dollar and also to incidental news from rivals. Such was the case with GM, which benefited from Ford (F) posting a profit of $100 million for the quarter ended March 31.

The financials - JPM and Citigroup - were boosted on a combination of bottom-fishing, short covering and an odd sensation that the worst of the mortgage and credit crisis is behind these firms. The betting is for improved earnings in the financial sector, though there have been no definitive statements from the companies themselves.

Dow 12,848.95 +85.73; NASDAQ 2,428.92 +23.71; S&P 500 1,388.82 +8.89; NYSE Composite 9,250.22 +12.93

Advancing issues finished well ahead of decliners, by a 3953-2284 margin. New lows, however, retained their edge over new highs, 217-99. The inescapable fact is that recent rallies have not been all-inclusive, though sufficient enough to push the major indices to levels not seen since January.

The price of crude added to the rally in equities, falling $2.24 to $116.06, a sizable drop, but by no means indicative of anything other than orderly trading. The price could easily be up $2.00 or more in upcoming days. Somehow, investors believe a one-day drop, following an unprecedented rise to new highs, is a positive sign.

Gold dropped again by a large number, losing $19.60 to $889.40 and silver fell 51 cents to $16.77. Most of the movement in the metals and some of the stock gains can be attributed to strength in the dollar, which is generally accepted as overdue good news. Whether it will last is another question, though equity investors seem to have taken the approach lately of cherry-picking their news. While they may ignore the dollar (and they have) while it's going down, new that it's gaining is good. The same logic applies to oil, housing, inflation, the economy, etc.

As far as the charts are concerned, the indices are still rangebound, though they've managed to pull within shouting distance of last Friday's highs. In fact, the Dow's close today was just 0.41 short of the close on the 18th.

NYSE Volume 4,462,621,500
NASDAQ Volume 2,351,706,000

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