Tuesday, April 22, 2008

Stocks Give Back On Oil, Outlooks

With a slew of companies reporting earnings on Tuesday, investors took a look at some of the more recognizable names, noted last week's outsize gains as well as another record high for oil and took the cautionary route, selling throughout the session.

The big movers were Texas Instruments, which reported solid earnings gains, but issued guidance that was skeptical about the near term. Airline stocks took another beating as UAL Corp., the operator of United Airlines (UAUA 13.55, -7.88) reported a quarterly loss of $4.45 per share, which was worse than the loss analysts were expecting.

Dow 12,720.23 -104.79; NASDAQ 2,376.94 -31.10; S&P 500 1,375.94 -12.23; NYSE Composite 9,227.97 -84.32

The earnings news was far from all bad. While most companies were in line with expectations or close, Dow components McDonald's (MCD 58.35, -0.32) and DuPont (DD 50.16, -2.09) bested their earnings estimates yet still faced selling pressure.

Internals showed the real story, with declining issues dealing defeat to gainers by a wide margin, 4605-1666. New lows took back the lead from new highs, 269-151.

As noted above, oil made another new top at $119.50, gaining $1.89 on the day. Oil futures are completely out of control and would be subject to a significant fall-off were it not for the inelasticity of the commodity. The inescapable need for oil and gas by business and consumers alike are making conditions for reasonable, sustainable prices impossible.

Likewise, the futures are being led by a devious group of speculators intent on driving prices as far as they can. It should be noted that the speculation in oil fuels rampant profits for the big suppliers who are not buying on spot markets. Their gains will continue to be enormous until some regulation of the futures markets rein in the runaway speculation.

Another part of the equation is the weakening dollar, but it alone cannot account for the spectacular rise in oil prices. As mentioned in yesterday's post (an a good number of posts over the past 12 months), the higher prices of oil and gas are economy killers and they're doing a bang-up job at the present time.

Gold priced higher by $7.60, to $925.20 and silver rose 35 cents to $17.71.

Overall, the markets seem to be distracted daily by the price of oil even in the face of consistently good earnings reports. Unless and until oil finds a top, the markets will find it difficult to post further gains.

NYSE Volume 3,893,264,250
NASDAQ Volume 1,991,252,375

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