Monday, April 30, 2007

Stocks in Broad Retreat on Spending Concerns

After reaching record highs in each of the last three sessions, the Dow Jones Industrials took a breather on Monday as investors mulled economic data instead of quarterly corporate reports. The other indices followed suit, led by the NASDAQ, which suffered a 1.26% decline, by far the largest percentage loss of all the exchanges.

Dow 13,062.91 -58.03; NASDAQ 2,525.09 -32.12; S&P 500 1,482.37 -11.70; NYSE Composite 9627.73 -77.63

Once again, the Dow stocks held their own as investors fled more speculative issues in favor of the blue chips, though 20 of the 30 Dow stocks were in retreat. The losses could have been worse, if not for the strong showing of Proctor & Gamble (PG), which rose by 1.42 (2.25%) in anticipation of what is expected to be a solid quarterly report on Tuesday. Volume of PG was more than double its average.

Market internals showed a significant shift in perspective as the week began and the month of April ended. The advance-decline line was the worst in over a month, with declining issues swamping advancers by a better than 7-3 margin. Many more new lows made an appearance as well on Monday, with 137 (also the highest figure in the past 4 weeks) new lows to 300 new highs.

It remains to be seen whether these metrics are going to prove prophetic or just axiomatic of general profit-taking. With the Dow gaining more than 700 points in April alone, some pullback was expected and probably overdue, though longer term issues - such as consumer spending (up a mere 0.2 in March), burgeoning federal deficits and the continuing malaise in residential housing - persist. Recessionary forces are present and the ongoing high price of gas is also a contributor to sour moods and souring predictions.

Speaking of oil, the price of a barrel of light sweet crude also took a short hiatus, losing 75 cents to end the trading day at $65.71. The price of oil and gas continues to be a thorn in the side of American businesses of all sizes, affecting the purchasing power of consumers and driving up the cost of doing business everywhere.

The oil companies may be getting an unwelcome reminder of how upset people are on May 15. An email is making its rounds on the internet urging consumers to boycott gas stations nationwide on that date and forward the email to others so that they may participate. There will be more on that effort in this space tomorrow.

Gold gained $1.70 and silver was unchanged.

Friday, April 27, 2007

Storm Clouds Gather: Dollar Down, GDP 1.3%

There's a palpable disconnect between what's hot on Wall Street and the realities of the US economy. While the Dow makes new highs day after day, extending one of the longest bull markets (55 months and counting) without a 10% correction.

Corporate profits are the drivers of the current rally which has taken the Dow on a 1000-point ride upwards over the past two months and the reports have been solid, if not spectacular. The other side of the equation is comprised of economic indicators, the value of the currency, credit markets and mood, may be more forward-looking than a string of corporate pluses and rising indices. Those indicators are forecasting more pain than pleasure, but the market has yet to buy into the argument.

So, is this the last hurrah? Are investors wringing every last cent out of stocks in anticipation of a dramatic reversal, or are investors just confident that US businesses are sufficiently globalized that they will not be largely affected by suffering in the US market alone. At the end of the day, the major indices registered a ho-hum split decision.

Dow 13,120.94 +15.44; NASDAQ 2,557.21 +2.75; S&P 500 1,494.07 -0.18; NYSE Composite 9,705.36 -10.13

While these investors should be applauded for their optimism, the decline of the US economy should have some ripple effect across the spectrum, though the extent of the decline (we may already be in recession) and the impact on various industry sectors is difficult to calculate, much the less correlate.

First quarter 2007 GDP showed a feeble 1.3% growth rate according to the Commerce Department, the lowest quarterly rate since the first quarter of 2003, which closely coincides with the beginning of both the current bull market and the start of the war in Iraq.

It should come as no surprise to anyone that this bull may be on its last legs, especially with the public discontent and debate to end the war sooner rather than later. Bull markets don't last forever, just as recessions aren't the end of the world. As a matter of fact, recessions are necessary and vital parts of a properly-functioning market economy. Expansions build excess and excesses must be wrung out to put the system back on a functional footing.

And who can say that the economy wasn't full of excess? Witness the housing and credit boom of the past five years. That rocket fuel has been spent and house prices are plummeting back to earth while credit qualifications by banks and finance companies ratchet up the pressure. The stock market - especially the Dow - looks like the last refuge for safe money.

Make note of this number: 13,197.50. That's the all-time intraday high (April 26, 2007). We may go past it, but if the market doesn't continue climbing past it over the next week, the summer and fall could be very trying seasons for US equity investors.

Another of the reasons the markets may soon struggle is the high price of oil and gasoline. Crude was up again on Friday, with a barrel for June delivery set at $66.46 after traders tacked another $1.40 to the price. Keeping with the tone, Chevron posted 1st quarter profits of $2.18 per share (net $4.7 billion), compared with $1.80 per share ($4 billion), during the same period last year, an 18% gain, or roughly the same percentage deeper US motorists dug into their pockets to fuel their transports. Lovely.

In currency trading, the Euro reached an all-time high against the greenback of $1.3682, before closing slightly lower, at $1.3650. Barely noticed by the general public, the dollar buys less overseas, driving up import prices on just about everything. The dollar weakness has been evident for years. Easy credit, loose fiscal policy by the government and a huge - and growing - federal debt have made the US dollar lose respect in world markets. The dollar's decline is gradual, but surely it is killing us.

Gold closed at $682.50, up 3.80, while silver ended the day at $13.58, a gain of 12 cents.

Earnings will continue to make headlines next week, but so could some serious profit-taking. Expect a roller coaster.

Thursday, April 26, 2007

Broken Record: Dow Makes Another High Mark

The stock market continues to dazzle and amaze amid a flurry of spectacular earning reports from American corporations, the latest being computer software behemoth Microsoft, which blew away estimates on Thursday.

Reporting after the final bell on Thursday, Microsoft reported earnings for the quarter ended March 31 rose to $4.93 billion, or 50 cents per share, up from $2.98 billion, or 29 cents in same period last year, a gain of 65%. Analysts were seeking 46 cents, so expect the company that Bill built to get a boost at tomorrow's opening.

Elsewhere, ExxonMobil reported its best 1st quarter ever, earning a staggering $9.3 billion, or 1.62 per share, up from $8.4 billion, or $1.37 per share for the same period of 2006.

Despite the generally good news, the indices were split, as both the NYSE Composite and S&P 500 suffered losses while the Dow and NASDAQ gained.

Dow 13,105.50 +15.61; NASDAQ 2,554.46 +6.57; S&P 500 1,494.25 -1.17; NYSE Composite 9,715.49 -31.08

Volume was once again strong, though profit-takers kept the markets in check throughout the session. Declining issues held a slight 11-10 edge over advancers. There were 513 new highs to just 93 new lows.

Oil slipped 78 cents to close just a shade above $65 per barrel, but precious metals suffered hefty losses as the dollar strengthened against the Euro and Pound. Gold lost $9.40, closing at $678.00. Silver lost 44 cents to end the day at $13.46.

Despite Thursday's lackluster performance, all indices should show gains for the week as a whole, mostly attributable to Wednesday's blowout performance.

Wednesday, April 25, 2007

Another Banner Day as Dow Crashes through 13,000

Wednesday was just another day on Wall Street in this exceptionally energetic earnings season. Apple reported outstanding numbers and stocks soared on a wave of unbridled optimism.

It's becoming so routine to the point of boredom, just watching everything go up, up, up all the time, day after day, la dee da...

If you're in the right stocks it's a marvelous time to be invested. The question is why, if all is so damn wonderful in the world of high finance and corporate profitability, did only 22% of respondents to a new NBC/Wall St. Journal poll say that America was moving in the right direction. There seems to be a high level of dissatisfaction afoot, but none of it could be found on Wall Street.

Still, the mood of the public raises an interesting question. Are these anonymous poll respondents seeing something we're missing? Are the profits on Wall Street more fleeting and illusory than we have been led to believe? Or are the investment returns isolated to an emerging, small class of wealthy individuals who reap most of the gain from soaring stocks?

Food for thought, which we're not going to bite on right now.

Dow 13,089.89 +135.95; NASDAQ 2,547.89 +23.35; S&P 500 1,495.42 +15.01; NYSE Composite 9,746.57 +98.07

Apple was the key driver for the day, reporting profits of $770 million, or 87 cents per share, up from $410 million, or 47 cents per share, in the year-ago period. The stock breached the $100 mark on the news, up 2.11 on the session. Analysts were looking for 64 cents per share, so they, like everyone else, were absolutely shocked at Apple's incredible performance.

Corporate news took precedence over the scourge of the street, crude oil, which jumped back up to $65.84/bbl., up $1.26 on the NY Mercantile Exchange. In what continues to be a counter-trade, gold and silver both lost ground again, though gold at $387.40 and silver at $13.90 are close to the higher end of the range. There may be some consolidation at this level, anticipating a break out. However, there have been a number of false flags like this, so it could just turn out to be more of the same as no catalyst seems capable of taking the metals to new highs.

Speaking of new highs, there were an astounding 602 of them, versus only 69 new lows, the bulk of those on the NASDAQ.

Volume was exceptionally strong, one of the top 5 volume days this year and advancing issues drubbed decliners by nearly a 2-1 margin.

The question for tomorrow and the succeeding sessions leading up to the May 9 FOMC meeting is, how high is up?

Tuesday, April 24, 2007

Dow Resumes Rally After One Day Hiatus

US equities mostly returned to the plus side after taking a day off on Monday. The Dow nearly erased yesterday's decline and closed within 47 points of 13,000, though the NYSE Composite and S&P 500 experienced marginal declines.

Dow 12,953.94 +34.54; NASDAQ 2,524.54 +0.87; S&P 500 1,480.41 -0.52; NYSE Composite 9,648.50 -12.06

The fuel for the rally (pun intended) was a dip in the price of crude, which slipped $1.31 to close at $64.58. While the relief was welcome, it was hardly enough to move gas prices or the pessimism felt by most drivers in the US who are paying close to - and in some cases, such as on the West coast, more than - $3.00 per gallon for regular unleaded.

In a related story, British Petroleum (BP) reported first quarter profits 17% lower than in the same period a year ago. The British concern saw 1Q profits of $4.66 billion, or 1.35 per share. BP made $5.62 billion or 1.54 per share in the first quarter of 2006. There was nary a tear shed for the still-exceedingly profitable company.

Other commodities were effected as well, with gold and silver taking tumbles. Gold lost $6.50 while silver declined 27 cents. The metals have stymied investors with more than a year of rangebound trading. Both recently closed near benchmarks but failed to sustain the momentum and have pulled back considerably.

Declining issues once again surpassed advancers by a 5-4 margin, and there was a slight shift in the new high - new low ratio. A total of 373 issues recorded new highs while 97 (the most in more than a week) companies set new low marks. While the high-low mantra may be more tail wagging the dog than vice versa, the indicator could be signaling that the recent run-up in stocks has lost momentum and another correction mechanism is about to be put into play.

Stocks are, as it is, near record levels and the sustainability of high share prices is still in doubt in some circles. While the indices may not immediately react, especially in the middle of a pretty good earnings season, but within weeks (and possibly coinciding with the Fed meeting of May 9) there could be a pullback of some consequence.

Most of the movement will be a function of sentiment rather than fundamentals, however, as the market has shown great resiliency in the face of some troubling trends, most notably in the housing sector, which continues to suffer.

According to, Sales of existing homes fell 8.4% to an annual rate of 6.12 million in March from February's 6.68 million rate, the National Association of Realtors said. It was the biggest one-month drop since January 1989.

Lower prices for homes may be a problem for sellers, but it has to be good news for buyers, though there aren't many out there. With banks tightening their qualifications, fewer Americans can afford to buy a home today than last year. The other side of the equation is that of forced selling at a price lower than one paid in the previous six boom years.

The entirety of the housing and finance sector may be somewhat of a conundrum for the Fed, alternatively weighing higher energy and food prices (inflation) with lower base housing costs (deflation). There may still be some pressure for the Fed to ease rates in order to spur the housing industry, though that kind of thinking is more wishful than practical.

Bernanke and friends will probably take the easy route of holding the course and keeping rates unchanged at the next meeting as hiking rates could send stocks into a tailspin. Of course, there are many who contend that the Fed is in denial over inflationary pressure and that a short series of rate hikes would be the best medicine.

In the meantime, corporate profits continue to pour in mostly on the positive side providing plenty of rationale for continuation of the rally.

Monday, April 23, 2007

Manitoba Calling?

Wedged between the provinces of Ontario and Saskatchewan with a large Northern frontage on beautiful Hudson Bay, Manitoba is a naturalist's paradise. The province is the easternmost of Canada's three prairie provinces, replete with rolling hills, verdant forests and abundant wildlife.

Known as the land of 100,000 lakes, Lake Winnipeg, Lake Winnipegosis and Lake Manitoba are the three largest lakes. Forests of pine, hemlock and birch cover northern Manitoba with the Churchill, Nelson and Hayes Rivers flowing north into Hudson Bay.

All of these natural features make Manitoba one of Canada's most amenable vacation and getaway destinations. You can sell your Manitoba cottage free or find cottages and vacation homes for sale or rent, from high end, fully-featured second homes to condos, timeshares and mobile homes.

The name Manitoba comes from a Cree name meaning "the place where the spirit (manitou) speaks." At just over 250,000 square miles (a little larger than Texas and Oklahoma combined) a little more than 1 million people call Manitoba home, making it one of the more sparsely yet still habitable areas in the Northern Hemisphere.

The animal populace consists of large game, such as deer, elk, moose, caribou, black bear, and a wide variety of ducks, geese and other fowl. The lakes of Manitoba are world-renouned as some of the best fishing spots in the world.

For retirement or simply getting away from it all you can find the great properties - or sell yours. Maybe this custom built cottage on Lake Winnipeg is right for you.

We Will Drown in Barrels of Oil

The Dow streak was halted after three days of record closes on Monday as oil and gas shock hit the markets. Even the most well-heeled brokers and traders on Wall Street don't like gas at $3.00 a gallon, and for good reason. The high price of petro-energy threatens everything. The US economy - and to a large extent that of much of the civilized world - depends on fuel, not only for cars, but shipping, heating, cooling, industrial production and as a base element in many products.

The price of a barrel of light sweet crude ran up $1.78 to close at $65.89. The average price of a gallon of regular gas in the US, according to the most recent Lundberg Survey reached $2.87, and it's going higher.

Dow 12,919.40 -42.58; NASDAQ 2,523.67 -2.72; S&P 500 1,480.93 -3.42; NYSE Composite 9,660.56 -36.78

The big oil companies will be out with first quarter earnings reports this week. British Petroleum reports tomorrow, ExxonMobil on Thursday, Chevron on Friday. Expect gasps from the public, groans and grumblings from the monied class, and, of course, not a peep of derision from the complaisant wastrels otherwise known as our representatives in the US Congress. Big oil takes from all, but only greases the palms of legislators and others in the governing caste.

Nothing good can come from higher fuel prices unless you have a vested interest in the procurement, production or sale of those commodities. If anything can derail the economy all by itself, it's high energy costs, which have been a noticeable drag for the past two years at least.

If you're smart, you've already sold the SUV. If you're really smart and have some semblance of an environmental conscience, you've taken to
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walking or riding a bike - or motorized scooter - for short trips under one mile. Being that America has become the land of the fat, stupid and lazy, there aren't that many more bikes or scooters out there. We're doomed to drown either in debt, the cost of gas or from the coastal high tides of Global Warming.

It's all about the oil, the supposedly dwindling resource, even though almost nobody ever mentions the ongoing exploration, drilling and pipelining in North African nations by more than 70 companies. The Hubbard's Peak supply-demand scenario so frequently cited by the industry is a sham, an ersatz delusion perpetrated by the wealthy on the average and the poor. The more hand-wringing over global warming, the greater the demand for alternative fuels, the higher the price is likely to go. It's the unstoppable force of wealth, greed and power run amok.

To illustrate the illusory aspect of the oil scarcity argument, consider, on a day that oil rose nearly 3%, gold and silver - two elements which actually are scarce, barely budged. Silver rose 10 cents while gold lost $1.60 in value. Oil isn't scarce. The world is swimming in it and the oil barons are literally laughing all the way to the bank in armored limousines.

Volume on the exchanges today was close to average, with losers holding sway over winners by a slight margin of 5-4. New highs continue to flourish, with 474 of them as opposed to just 72 stocks making new lows. That imbalance is, and has been at the high range of historical charts.

If oil continues to rise in price, expect the market to react negatively, regardless of the quality of earnings being reported. Everyone and their brothers know that super high gas and oil prices are unsustainable in the long run and threaten to put an abrupt end to what has been a healthy run-up.

Saturday, April 21, 2007

Dow Erupts to New Record; NASDAQ at 6-Year High

Up nearly 150 points within the first ten minutes of trading, the Dow Jones Industrial Average eclipsed yesterday's record by a staggering sum, closing within hailing distance of the 13,000 mark at 12,961.98, up 153.35 points at day's end.

Dow 12,961.98 +153.35; NASDAQ 2,526.39 +21.04; S&P 500 1,484.35 +13.62; NYSE Composite 9,697.34 +95.65

Trade was heavily unbalanced to the buy side. Advancing issues led decliners by nearly a 3-1 margin while new highs popped to 507 against merely 65 new lows.

Possible catalysts include Google's stellar earnings report, in which the search and online ad company blew away analyst estimates along with year-ago figures. It's no surprise that the nation's leading technology company would lead to a significant breakout in all sectors, though there have been solid earnings all around.

Friday morning could have been simply an expression of extreme amounts of money not willing to sit idle any longer. Volume was easily the heaviest of the week with heavy money entering right at the open.

The big moves in equities came despite a lack of cooperation from commodities. Oil continues to be a thorny issue, rising $1.55 to close at $63.38. Gold was up $7.50 to $695.80, and silver gained 22 cents to end at $13.96 per ounce.

Perhaps the stock gains and commodity motion were nothing more than adjustment to the value of the US currency, which continues to slide against most other world monies. The US$/Euro ratio is close to $1.36 with no pullback in sight under current policies. The Fed's reluctance to tighten the credit tap is making the currency worth less, so stocks continually have to gain just to keep pace. In the long run, it's a no win situation which needs to be rectified some time soon.

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.

Wednesday, April 18, 2007

Black Eye for Big Blue But Dow Gets New High

Despite disappointment from Dow component IBM (down more than 2 points) on merely meeting analysts' first quarter estimates, the 30 blue chips of the Dow clawed their way to a new all-time high of 12,803.84. The finish was just seven points above the previous high, but it still counts. Hallelujah!

The big winner of the day was Caterpillar (CAT) up more than 2 points on the day and nearly 15% on the year. Along with the heavy equipment manufacturer, JP Morgan Chase (JPM) also added a couple of points (over 4%) to help move the entire average higher.

Without the moves from those two issues, the Dow would never had made it. 16 of the 30 component stocks were down, reflecting a somewhat bearish sentiment even on such a pin-striped, back-slapping kind of day.

The other indices we're exactly on the same page as the Dow, with the S&P and Composite showing marginal gains and the NASDAQ posting a second straight losing session.

Dow 12,803.84 +30.80; NASDAQ 2,510.50 -6.45; S&P 500 1,472.50 +1.02; NYSE Composite 9,634.87 +3.18

Volume was slightly beyond moderate, an indication of nothing more than increased interest in company earnings. Speaking of such, internet pioneer Yahoo got taken out and shot, losing 3.78 (-12%) after missing 1st quarter projections. Yahoo only made 10 cents per share as opposed to 11 in the same period of 2006.

Yahoo's miss was yet another setback in a long string of mistakes and miscues, most of them since startup Google stole most of the search business away. Yahoo has been playing catch-up and has been criticized for being complacent in the marketplace while other competitors ramped up new, innovative products and services.

Internals were a mixed bag, but still evidencing a bearish bias. Decliners beat out advancing issues by a 4-3 margin, and there were fewer new highs for the 2nd straight day, 353, but only 61 issues registered new lows.

Helping the equities at least stay in place, oil barely budged, gaining just 3 cents. Gold and silver were mixed, but both nearly flat.

More earnings tomorrow, and the market is nervous.

Tuesday, April 17, 2007

Dow Closes in on Record as NASDAQ Slips

The bidding was frantic on the NYSE, especially on Dow components Johnson & Johnson (JNJ) and Coke (KO) as both companies reported solid earnings for the 1st quarter of '06. Volume on both stocks was nearly triple their average and their contribution to the Dow's gain was obvious, as the other indices were close to the flat line.

Dow 12,773.04 +52.58; NASDAQ 2,516.95 -1.38; S&P 500 1,471.48 +3.01; NYSE Composite 9,631.39 +6.16

Whether the Dow stocks can continue their momentum is open for debate. Solid earnings are providing buying interest, but it seems short-lived. Take for instance, Merck (MRK), which popped nearly 4 points on Friday, but has seemingly run out of steam. It fell 31 cents today. Likewise, Citigroup (C), jumped nearly 1 1/2 points on Monday, but Tuesday saw it end down 40 cents.

The jury is still out on the overall health of the economy, and, particularly, the corporate end of it. The Dow stocks are still safe havens, though the returns are not quite the stuff of dreams, nor are the dividends they spin off, ranging between 2 and 4 percent, hardly keeping pace with inflation.

After the markets closed, IBM reported earnings in line with analyst estimates. The company said it made 1.21 per share, ahead of last years' 1Q 1.08 per share. IBM's picture has been cloudy, though it was one of the top performers during the 2nd half of 2006, in which it ran from the mid 70s to the high 90s, a better-than 30% move.

The computer and technology giant may be somewhat of a proxy for the Dow looking ahead. IBM sees earnings growth of 10-11% for the remainder of 2007. That's OK for a mature companies like Big Blue, but the market will want more.

Peeking under the hood, we see that the trade on Tuesday was not suggestive of further upward momentum. Declining issues actually held a nearly 5-4 edge over advancing ones, though new highs once again popped over 500, at 522, with only 62 issues hitting new lows. That ratio is about as strong as you'll ever see, with close to 8% of all issues trading at new highs. Pretty remarkable, that.

The question is sustainability, though as long as investors can take the continuing slide of the dollar in stride or completely ignore it, this market looks like it's ready to pop to another couple of hundred points. The dollar hit a benchmark against the Pound Sterling today, falling to a value equal to $2 per British Pound, a level last seen in 1992. That's good news for Brits, in a sense, in that their economy was inflating to the point that they're about to raise interest rates. Of course, their American counterparts aren't so circumspect, content to believe that "core" inflation of 2.5% (excluding food and energy - the two elements upon which the entire economy depends) is just fine and dandy.

On that note, the Fed may have some input on May 9, but not any time sooner. Should Bernanke and friends decide to hike rates even a smidgen, the stock markets will tank like so much dead weight. We'll reserve judgment until then.

Oil traders delivered some welcome news, selling off a barrel for 51 cents less than a day ago, closing at $63.10. Gold took some profit taking, dropping $2.00 to $692.50, but still close to 1-year highs. The same for silver, which lost just 6 cents to remain slightly above the $14 mark at $14.02. Both of the precious metals are signaling potential breakouts.

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.

Friday, April 13, 2007

Money's Got to Go Somewhere

Investors just have to put their money to work somewhere and most of them opted for US equities again today. With volume on the moderate to light side - as it has been during most of this recent upturn - all major indices recorded happy gains to close out the week.

Dow 12,612.13 +59.17; NASDAQ 2,491.94 +11.62; S&P 500 1,452.85 +5.05; NYSE Composite 9,522.86 +45.10

The joy wasn't spread broadly, however, as Merck was the standout on the Dow, leaping 3.85 - a gain of more than 8% - on positive news regarding Vioxx lawsuits and improved first quarter and full year outlooks. Merck's move accounted for more than 26 of the Dow's 59-point gain.

Late Thursday, Merck released guidance, saying that first quarter earnings would come in around 84 cents per share. Analysts had been widely expecting 64 cents. The company's full year guidance was also boosted by about 20 cents per share.

In New Jersey, a federal court judge threw out an investor class action lawsuit on statute of limitations grounds while the Wall St. Journal reported that a Texas judge was about to throw out a key Vioxx case. Such a move would defang another 1000 cases in the state which Merck is appealing.

All in all, Merck could not have asked for better news as Goldman Sachs analyst James Kelly upgraded the company to Neutral from Sell.

Elsewhere, good news from GE and Cisco boosted techs and blue chips alike, with the NASDAQ rising off the flatline late in the day on Cisco's suggestion that the 1st quarter would come in at the high end of estimates.

Company news overshadowed a 1% rise in the Producer Price Index (PPI), though core PPI, excluding food and energy, was tame, increasing only 0.4%. Even though the PPI number may not have been alarming to most, some speculated how hard the figures would impact Fed policy and that kept buying volumes somewhat restrained. Indeed, if energy and food accounted for a rise of 0.6% in just one month, that translates to an increase in those "non-core" (shouldn't they actually be "core"?) elements of 7.2% over the course of the year. That would be cause for concern, and there's plenty of evidence - as noted in yesterday's posting - that food prices may be headed higher. As for energy costs, they're already too high.

Advancing issues outpaced decliners by nearly a 5-3 margin and new highs surged to 411 against just 56 new lows, again indicative of a possible breakout. These figures continue to jump around without providing solid indications.

Crude slipped 22 cents to $63.63, but gold and silver, reflecting the resumption of inflationary pressures, responded with sizable gains. Gold was boosted 10.20 to close at $689.90, while silver approached recent high territory, adding 24 cents to $14.09 per ounce.

With earnings dominating the news, inflation fears may be shoved aside for the next few weeks, at the peril of many unseasoned investors. The Fed doesn't meet until May 9, which may already be too late to forestall the effects of higher inflation. Look for choppy trade until then, as the possibility of a Fed rate hike becomes a serious consideration.

Market Rebounds; Inflation Signs Obvious

Thursday began with a continuation of Wednesday's pull-back, with the Dow lower by nearly 50 points in the opening half hour. But, as has been the case for many a day that looked to be headed towards disaster, the market suddenly and without cause pivoted and moved higher, stabilized in the positive and closed with healthy gains.

Dow 12,552.96 +68.34; NASDAQ 2,480.32 +21.01; S&P 500 1,447.80 +8.93; NYSE Composite 9,477.76 +64.13

The general news was counter-trend, as new unemployment claims were sharply higher as was the price of crude.

Advancing issues outnumbered declining ones by nearly a 2-1 margin.

New Highs: 280; New Lows: 86. Despite the headline numbers from the indices, new highs remained muted, still signaling a continuation of the downtrend.

Oil shot skywards once again, up 1.84 to $63.85. Gold is getting close to a breakout position, adding another 5.60 to $685.30. Silver refused to follow along, losing 4 cents to $13.86. The move in gold may be somewhat of a reaction to increasingly alarming inflation news and Friday's PPI numbers could augur more increases in gold.

On the inflation front - the one the Fed promised to fight but hasn't - there's a lot of anecdotal evidence that food prices are going to spike wildly this Spring (if it ever arrives) and Summer. The key driver is corn, which is being more widely planted and grown for alternative energy use, primarily to be converted to ethanol.

The upshot is, so far, higher prices for corn and less arable land devoted to other crops, especially wheat, which some predict will cause a tightening supply and higher prices for the most staple of staples, bread.

Adding to the food woes, corn is used as a primary ingredient in farm animal feed, the price of which has nearly doubled in a year, so all meat products should see price increases over the next six months.

On top of that, as if that weren't enough, there's been widespread damage to orange groves in California and peach orchards in Georgia, and then there's the mysterious bee colony collapse disorder which is literally killing off millions of bees, important for pollination of all forms of fruits and vegetables.

If the Fed is looking for core core inflation, the two biggest components being food and energy, it's staring them straight in the face. Still, they refuse to do anything substantive - like raise interest rates - over fear that their glorious stock market might decline.

Sadly, the Fed cannot even read bold print, so expect inflation to remain untamed for some time.

Wednesday, April 11, 2007

Earnings Season Off on Wrong Foot

As mentioned yesterday, today was going to provide some fireworks and the indices took little time falling into the red right out of the gate. Most of the news of the day was on the negative side, especially Citigroup's announced restructuring, in which the company will shelve more than 17,000 employees worldwide. A rise in the price of crude (up 12 cents to $62.01) was probably more of an annoyance than a catalyst.

Dow 12,484.62 -89.23; NASDAQ 2,459.31 -18.30; S&P 500 1,438.87 -9.52; NYSE Composite 9,413.63 -55.07

The real blow came just after 2:00, when the minutes from the most recent Fed meeting showed that the FOMC governors were far from favoring a rate cut in the near future, something for which many ill-advised speculators had been hoping.

It's difficult to comprehend how people who are paid to be in touch with such things could be so far removed from reality. Inflationary pressures are everywhere, but some analysts still held to the belief that the Fed would cut rates within the next three to six months. With a fed funds rate at an historically moderate level of 5.25%, what exactly were they thinking? Was it all just a set-up by short-sellers in the know?

Upon release of the Fed's minutes the markets sank like they were loaded down with lead weights. False hope apparently dies hard.

Declining issues carried the day by a 2-1 margin over advancers.

New Highs: 290; New Lows: 101. This is the first session in at least the last 7 that there were less than 300 new highs, which is our benchmark. Expect the market to continue a downward trend until this is reversed.

After gaining for 8 consecutive sessions on relatively weak volume, the markets took a sudden, but hardly unexpected turn today, unofficially the first day of earnings season. Today's decline lopped off nearly a third of the gains made over that 8-day run. Since the indices never reached the previous highs, we are still technically in a downtrend.

Tuesday, April 10, 2007

Eight Straight, But How High Is Up?

The Dow managed to close in the green again on Tuesday, but just barely, with the other indices following the lead. It brings up the question of whether this is really a rally, or just normal bounded in-range trading prior to some future market event during the great earnings deluge to come.

Dow 12,573.85 +4.71; NASDAQ 2,477.61 +8.43; S&P 500 1,448.39 +3.78; NYSE Composite 9,468.70 +39.49

Over the course of the last eight session the Dow has gained 273 points, or, an average of 34 points per day. If that doesn't sound like much, it's because it isn't. One just one day, April 3rd, the index was up 129 points, meaning the other seven days combined accounted for only 144 points, or just over 20 points per day on average.

Today's gain was less than 4 points. Yesterday's was less than 9. On March 30, the Dow was up 5.60 points. Three days, less than 20 points. The Dow could, and does, do that in a matter of minutes under normal conditions. In percentage terms, these last 8 days of gains amounted to less than 2.5%. 8 straight up days and the average still is 200 points shy of the February 20 record close. What's really going on here?

From a volume perspective, no single day has cracked the 3 billion mark. For purposes of comparison, on the black day of February 27, when the Dow dropped more than 400 points, over 4 billion shares changed hands. If anything can be said of this rally, it's that not everyone is participating, and, while gains are always good, these have not been very much so.

Today's performance was among the weakest, with 2.5 billion shares traded, even though advancing issues on the NYSE outpaced declining issues by a 5-3 margin, on the NASDAQ the margin was more on the order of 8-7.

Once again, it was a phenomenal day for new highs, with 408 issues making tops, and only 71 new lows. Those numbers haven't changed much for about a week, and considering the Dow's feeble close, this mini-rally seems to be at an end. What will propel the market over the next 3-4 weeks - in either direction - will be quarterly earnings, and all of that starts tomorrow.

Oil gained 38 cents to close at $61.89; gold gained 4.60 to $681.50; silver was up 12 cents to $13.93.

The real action starts tomorrow. Don't miss it.

Monday, April 9, 2007

Back to Work: Dow Goes Seven for Seven

The Dow Jones Industrials got back to work on Monday after a three-day hiatus and quickly moved to the positive at the opening bell. The Dow remained in the plus column almost all day and finished higher by nearly 9 points. Stocks on the NASDAQ hovered around the flatline much of the day, and closed with a small loss.

Dow 12,569.14 +8.94; NASDAQ 2,469.18 -2.16; S&P 500 1,444.61 +0.85; NYSE Composite 9,421.29 +2.64

The session was one of the more lackluster in a series of similarly quiet trading days, but the Dow managed to eke out a minor gain even though advancers were beaten by declining issues by about a 12-10 spread. There were 463 new highs to 84 new lows, so little change there.

The best news for investors was actually released last Friday when the markets were closed. The Labor Department reported the economy created an additional 180,000 jobs last month, well beyond the market expectation of 135,000. Many of the new jobs were in construction, which was a little more of a surprise, since the housing industry had shown significant signs of slowing recently.

The rather tepid response was probably due to some level of disbelief in the Labor Dept. figures - which also showed unemployment declining to 4.4% from 4.6% - and anticipation of 1st quarter reports, most of which aren't due out until later this week and then for the two weeks thereafter.

Another damper on the market continues to be oil, or, to put it more succinctly, the price of a gallon of gas, which has risen for ten straight weeks. Traders actually may have gotten the message, or there was a subtle reduction in tension over Iran (rumors were widely circulated that the US would launch an attack on Iran over the Easter weekend, and that failed to materialize), as the price of crude for May delivery fell $2.77, closing the day at $61.51.

A few more days like today on the oil bourses should send the Dow and other indices skyward once again. Despite some concern over higher food prices, due in part to some food crops - particularly corn - being used to produce fuel instead, the price of oil and gas are still of primary importance.

Gold was slightly lower, but silver gained 7 cents to close at $13.81 per troy ounce.

Spare Time: Casino Games at Home

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One of the more popular and unique features at EGM is their game of the month club, which allows you to send a game package - like Texas Hold 'em, Poker Mania, Blackjack or Roulette - to a specific recipient or to your own home. It's an easy way to get the tools for some practice prior to a trip to your favorite casino for a tournament or just have a good time playing your preferred games.

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Investing is tough. But that doesn't mean you can't have some fun learning game strategy.

Thursday, April 5, 2007

Stock Streak at Six Straight

The Dow added another 30 points on Thursday, the day before the markets take a break for Good Friday. While the Dow advance was reasonable, the NASDAQ actually outperformed on a percentage basis for the second straight day, gaining 0.51% to the Dow's 0.24. It's about time the bargain-hunting moved from the Blue Chips to the techs, and we could be witness to a dramatic shift in investor priorities shortly.

After all, many of the NASDAQ stocks represent relatively young, nimble enterprises, as opposed to the relatively stodgy businesses in the Dow 30. Tech is much better prepared to face the challenges of the 21st century and some of these companies are yet to embark upon long, long histories of solid earnings.

The Dow companies, on the other hand, are engaged in very segmented businesses which rely heavily upon manpower and raw materials. They are exposed to margin squeezes on the edges of their businesses and their ability to expand and react is questionable.

The Dow companies are, however, led routinely by strong managers and they have solid balance sheets. In this current market environment, though, it's all about profit and share price. Some of the Dow stocks are only going to levitate from M&A activity or aggressive cost-cutting, whereas the techs are innovative and potentially explosive (both ways).

Dow 12,560.20 +0.15; NASDAQ 2,471.34 +12.65; S&P 500 1,443.76 +4.39; NYSE Composite 9,426.97 +28.01

Volume was muted on Thursday, but that's nothing new. Market volume has been tepid for most of 2007. With earnings reports due next week and for three weeks after that, there's likely to be more trading, though it may not be any great shakes.

There's a strong rally brewing, as the numbers suggest. The new highs-new lows figures continue to be lopsided in favor of the highs, 396-69 on the day. Advancers held a 7-5 edge over declining issues.

Oil was under pressure, hitting a low of 63.60 before closing at 64.28, off just 10 cents. Gold gained $2, silver was up 12 cents, both again approaching the high ends of their channels. Something may be up. Then again, it could be nothing more than simple dollar arbitrage.

Happy Easter.

Wednesday, April 4, 2007

Making Gains Before Earnings

The major indices were more influenced by outside forces today than any great inner impetus. Most traders of individual issues are anxiously awaiting quarterly earnings reports, so the news of the release of the 15 British sailors from Iran came as very welcome news to jittery world-watchers.

When word came that Iran would release the sailors, oil prices slipped more than a dollar, but soon rebounded when US inventories checked in at very low levels. For the day, oil fell 26 cents to close at $64.38.

Gains on the US indices were minimal, following yesterday's dramatic rise. The NASDAQ posted the best percentage gain, 0.34%.

Dow 12,530.05 +19.75; NASDAQ 2,458.69 +8.36; S&P 500 1,439.37 +1.60; NYSE Composite 9,398.56 +17.10

Volume was once again on the light side, with advancing and declining issues nearly even. New highs were heavy for the third straight session at 387, compared to only 58 new lows. This metric continues to indicate a market on the verge of a major breakout. Any solid earnings should propel stocks past their February all-time highs in coming days or weeks.

Since the minor correction of last month, weak hands have been wrung out of this market, though valuations are still on the high side. Most of the best values are likely to be found in the tech sector which has been somewhat battered lately. The net cash outflow from the continuing collapse in housing prices is unlikely to have a serious effect short term, so the market is looking more and more like a well-fueled locomotive ready to embark on a long uphill journey.

Risk in the US markets is all a matter of perspective. While there are still some structural difficulties, there's also a lot to like about US equities, which more and more are becoming globalized, well-branded and acceptable. Money has to go somewhere, and when weighing the choices, the US still has the advantages of stability with growth potential over most of Europe and Japan, and certainly beyond emerging markets in India, China and East Asia.

We may be about to embark on another mid-90s type of bull market, but that kind of run carries the risk of a significant bust at some point, a la 2000-2001. Despite that, most of Wall Street seems to have discounted almost all risk and is ready to buy in with both hands.

Gold and silver were contrarians today, both registering better than 1% gains in value. But, since they've both bounced in a bounded range for nearly a year, there may not be much to it. The metals still look less attractive than stocks in the near term.

Tuesday, April 3, 2007

April Fools? Stocks Gain as Oil Slips

There wasn't a great deal of news today but all of it was good and that helped restore some confidence to a shaky market. Since the fallout from mid-February to mid-March the markets have stabilized and rebounded quite well. The Dow has recovered 460 points off its March 5 low, the NASDAQ has added 110 points from the same date and the S&P 500 is up more than 60 points.

What fueled today's action were a series of unrelated reports and market action which together created one big buying spree on the street. A 0.7% rise in pending home sales got the market's attention and eased some of the fears of a spreading crisis. That minuscule rise would hardly be worth noting under usual circumstances, but the worries in housing are palpable, and this little bit of good news was welcome relief. What the market isn't seeing is another story. More on that later.

U.S. chain store sales rose 0.3 percent in the week ending Saturday, according to data released by the International Council of Shopping Centers and UBS Securities. This report came on the heels of a 4.6% gain in the previous week, so the fact that there was no pullback was a strong sign.

The price of oil also contributed to wealth creation in equities, with crude losing $1.30 to $64.64 a barrel on the NY Mercantile Exchange. As I've commented all too frequently, the price of oil (and by proxy, gasoline), is the key cog in the economic cycle.

If the oil barons (you don't really think there's actually a free, open un-rigged market in crude, do you?) can wrap their brains around the concept that lower gas prices actually means more money for them (supply-demand scenario) and let the price slide into the high-to-mid 50s over the next few months then the economy might actually flourish.

Despite auto sales of the big 3 US automakers slumping in March, the market shrugged off that bit of disappointment and surged ahead in a buying orgy that saw new highs for 469 issues with only 83 new lows. As I commented yesterday, that indicator is telling us that the market is poised for more upward movement, circumventing the big correction that many - including me - said was coming.

Indeed, the sewers of Wall Street are full of pundits and predictors who said a correction was imminent over the past four years. Incessant priming of the liquidity pump by the Fed has averted any notion of a downturn since the early months of 2003.

Dow 12,510.30 +128.00; Nasdaq 2,450.33 +28.07; S&P 500 1,437.77 +13.22; NYSE Composite 9,381.46 +75.91

Getting back to those tepid housing figures... there's still a problem in suburbia. Housing prices rose dramatically over the past 6 or 7 years and a pullback was overdue. There's going to be plenty of home buying in the next few years, but most of it is going to come at some expense to the sellers. Simply put, buyers in 2000-2006 paid too much and some are getting out at a loss today. Any abrupt economic disruption would likely cause a panic in oversold markets. In general, home sales are likely to be brisk, but at lower prices, producing a net loss in economic activity and the general market is too concerned with day-to-day observations to pay attention to that troubling longer-term trend.

Still, the credit and money spigot at the Fed is still wide open and there's no way to close it gently without spinning the economy into a recession. Despite what the Fed says about controlling inflation, it's mostly lip service. Prices and wages will continue higher.

Gold was up and silver down. Holding coins or raw metal is still bad practice in today's environment. Expect a pullback before another rally can occur in the precious metals.

Monday, April 2, 2007

Market Squeezes Out Another Positive Close

With first quarter earnings reports due to begin hitting the street later this week, the major indices managed to put on a smile at the close on Monday. Even the NASDAQ, which had traded in the red for almost the entire session, managed to gain fractionally.

Advancers and declining issues on the NASDAQ were dead even, with 1517 up and 1517 down, though gainers were far ahead on the NYSE, 2039 to 1214. New highs amounted to 317, near a peak, to just 108 new lows. This is a signal that the markets are about to make a break, either further to the upside (which means a 6-700 point move) or down about 4-500 points.

The Dow also registered its 15th positive day since the Feb. 16 top, more than the 14 down days, though the index is still 400 points off that high. It's been a real see-saw market, with alternating up and down weeks the past 5. If that's any kind of guide (probably not), we're due to finish on the plus side on Friday, though nobody's making book on it.

Dow 12,382.30 +27.95; NASDAQ 2,422.26 +0.62; S&P 500 1,424.55 +3.69; NYSE Composite 9,305.55 +43.73

Overall, it was a very tame day of trading. Even the oil bourses weren't bubbling as crude gained only 7 cents to $65.94. While that number is still too high for most of the public to want to comprehend, there seems to be some consensus among oil traders that there's not much more upside to this market. As the supply-demand scenario gives way to inflation and pricing pressure, oil, and its derivative, gasoline, may actually stabilize at slightly lower levels over the summer, all of which is good news for the economy and consumers.

The biggest news of the day was New Century Financial, the troubled sub-prime lender, filing for Chapter 11 bankruptcy protection. The company announced layoffs of more than half of its workforce, 3,200 in all, and other protections and refinancing arrangements with CIT Group and Greenwich Capital Financial Products.

The news was sobering and expected. However, the real fallout in the housing market may still be on the way as prices continue to fall in major markets. The cooling of the housing market is a slow process with the effects likely to be felt across the economy for a lengthy period of time.

After years of loose financing and consumers dipping into equity to finance all kinds of purchases, that spigot is slowly being turned off. The downward pressure in the economy will first be seen in large ticket purchases as households cut back on financing.

Gold and silver continued their in-range trading. It's almost gotten to be an inside joke, that holders of precious metals are now not hedging against inflation, but against their own well-being. After a dazzling run-up culminating at a peak of over $714 last May, gold has been one of the duller stories of the past year.