No Follow-Through on Rally

Chartists will understand that most of the trade after 2:30 (the last 100 points on the Dow) on Wednesday was options-related and short covering, thus, follow-through needed some form of impetus. After the close on Wednesday, IBM released first quarter earnings data ahead of expectations, which looked as though it could be that fuel for a second leg of the massive Wednesday rally.

By Thursday morning, IBMs results were already old news.

Prior to the markets' opening, investors digested two bits of news. Initial claims for unemployment insurance shot up to 372,000. Merrill Lynch (MER) lost money for the third consecutive quarter, losing $2.14 billion, or $2.19 per share in the first quarter of 2008.

Rally over.

By the end of the day, stocks ended mixed, but mostly down.

Dow 12,620.49 +1.22; NASDAQ 2,341.83 -8.28; S&P 500 1,365.56 +0.85; NYSE Composite 9,173.81 -29.95

Declining issues took back the initiative from gainers, though by a slim margin, 3453-2782. New highs once more approached, but did not surpass, new lows. There were 189 new lows to 174 new highs.

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After gyrating around the flat-line all day, stocks spent most of the day going nowhere, though after-hours, Google announced higher 1st quarter earnings, providing a possible boost for techs on Friday.

Another major setback was Pfizer (PFE) posting earnings for the quarter of 0.61 cents, five cents below analyst estimates. Overall, earnings are coming in mostly mixed, though hardly terrible. Most of the damage seems to be in financials, retailers and companies with a dominant US-only presence. More globally-based operations are posting better earnings than expected, or are in-line with expectations.

On the commodities front, where everything from corn to used tires seems to be going up in price, the majors took a little bit off the top. Oil was off 7 cents, closing at $114.86, a number that is sending shock waves throughout the world economic community and forcing prices for automotive fuel (gas, diesel), home heating oil and any oil-related products higher.

Gold lost $5.40 to $942.90, while silver fell two cents to $18.31.

Volume was muted, as has been the case for most of the past 45 days. The possible explanations are that investors are sitting back, awaiting more data, though more likely is that hedge funds have been shut down or have substantially slowed the velocity of trade.

The latter explanation is preferable, if only to stem some of the volatility that was evident from last August through this January. Overall, markets seemed to have settled down somewhat, with the mortgage morass under some kind of management - though likely insufficient - and consumers dealing with higher food and fuel prices in whatever ways they can.

What's troubling is how this scenario eventually ends. Prospects of eventually surpassing the all-time highs from 2007 are dim, though the major indices are still only 8-12% off their highs. With the residential housing market still falling and credit markets still close to seizure status, from where is future investment to come?

NYSE Volume 3,682,688,500
NASDAQ Volume 1,838,124,125