Rally Fades in Final Hour

Maybe investors got a little ahead of themselves on Wednesday, or the realities of gas at $4.00 per gallon began to take hold, but whatever it was, the powerful day-long rally ended abruptly at 3:00 pm ET.

The major indices hit their highs somewhere between 2 and 3 o'clock, but once the selling started in the final hour, it accelerated on higher volume into the close.

The Dow, which was up more than 160 points, ended with a gain of just 61, but the most unkind cut was on the NASDAQ, as the tech-heavy index closed up only 1 1/2 points after trading 33 points higher earlier in the day.

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Shares of Apple were a major drag on the index, though it alone could not account for the spate of late selling. The NASDAQ crossed the key 2500 threshold early in the day, but could not sustain it, as it had reached that level previously and failed. Likewise, the Dow Jones Industrials peeked at 13,000 and fell back.

Dow 12,898.38 +66.20; NASDAQ 2,496.70 +1.58; S&P 500 1,408.66 +5.62; NYSE Volume 3,946,686,250 NASDAQ Volume 2,084,606,500 NYSE Composite 9,437.45 +26.99

As expected, advancing issues finished ahead of decliners, 3386-2852. New highs posted their second straight day of outdoing new lows, 225-159.

Crude oil ended the session lower by $1.56 to $124.24 Gold also closed down $3.50, to $866.10, silver ended down 21 cents to $16.61 per ounce.

Consumer prices continued to increase, though only by 0.2% in April after the government statisticians "seasonally adjusted" gasoline prices from a gain of 5.6% to a figure of -2.0% in the April CPI. This "adjustment" was widely reported by major financial news providers, and may have had an effect on stock trading later in the day.

After witnessing the suspect first quarter GDP and April non-farms payroll reports, this latest CPI reading is likely to be seen as statistically flawed. Seasonal adjustments aside, the average US consumer is being squeezed by high gas prices and just about everything else that needs to be purchased has an alignment to fuel prices.

Word from the hosing market was equally discouraging. Foreclosures advanced again - up 65% year over year - in April according to RealtyTrac, the leading authority on real estate activity in the USA.

One has to wonder how long the market and its various participants can remain in denial about rising prices and the lower value of home ownership. Between these two forces, the American middle class is being squeezed without mercy while our leadership in Washington is focusing only on the November elections.

Supposedly, Americans are to muddle through somehow through the Summer and Fall before gleefully going to the polls to re-elect the same players in congress and elect a fresh, new president who will magically relieve us from the morass created largely by government mismanagement.

Don't count on it. The mood on the street is growing increasingly annoyed though the pinstripers on Wall Street seem not to notice. Profits are still healthy for most companies, but people are beginning to change their ways, economizing and looking for real change.

NYSE Volume 1,188,539,000
NASDAQ Volume 2,117,316,000