Stocks Up, Outlook Still Cloudy; Retail Sales Horrible

Investors took little time this morning putting stocks back on a positive path, after initial jobless claims came in lower for the 4th consecutive week. Gains were broad-based, though marginal in most cases, with all indices trading in very narrow ranges. The Dow, for instance, traversed just 116 points from the morning low to the afternoon high, finishing close to the top and near recent highs.

Without much to move the markets, stocks were fairly settled as investors seem to be on hold for now, at least awaiting word from the Labor Dept. on May job losses, released tomorrow at 8:30 am EDT. That number should not be much of a surprise, as there's little to indicate that job losses are going to narrow appreciably. The consensus estimate is for about 525,000 more jobs being shed from the pool in the prior month.

Financials led the way again, with Bank of America and Citigroup both gaining more than 5% by the close, providing a significant boost to the Dow Jones Industrials. General Motors was officially removed at the end of the day, as it will now trade over the counter, under the symbol, GMGMQ.PK. Citigroup will also exit as of Monday. The two Dow components will be replaced by Cisco Systems (CSCO) and Travelers Insurance (TRV).

Apparently of less importance to investors were the ugly retail sales figures released by a number of America's largest chain stores. Same-store sales for a group of 30 retailers fell 4.8% from a year ago. The numbers for some of the nation's best-known stores were horrific, reflecting the reality of a declining economy in a deflationary environment. Limited Brands fell 7%; Gap, down 6%; Abercrombie and Fitch collapsed 28%; Dillard's was down 12%; Macy's fell 9.1%; Nordstrom's sales were of 13.1%; Sak's was down 26.6%. even discounters Target and Costco were off by 6.1% and 7%, respectively.

The retail figures underscore the disconnect between Washington, Wall Street and Main Street. While the pols in D.C. and the monied financiers in New York continue to preach that the economy is recovering, real life experience is posting a different message altogether. The condition is becoming particularly acute, and can be seen in the strain for stocks to gain further momentum. Add to the retail woes the coming closure of nearly 4000 auto dealerships by Chrysler and GM and the condition can only deteriorate over the near term.

Dow 8,750.24, +74.96 (0.86%)
NASDAQ 1,850.02, +24.10 (1.32%)
S&P 500 942.46, +10.70 (1.15%)
NYSE Composite 6,110.76, +76.86 (1.27%)

Advancing issues finished well ahead of decliners, 4769-1643, a rather large bias considering the paucity of gains. New highs barely beat new lows, 66-65, so the indicator remains poised to signal either a renewal of the rally or the beginning of a precipitous decline. Volume was a touch higher than Wednesday's, though still not remarkable and thus, not signaling anything.

NYSE Volume 1,358,776,000
NASDAQ Volume 2,488,895,000

Commodities completely reversed yesterday's performance, with nearly everything gaining in value. Oil rose $2.69, to $68.81. Gold was higher by $16.70, to $982.30, with silver up 59 cents to $15.90.

Tomorrow's non-farm payroll report could be significant, no matter which way the numbers are interpreted, though it's becoming increasingly clear that stocks cannot go much higher without support from the real world. Investors are either living in a dream world or seeing a different new reality, obscure to most Americans.

In the best news of the day, former Countrywide CEO, Angelo Mozillo and two other top executives were formally charged with fraud and insider trading by the SEC. It is a civil lawsuit, but may pave the way for the Justice Department to file criminal charges. Mozilo is the first and only executive to be charged with any crimes stemming from the subprime and general banking crisis.