Everything Is Coming Up Roses...If You Live on Wall Street

Today's Markets:

Dow 17,976.31, +263.65 (1.49%)
S&P 500 2,086.24, +25.22 (1.22%)
NASDAQ 4,947.44, +56.22 (1.15%)

The results of trading today in New York (and just about everywhere else in the world) show that if a trend gets started for no good reason, people will follow along blindly.

There's no good reason for stocks to go up like they did today, especially in the face of weak economic data in the US and in many countries around the world. However, this is the normal conclusion to the debasing of currencies. If money is free to obtain, then it is not regarded as anything of value.

Worse, when markets and morals are manipulated (see gold and silver, primarily) or goosed by computer algorithms which actually do the bulk of the trading, this is what happens.

Should one take the time to research the companies that are being traded these days to higher and higher valuations, one may find an odd, but, nevertheless, disturbing trend among them: that earnings per share are being led higher by stock buybacks, which reduce the number of shares outstanding, so that the same, or even lower, earnings result in the same or higher, EPS. Or, one might discover that many of these same companies' earnings are actually falling, yet, in a complete break with logic and core investing principles, investors are willing to pay more per share for them.

This kind of trading, based on nothing but vapidness and the delusion of crowds, was once thought to be able to continue only for a short while, because, as investors discovered the reality of assets without any basis in reality, they would bail out, sell, and cause a wicked market correction or crash. That hasn't happened in six years of this kind of activity.

While the future is unknown, it can be assumed that whatever is guiding stocks to new high after new high will some day end. The trick is getting the timing right. For most, that would be impossible. For some it will be dumb luck, but, for the many, they will be stuck with stocks without any value.

On Friday, the BLS will release the non-farm payroll report for March, and everyone will happily accept the fiction that 250, 000 - 300,000 net new jobs were created during the month, or, failing that, some excuse, like "weather" will be invented, but stocks will soar to new highs again.

Some things, you can bank on them.

Alcoa Worth the Wait; Gold Makes Another New High

The rally took a bit of a breather on Wall Street Wednesday, as traders awaited word from aluminum giant Alcoa (AA) on third quarter earnings. Traditionally the first Dow 30 stock to report, the company did not disappoint, reporting earnings of 4 cents per share and revenues of $4.62 billion, well ahead of analyst expectations of a 9 cent loss on revenue of $4.55 billion. Alcoa closed up 31 cents (14.20) at the close of regular trading, but, after their upside surprise, was about 6% higher, at 15.00, in extended trading.

This followed a day in which stocks vacillated along the break even line, in a narrowly split decision. Of the major averages, only the Dow finished in negative territory, and that was marginally there.

Dow 9,725.58, -5.67 (0.06%)
Nasdaq 2,110.33, +6.76 (0.32%)
S&P 500 1,057.58, +2.86 (0.27%)
NYSE Composite 6,912.65, +12.97 (0.19%)

Advancing issues beat decliners by a slight margin, 3284-3021, and new highs trounced new lows, 365-48. Volume was a bit on the low side, owing to the anticipatory nature of the market, kicking off 3rd quarter earnings season.

NYSE Volume 4,890,557,000
Nasdaq Volume 2,239,362,000

Commodities were split as the dollar gained some strength, though very little. Crude oil closed down $1.31, to $69.57, but gold set a new all-time high for the second day in a row, up $4.70, to $1,044.40. Silver tagged along for a gain of 21 cents, to $17.50, its high for the year. Analysts expect resistance for gold at $1050, but expect it to blast through that, and, with the weakened greenback, to reach $1100 by the end of the year.

With Alcoa's strong showing, stocks should be on the move to the upside again on Thursday.

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.