Stocks Gain on Uneven News

Foreclosures are up 57%. In March, new home sales fell to their lowest levels in 16 1/2 years. Durable goods orders were off 0.3% in March. Stocks were up, though the gains were not spread equally across the indices. While the Dow, NASDAQ and S&P were up healthy percentages, the NYSE Composite, the broadest of the indices, was up a mere 0.14%.

Winnipeg Extended Stay Hotels
Enjoy all the comforts of home on your next trip.
qualityhotelwinnipeg.com

The main drivers for the hefty gains on the Dow came from sizable gains in five stocks - American International Group (AIG), Merck (MRK), Citigroup (C), JP Morgan Chase (JPM) and General Motors (GM) - all up by more 3.5% or more. Much of the rise was attributed to a stronger dollar and also to incidental news from rivals. Such was the case with GM, which benefited from Ford (F) posting a profit of $100 million for the quarter ended March 31.

The financials - JPM and Citigroup - were boosted on a combination of bottom-fishing, short covering and an odd sensation that the worst of the mortgage and credit crisis is behind these firms. The betting is for improved earnings in the financial sector, though there have been no definitive statements from the companies themselves.

Dow 12,848.95 +85.73; NASDAQ 2,428.92 +23.71; S&P 500 1,388.82 +8.89; NYSE Composite 9,250.22 +12.93

Advancing issues finished well ahead of decliners, by a 3953-2284 margin. New lows, however, retained their edge over new highs, 217-99. The inescapable fact is that recent rallies have not been all-inclusive, though sufficient enough to push the major indices to levels not seen since January.

The price of crude added to the rally in equities, falling $2.24 to $116.06, a sizable drop, but by no means indicative of anything other than orderly trading. The price could easily be up $2.00 or more in upcoming days. Somehow, investors believe a one-day drop, following an unprecedented rise to new highs, is a positive sign.

Gold dropped again by a large number, losing $19.60 to $889.40 and silver fell 51 cents to $16.77. Most of the movement in the metals and some of the stock gains can be attributed to strength in the dollar, which is generally accepted as overdue good news. Whether it will last is another question, though equity investors seem to have taken the approach lately of cherry-picking their news. While they may ignore the dollar (and they have) while it's going down, new that it's gaining is good. The same logic applies to oil, housing, inflation, the economy, etc.

As far as the charts are concerned, the indices are still rangebound, though they've managed to pull within shouting distance of last Friday's highs. In fact, the Dow's close today was just 0.41 short of the close on the 18th.

NYSE Volume 4,462,621,500
NASDAQ Volume 2,351,706,000

Earnings OK, But Troubles Persist

As traders make their ways through the morass of earnings reports now crowding the markets, the general trend is that companies, for the most part, are beating or equaling estimates, with about 30% failing to make the grade.

With each passing day, more and more companies are releasing earnings, and by Friday, we'll have pretty much reached the midpoint of earnings season.

$100 Car Payments
Edmonton, Vancouver, Bad Credit, Divorced, Bankruptcy OK. Apply online.
secondchancefinance.ca

There were some prominent companies reporting on Tuesday, with Yahoo (YHOO), Yum Brands (YUM) and Boeing (BA) exceeding estimates, while Ambac (ABK), the monoline insurer of municipal bonds and much of the subprime debt shocked traders with an enormous $5.42 per share loss on $1.7 billion in write-downs, while analysts were seeking a loss of only $1.51 per share.

Shares of the troubled bond insurer traded 42% lower on the news, down 2.57 to 3.46 per share. Ambac had traded as high as 96.10 just last summer but has lost nearly all of its value due to the overwhelming number of defaults and writedowns in mortgage-backed securities and the general overhang from the credit crunch.

With one eye on Ambac and the faltering credit structure and the other on relatively strong reports from mainline stocks, investors were vexed over which direction they should turn, thus, the somewhat uninspired trade on the session.

Dow 12,763.22 +42.99; NASDAQ 2,405.21 +28.27; S&P 500 1,379.93 +3.99; NYSE Composite 9,237.29 +9.32

Declining issues edged out advancers once again, 3499-2765. New lows took the prize from new highs, 264-90.

Trading was led by some big name companies on heavy volume while many smaller stocks - especially on the NASDAQ - were selling off. Since the massive gains this past Friday the markets have been unable to confirm the highs and have since wallowed in a range, seeking direction.

It's difficult to grasp market movements, especially at the height of an earnings season, but this market continues to exhibit signs of weakness rather than strength, but only marginally. Sideways would be the most likely direction for the near term, though a major event or spate of either positive or negative earnings could turn the tide in one direction or the other.

The market's indecision actually may be a boon for traders looking to lock in or get out of positions as we're in a somewhat stable environment for the time being. Of course, that's likely not to last long.

Oil made another new high on the day, gaining 23 cents to $118.30. Gold was slashed $16.20 to $909.00, while silver also lost ground, off 55 cents to $17.28.

There is a good deal of gyration in all markets presently, though the overall movement is a bit like riding around in circles. If anything, the equity and commodity markets are both overbought and a correction to the downside may be in the cards.

NYSE Volume 4,017,958,250
NASDAQ Volume 2,145,000,000

Stocks Give Back On Oil, Outlooks

With a slew of companies reporting earnings on Tuesday, investors took a look at some of the more recognizable names, noted last week's outsize gains as well as another record high for oil and took the cautionary route, selling throughout the session.

The big movers were Texas Instruments, which reported solid earnings gains, but issued guidance that was skeptical about the near term. Airline stocks took another beating as UAL Corp., the operator of United Airlines (UAUA 13.55, -7.88) reported a quarterly loss of $4.45 per share, which was worse than the loss analysts were expecting.

Dow 12,720.23 -104.79; NASDAQ 2,376.94 -31.10; S&P 500 1,375.94 -12.23; NYSE Composite 9,227.97 -84.32

The earnings news was far from all bad. While most companies were in line with expectations or close, Dow components McDonald's (MCD 58.35, -0.32) and DuPont (DD 50.16, -2.09) bested their earnings estimates yet still faced selling pressure.

Internals showed the real story, with declining issues dealing defeat to gainers by a wide margin, 4605-1666. New lows took back the lead from new highs, 269-151.

As noted above, oil made another new top at $119.50, gaining $1.89 on the day. Oil futures are completely out of control and would be subject to a significant fall-off were it not for the inelasticity of the commodity. The inescapable need for oil and gas by business and consumers alike are making conditions for reasonable, sustainable prices impossible.

Likewise, the futures are being led by a devious group of speculators intent on driving prices as far as they can. It should be noted that the speculation in oil fuels rampant profits for the big suppliers who are not buying on spot markets. Their gains will continue to be enormous until some regulation of the futures markets rein in the runaway speculation.

Another part of the equation is the weakening dollar, but it alone cannot account for the spectacular rise in oil prices. As mentioned in yesterday's post (an a good number of posts over the past 12 months), the higher prices of oil and gas are economy killers and they're doing a bang-up job at the present time.

Gold priced higher by $7.60, to $925.20 and silver rose 35 cents to $17.71.

Overall, the markets seem to be distracted daily by the price of oil even in the face of consistently good earnings reports. Unless and until oil finds a top, the markets will find it difficult to post further gains.

NYSE Volume 3,893,264,250
NASDAQ Volume 1,991,252,375

Oil and Gas Killing Economy

Regardless of the causes, the recent spike in the prices of crude oil and gasoline are killing the US and other economies. Middle and lower class consumers are the hardest hit and also the least likely to continue spending on other goods and services, since the cost of transportation has risen more than 35% over the past year and has also caused the price of another basic element of life - food - to skyrocket in the past 3 months.

Higher energy prices overall are great for oil and utility companies, but they come at the expense of curtailed retail spending in nearly all other areas and also contribute to a vicious price spiral since almost all goods are transported. Similarly, most services have energy expenses they cannot absorb, and these are passed along to the consumer in the guide of higher prices.

Forex Beginner's Resource Website
Forex Foreign Currency Exchange Trading Beginner's Resource Center.

forexforexforexforex.com

The entire world is feeling the pain from the seemingly unending rise in the price of basic fuel, and with gas nationwide at $3.50 per gallon in the US, average people and businesses are having a hard time keeping pace, much less enjoying the fruits of their labors.

Thus far, the stock markets and big business have been able to maintain profitability in the face of spiraling fuel costs, but a significant pullback by consumers will damage (and already have) some segments of the business community. It's difficult to cut back on fuel expenses for most individuals, so in this case, the Exxons and Chevrons of the world win, at the expense of everything else.

Dow 12,825.02 -24.34; NASDAQ 2,408.04 +5.07 (0.21%) S&P 500 1,388.17 -2.16; NYSE Composite 9,312.29 +2.05

The major indices finished mixed, with the Dow and S&P lower, while the NASDAQ and NYSE Composite posted marginal gains. Actually, all of the indices were lower for the better part of the day, but regained much of what they lost thanks to a late-day surge.

After all was said and done, declining issues outpaced advancers, 3521-2749. New highs outdid new lows for the second straight session, though only marginally, 183-177. All indications are that the market is searching for direction in the aftermath of 4-5% gains last week.

Oil closed at a new record of $117.48, up 79 cents on the day. Gold gained $2.40 to $917.60, while silver lost 46 cents to close at $17.36.

Companies reporting earnings were mostly in line with expectations, though Bank of America (BAC) experienced a 77% decline in earnings for the first quarter on a year-over-year basis.

Bank of America's shares dropped 95 cents, to $37.61.

NYSE Volume 3,379,862,250
NASDAQ Volume 1,636,458,250

Resistance Is Futile

...and also nonexistent. With solid corporate earnings in hand, investors broke through the Dow Jones' 12,700-12,750 resistance right at the open, gapping nearly higher than the previous close. Within 5 minutes, the Dow was soaring past 12,800 and into the voided area between, 12,800 and 13,500.

If corporate earnings continue as strong as they've been - and there's no reason to suggest they shouldn't - stocks should continue their march higher. The Dow and other indices have exploded through two separate resistance levels in the past week with no real end in sight.

Forex Beginner's Resource Website
Forex Foreign Currency Exchange Trading Beginner's Resource Center.

forexforexforexforex.com

Rather than facing the desperation of an extended recession, Wall Street may be right that one of the features of globalization is a real disconnect between corporations and the US economy. While those at the very bottom are struggling to find jobs, pay rising utility, fuel and food costs, corporations have gleefully passed those costs on to the consumer without missing a beat.

While there are a couple of sectors that have been harder hit than the general market - financials, home builders, retailers and some discretionary goods and services (notably alcoholic beverages and gambling) - the rest of the market seems poised to get past this period and move to higher ground.

Dow 12,849.36 +228.87; NASDAQ 2,402.97 +61.14; S&P 500 1,390.33 +24.77; NYSE Composite 9,310.24 Up 136.43

The open questions are whether the US (and to a larger extent, the world) economy can cope with higher prices for just about everything without some substantive changes. Gas at $3.00 - and soon $3.50 - a gallon, food costs spiraling out of control and credit strains have put Americans to the test, but they've neither stopped driving nor eating. Defaults on everything from mortgages to credit cards are dramatically higher, however, so the costs of everyday life cannot be sustained much longer, especially if jobs become scarce, which they haven't, yet.

With all the distortions caused by the subprime mortgage implosion and the related global credit crunch, it's difficult to predict direction over the long term, but for the past month, that direction has largely been straight up. There doesn't seem to be much more ground to gain before the markets become severely overbought and correct themselves through profit-taking.

Having the profit on trades in mind (and noting that today was an options expiration day) a cooling off period could come shortly, though we've just barely touched down into earnings season.

Of companies reporting better-than-expected first quarter results, Google (GOOG), Honeywell (HON) and Caterpillar (CAT) and Schlumberger (SLB) were notable standouts. Citigroup (C) posted a 1.02 per share loss and wrote down another $12 billion in bad loans, but was boosted by investors with a 4.5% gain. Other banks and financial services were also ridden higher. They really do take care of their own.

Advertise on Blogs, Web Sites
Choose your own colors, dates and message for maximum impact. Display or text ads by frequency or CPM.
dtmagazine.com/advert.html

For the week, the major indices posted their best gains of they year, up anywhere from 4 to 5%. On the day, advancers outnumbered decliners, 4764-1552, and new highs finally supplanted new lows, 216-152.

Of course, the oil barons couldn't resist the euphoria and closed at another all-time high of $117.00, up $1.83. The metals, however, were decimated, with gold down $27.70 to $915.20 and silver off 49 cents to $17.82.

Earnings will be a huge factor to next week's trading, and if the companies reporting come through with reports as robust as this week's early batch, the rally could be monumental. Shorts and puts players should keep abreast of developments and especially note how their individual positions compare to the general market.

I'm still not convinced that the economy won't eventually drag stocks down, but the corporate results appear to have overcome the worst-case scenarios.

NYSE Volume 4,193,403,000
NASDAQ Volume 2,221,355,750