Markets Finish Week Mixed

We are still in the midst of very turbulent times. Over the past nine months, since the blowup of the subprime mortgage market, the major indices have lost somewhere in the range of 8-12% of their value. Not bad, considering the difficulties faced by lenders, homeowners, small businesses and municipal governments, which have faced a plethora of unhealthy conditions including tight credit, general inflation, falling home values, high energy prices and not much in the way of assistance or direction from government.

Fed Chairman Ben Bernanke tells us that conditions in credit markets have improved, though that's not much solace for consumers who have had to trade off some stability in the credit markets via lower interest rates for a weaker dollar. The result has been higher prices for basic necessities - food and fuel - though these matters haven't seemed to have any noticeable affect on corporate profits.

Treasury Secretary Henry Paulsen said the economy would rebound in the second half of 2008. We've been hearing that refrain for the last six months, though without a good explanation as to why. (Personally, I have no confidence in Paulsen and consider him somewhat of a hollow suit.) Today, in prepared remarks, Paulsen again repeated that the stimulus checks to American taxpayers, plus breaks for business would produce 500,000 new jobs in the last six months of the year. Wishful thinking, for sure, but remember, he's using very slanted government statistics, so the odds that the figures will ring true by November (election time) are good.

Dow 12,986.80 -5.86; NASDAQ 2,528.85 -4.88; S&P 500 1,425.35 +1.78; NYSE Composite 9,603.01 +49.49

Friday's trade could best be described as subdued, as there were few newsy items upon which to trade. The good news from the construction sector - an 8.2% jump in residential housing - was tempered when the Commerce Department reported most of the gain was due to apartment building, not new single-family homes.

Consumer confidence hit a 28-year low while oil gained $2.17 to close at $126.29, another record high. Gold gained $19.90 to $899.90, while silver moved up 28 cents to $16.96.

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Declining issues edged advancers on Friday, 3010-2859. New highs surged past new lows, 252-162, reversing yesterday's decision, another sign of turbulence or volatility.

While the markets were up this week, they are basically unchanged over the past two. Until there is some upside thrust, direction and bias remains sideways to lower.

NYSE Volume 1,314,786,000
NASDAQ Volume 2,276,973,000

Stocks Blast Higher on Options, Optimism

With Wednesday's rally truncated late in the day, investors - apparently not content to sit back and wait - sent stocks higher on Thursday in brisk trading. The S&P, NASDAQ and NYSE Composite all were up more than 1% on the day, breaking through key levels while the Dow Jones Industrials struggled just below the key 13,000 mark.

Dow 12,992.66 +94.28; NASDAQ 2,533.73 +37.03; S&P 500 1,423.57 +14.91; NYSE Composite 9,553.52 +116.07

Spurring investors were a recent spate of corporate mergers and maneuvers, including Hewlett Packad's (HPQ) $13.9 billion purchase of Electronic Data Systems (EDS) and General Electric's (GE) decision to sell off its appliance division.

Also helping investors make stock buying decisions were a number of economic reports, including figures from the NY and Philadelphia Fed, which both saw declines in economic activity, though Philly's was not as severe as expected. Still, the Empire State Index unexpectedly fell to -3.23, while the Philadelphia Fed's General Economic Index improved to -15.6, from -24.9 in April. Manufacturing in the region, however, continued a precipitous decline.

New unemployment claims increased only 6,000 for the week, to 371,000. National industrial production slumped 0.7%, and capacity utilization fell a negligible 0.1% to 79.9%.

Somehow, all of this is viewed on Wall Street as good news. Naturally, one has to view today's gains in the context of options expiration, which occurs tomorrow.

Oil moderated again, losing 26 cents, to close at $123.85 per barrel. Gold, +13.50 finished at $880.00, with silver tacking on 7 cents per ounce to $16.69.

Advancing issues outdid decliners, 3960-2033. Somewhat against the grain, new lows recaptured the lead from new highs, 173-169, suggesting that options activity actually had more to do with today's trading than some optimistic sentiment or market fundamentals, as investors may have been bottom fishing on puts and out of money calls about to expire.

Trading volume was solid, though unspectacular. The markets appear to be doing little more than treading water, however, as the major indices are at roughly the same levels as two weeks ago, except the NASDAQ, which has continued to move forward, but is still down roughly 4% on the year.

NYSE Volume 1,194,660,000
NASDAQ Volume 2,242,104,000

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

Stocks Mostly Down, But Internals Point Positive

While the Dow shaved a little off yesterday's gains, the NASDAQ gained again while the S&P was virtually unchanged.

With the indices hanging in limbo, somewhere short of their recent highs, but far from the lows of January and March, investors are searching once again for direction.

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Some of that came from Fed Chairman Ben Bernanke, who said that recent turmoil in credit and financial markets has subsided of late. However, beyond that and Hewlett-Packard's planned acquisition of EDS for $12.6 billion, there was little in the way of positive news.

First quarter home sales, according to the National Association of Realtors (NAR), fell by the steepest percentage (-7.7%) since such figures began to be recorded... in 1982.

April retail sales fell 0.2% - the second straight monthly decline - though most of the loss was attributed to weakness in auto sales. Of course, the price of crude oil and gas contributed to the distress, with oil hitting another new high on the NY Mercantile Exchange, ending up $1.57 at $125.80. Gas hit another record as well, with the average US price at the pump rising to $3.73 per gallon.

Dow 12,832.18 -44.13; NASDAQ 2,495.12 +6.63; S&P 500 1,403.04 -0.54; NYSE Composite 9,410.46 -7.51

The metals lost ground, with gold off $15.30, to $869.60, while silver shed 40 cents to close at $16.83 per ounce.

Advancing issues squeaked out a win over decliners, 3166-2819. New highs took the lead over new lows, by a surprisingly healthy amount, 200-170. Once again, these indicators are signaling little more than a market in distress about which way to go next. There is some overhead resistance, though it could hardly be called strong. On the downside, there is little support in the indices immediate trading ranges.

NYSE Volume 1,207,764,00
NASDAQ Volume 1,878,101,000

Following Last Week's Losses, Stocks Rise

Last week, the indices took their worst hits in the past two months, so gains, in the absence of any meaningful resistance, were in the cards today on Wall Street.

Despite a profit warning from FedEx (FDX), based on costs related to (what else?) high fuel prices and a major meltdown in earnings reported by bond insurer MBIA (MBI), which reported a first quarter loss of $2.4 billion (-14.03 per share), investors took it upon themselves to get out and buy stocks, based largely on false hopes that the US economy is rebounding and inflation will be tame heading into the summer.

Nothing could be further from the truth. Oil and gas will both continue to march higher without concerted efforts from the US government and/or conservation measures by the average American driver. That's the main catalyst for inflation. Further, some analysts are suggesting that the recession may be just beginning, citing the government's own figures which showed identical 0.6% GDP growth for the 4th quarter of 2007 and the 1st of 2008.

If that's the case, the economy is only now beginning to compress. That scenario, though difficult to believe, may be spot on, meaning that conditions will worsen through the summer and into the fall. Actions by the Fed, including seven consecutive cuts in the federal funds rate and various other machinations designed to keep the economy from imploding, should have had some effect on keeping the GDP in positive territory these past six months, and maybe they did.

However, nothing is going to keep the US economy from falling into recession, though it's hoped that it will be short and shallow rather than long and deep. As it stands, our growth rate is ludicrously low, and changes in budgeting and spending patterns by the biggest spender of all, the federal government, are needed more than ever.

Once again, investors are still in some vague state of denial about the overall need for a strong US economy and the real impact of the subprime debt blow-up.

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Dow 12,876.31 +130.43; NASDAQ 2,488.49 +42.97; S&P 500 1,403.58 +15.30; NYSE Volume 3,326,991,250 NASDAQ Volume 1,731,311,000 NYSE Composite 9,417.97 +90.00

Advancing issues soared ahead of decliners, 4381-1839. New lows, however, were once again ahead of new highs, 167-134.

Oil rose to new highs in early trading, but backed down, to close off $1.90, at $124.10. Gold closed at $884.90, down 90 cents. Silver finished the session at 17.23, a gain of 32 cents.

NYSE Volume 1,050,167,000
NASDAQ Volume 1,758,287,000