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Oil Rises to Record High, Stocks Stymied.......


Into The Close, Friday 5/16/2008


Stocks in the U.S. were falling Friday, albeit in fairly substantial recovery from their worst levels, as oil soared to a new record high and consumer confidence took yet another slide.

The Dow Jones Industrial Average, down nearly 100 points earlier, was recently off just 22 points, or 0.2%, at 12,971. The S&P 500 was shedding a point, or 0.1%, at 1423, and the Nasdaq Composite surrendered 10 points, or 0.4%, to 2524.

Equity measures were weak from the outset, but sank further after the University of Michigan's preliminary May consumer confidence index eased nearly another 3 points to a 28-year low of 59.5, reflecting worsening sentiment on both current and future economic conditions. That's well under economist projections for a dip to 62.

Though the report reflects economic deterioration that has already occurred, it still tends to be a closely watched gauge on the health of U.S. consumers, who over the past few months have been buffeted by the housing crisis, spiking gas prices and an uncertain jobs environment.

"It's clear the housing prices, rising food prices and energy prices are the big things that are weighing on consumers'' minds now," said Nigel Gault, chief U.S. economist with Global Insight. "But I have to say, as of right now, the sort of numbers we've seen on consumer spending haven't been anywhere near as bad as you might have expected, given where sentiment numbers are going."

Still, retail stocks took a tumble on the news. The S&P Retail Index dropped 1.8% as the Dow Jones U.S. Retail Index lost 1.2%.

Another key story was the data on housing starts, which surprisingly jumped in April. The Commerce Department said the number of homes on which construction began last month climbed to an annualized rate of 1.032 million from an upwardly revised reading of 954,000 in the prior month. Economists were looking for a drop to 940,000.

"The main reason forecasters missed the April figure was a big increase in starts for multifamily homes," wrote Tony Crescenzi, chief bond market strategist with Miller Tabak and a contributor to RealMoney.com, a sister site to TheStreet.com. He pointed out that this figure is normally a volatile one.

Gault said the volatility of that number renders the report a false uptick. "Don't read much into that," he said. "It's still doubtful we're at the bottom."

Crescenzi added that, excluding January 1991, single-family home starts were at their lowest level since 1982. "This is good news, as it will help to clear the massive overhang of unsold homes by limiting the amount of new homes put into the housing stock," he said.

Also, the number of building permits issued rose by 46,000 in April to 978,000, compared with consensus estimate for a drop to 912,000 permits.

The other big news was taking place in the oil market, where crude oil reached $127.82 a barrel, its highest level ever. Recently, crude was surging $2.23 to $126.35. As usual, the AAA reported another all-time high for gas prices at the pump, as the nationwide average hit $3.787.

Most shares in the energy complex were strengthening, including Exxon Mobil (XOM:NYSE) , Chevron (CVX:NYSE) and Transocean (RIG:NYSE) .

Gold futures were up $19 to $899 an ounce. The U.S. dollar slid by 0.8% against the euro to $1.5578 while dropping 0.6% against the yen to fetch 104.05.

On the corporate side, Kohl's (KSS:NYSE) slipped 4% after the department-store chain knocked down its 2008 profit guidance to between $2.95 and $3.15 a share. The company's first-quarter profit dropped 26.8%, though it did top analysts'' pessimistic expectations.

Nordstrom (JWN:NYSE) , however, gained ground on its own earnings beat, even as its bottom line shrank by 24%. The specialty retailer also whittled down its full-year outlook. Shares were adding 2%.

Abercrombie & Fitch (ANF:NYSE) said its first-quarter profit came in higher than last year and bested the consensus target. Still, shares were trading just under the flat line.

Away from retail, Autodesk (ADSK:NYSE) came in ahead of projections as the design-software firm saw its first-quarter income rise 14% from the prior year. Still, the stock erased early gains to lose 0.5%.

Compuware (CPWR:NYSE) posted a lower first-quarter profit of $61.2 million, or 23 cents a share. That tops the Thomson Reuters estimate by 2 cents a share. Shares started out lower before hiking up 4.9%.

Treasury prices were reversing early gains. The 10-year note was off 6/32 in price to yield 3.84% and the 30-year bond slumped 9/32 in price, yielding 4.57%.

The prices of Treasury securities have been in determined retreat since March, when panic over the credit crisis reached a hilt amidst the near-collapse of Bear Stearns (BSC:NYSE) , and investors embarked on what Morgan Stanley analyst George Gonclaves called a "major flight to quality."

In a research note, Gonclaves pointed out that investors bagged a net total of $55 billion in bonds that month, nearly tripling the February amount, driving up prices and yanking yields sharply lower. "But after this demand was satisfied and we moved pasted the cathartic moments of March," he said, "yields could only go one way -- higher."

Meanwhile, the United Nations said in its mid-2008 report that "the world economy is teetering on the brink of a severe global economic downturn" spawned by the U.S. credit crisis, the dollar's long fall, spiking oil and food prices, and "persisting global imbalances." The U.N. predicted that global growth will pull back sharply this year, to 1.8% from last year's 3.8%, and pegged a recovery only to 2.1% in 2009.

Overseas markets were mainly rising. The Nikkei 225 in Tokyo lost 0.2% overnight, but the Hang Seng Index in Hong Kong rose 0.4%. As for Europe, the FTSE 100 climbed 0.8% and Germany's Xetra Dax jumped 1.1%. The Paris Cac was higher by 0.4%.

Stocks Lose Their Oomph at the End.......


Into the close, Monday 5/19/2008


Stocks in the U.S. gave up most of their big gains Monday, closing out the session mixed, after sudden strength in crude futures seemed to help deflate the effects of a relatively positive report on recent economic data.

The Dow Jones Industrial Average, which began the day on soft footing, was later up some 150 points before easing to a gain of 41.36 points, or 0.32%, at 13,028.16. The S&P 500 edged up 1.28 point, or 0.09%, to close at 1427.63.

The Nasdaq Composite, however, lost 12.76 points, or 0.5%, to 2516.09, under pressure from Microsoft (MSFT:NYSE) and some other suffering tech names.

The reversal came after crude oil flirted with the record it set on Friday, reaching an intraday high of $127.77 a barrel before receding to a gain of 76 cents at $127.05.

"It's bullish mania, baby," said Phil Flynn, vice president and senior market analyst with Alaron Trading. "We're playing the game, ''How high can it go?''"

Flynn noted that a number of oil traders are probably squaring their positions ahead of the futures expiration tomorrow. Some supply concerns may have had an impact today, he added, but he emphasized, "I think it's just pure and simple bullish momentum."



                                       The Real Story Wrap: May 19
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Still, Ryan Detrick, senior technical strategist with Schaeffer's Investment Research, is skeptical that oil was entirely responsible for the equities reversal. "We're not reading much into it," he said. "We think it's simply intraday volatility, a potential simple selloff to resistance levels."

Detrick pointed out that the Dow "ran into problems" on May 2 at about the peak it hit today -- a level that's also roughly at the index's 200-day moving average. The S&P, he added, has also had trouble getting past its closely-watched 200-day of 1428.

Breadth was poor to start the week. Roughly 1.86 billion shares changed hands on the New York Stock Exchange, with declining issues outrunning advancers by nearly a 5-to-4 margin. Volume reached around 2.24 billion shares on the Nasdaq as losers topped winners about 3 to 2.

As for gold, futures on the metal closed up $5.90 at $905.70 an ounce. Nevertheless, the U.S. dollar remained stronger, firming by 0.4% against the euro to $1.5511 while adding 0.2% against the yen to fetch 104.34.

Earlier, stocks got a boost after leading indicators, a collection of mostly previously released economic data from the Conference Board, ticked up 0.1% in April -- the same as the prior month, and a hair better than expected. Ian Shepherdson, chief U.S. economist with High Frequency Economics, said the consensus overshot because most economists made their forecasts before Friday's stronger-than-expected numbers on building permits.

"These data certainly reflect a weak economy but not one in recession," said the Conference Board.

Art Hogan, chief market analyst with Jefferies, pointed out that much of what buoyed the overall figure were gains in the stock market. "So it's a self-fulfilling prophecy, to a certain extent," he said. In addition to rising equities and the housing permits, said the board, the interest rate spread also worked to outweigh harsh slides in average weekly hours and consumer expectations.

In corporate news, Microsoft, which earlier this month dropped its attempts to take out Yahoo! (YHOO:) , over the weekend presented the Internet-portal operator with a new deal that would not constitute an outright acquisition. The software giant added, however, that it "reserves the right to reconsider" another buyout offer.

Shortly before market close, Reuters reported that the proposal entails Microsoft buying Yahoo!''s search business and taking a minority stake in the company after Yahoo! spins off its Asian assets, according to a person familiar with the discussions.

The development comes amid billionaire investor Carl Icahn''s looming threat to nominate 10 people to Yahoo!''s board. Icahn recently began amassing large amounts of Yahoo! shares, saying the company acted "irrationally" in turning down Microsoft's sweetened takeout bid earlier this month. Microsoft shares shed 1.8% as Yahoo! finished up 2 cents at $27.68, having backed off from a more robust early climb.

Staying in tech, Garmin (GRMN:NYSE) slumped 5.3% on a Needham downgrade to hold from buy.

Among other falling names in the technology patch were Apple (AAPL:NYSE) , down 2.1%, and Hewlett-Packard (HPQ:NYSE) , which was off 1.2%. SanDisk (SNDK:NYSE) slid 7.5% to $30.02.

On the other hand, Amazon.com (AMZN:NYSE) surged 7.6% after Goldman Sachs added the stock to its "Americas Conviction Buy" list and sharply lifted its price target to $98. Also, Texas Instruments (TXN:NYSE) rose 2.3% after Citigroup upped the chipmaker to buy from hold.

Elsewhere on the equities side, American Axle Manufacturing (AXL:NYSE) last Friday struck a tentative agreement with the United Autoworkers that would end a costly strike. American Axle is a key supplier to supplier to automaker General Motors (GM:NYSE) , shares of which were up 0.9% to help prop up the Dow. American Axle shares lost 5%.

In earnings, home-improvement retailer Lowe's (LOW:) said early Monday its first-quarter profit plunged 17.9% to $607 million, or 41 cents a share, a penny better than the average analyst estimate from Thomson Reuters. Same-store sales, or those from stores open a year or more, slid 8.4%, and the company also shaved down its full-year outlook. Shares were down 2.6%.

Meanwhile, Campbell Soup's (CPB:NYSE) fiscal third-quarter earnings missed Street estimates by a penny a share, excluding a big gain from the sale of its Godiva business. Campbell's adjusted profit was down 7.8% to $165 million, or 43 cents a share. The stock sank 6.3%.

Back in analyst research, Citigroup upgraded National City (NCC:NYSE) to buy from hold with a $7 price target, saying the Bank's recent $7 billion capital raise gives it leeway to deal with its credit issues. Nat City shares climbed 5.4%.

However, Citi also cut earnings estimates for three brokerage firms -- Goldman Sachs (GS:NYSE) , Lehman Brothers (LEH:NYSE) and Morgan Stanley (MS:NYSE) -- which Citi says may face more losses due to a difficult operating environment. Shares of the companies all spent time in the green earlier, but ended down 1.5% or more.

In more negative calls, Continental Airlines (CAL:NYSE) lost 6% after JPMorgan cut the stock to underweight. Friedman Billings downgraded American Eagle Outfitters (AEO:NYSE) to market perform while easing its price target on another clothing retailer, Abercrombie (ANF:NYSE) . Shares slumped 3.7% and 1.9%, respectively.

As the equities environment became less certain late in the session, Treasury prices crept back into positive territory. The 10-year note rose 4/32 in price to yield 3.8%, and the 30-year bond ticked up 2/32 in price, yielding 4.57%..

The major overseas markets were almost uniformly higher. In Asia, Tokyo's Nikkei 225 added 0.4% overnight, and Hong Kong's Hang Seng Index was ahead by 0.5%. Among European bourses, the FTSE 100 in London tacked on 1.2%, and Germany's Xetra Dax was better by 1%. The Paris Cac bounced 1.3%.

Stocks Can't Shake Oil, Housing Woes.......


Into the close...Friday...5/23/2008


Stocks in the U.S. were buried Friday as investors dealt with a resuming climb in oil and abysmal home-sales numbers, while unwinding their positions ahead of a long holiday weekend.

The Dow Jones Industrial Average slid 146 points, or 1.2%, to 12,480, and the S&P 500 gave up 18 points, or 1.3%, at 1376. The Nasdaq Composite sank 20 points, or 0.8%, to 2445.

"This week was not terrific, so I think investors are looking to take money off the table ahead of the three-day weekend," said Paul Nolte, director of investments with Hinsdale Associates. U.S. markets will be closed Monday in observance of Memorial Day.

"It's sell now and ask questions later," he said.

Earlier in the week, stocks were crushed in a huge two-day selloff as investors were jarred by new highs in oil and gloomy economic forecasts by the Federal Reserve. The major indices attempted a halting recovery on Thursday, but the session saw rather thin trading volume.

"We are seeing a little bit of a different dynamic in the market," said Nolte. "We're seeing more volume now on the market declines than on those advancing days, and certainly over the last four months or so, volume had been better on the advancing days."

That shift, he added, is not a good sign.

"The reality is, expectations probably got out of line in April," said Jason Pride, director of research with Haverford Investments. "And now everybody that that hopped back in, thinking everything was okay, now they're backing off a little bit. It's this manic mood that the market seems to have. We go back and forth on it in dramatic swings, when the reality is, not much has changed. It's only the perception that's different."

Specifically, Pride said it was "outrageous" that people began believing the Federal Reserve would actually hike interest rates soon. He predicted the economy will undergo an extended "soft" period that it will take awhile to surmount, though he also believes the likelihood of a dramatic recession is being "gradually stripped away."

Helping to drag on the market Friday were crude-oil futures, which turned higher again following yesterday's brief reprieve from a stunning upward climb over the past few weeks. Crude hit an intraday high near $134 a barrel earlier today, but later pared back its gains to $1.38 at $132.19. The national average for gas prices at the pump lifted to another record of $3.875 a gallon, according to AAA.

Gold futures added $7.50 to $925.80 an ounce. The U.S. dollar was back on a downward track, losing 0.5% against the euro to $1.5772 and fetching just 103.31 yen, a 1% tumble from the prior settlement.

On the economic front, the National Association of Realtors said April's existing-home sales fell 1% from March to a seasonally adjusted annual rate of 4.89 million units -- a hair better than the economists'' consensus, though also a 17.5% slide from a year earlier. Total inventory jumped 10.5% sequentially and it should take 11.2 months, a 23-year high, to work through that backlog at the current sales pace. That's up from a 10-month estimate in March.

"With prices collapsing the incentive not to buy a home is increasing by the week, and with inventory showing no sign of improvement prices will keep falling," wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics. "Supply always rises in spring so the headline inventory numbers overdo the true position, but it is still bad."

On the corporate side in the new session, striking workers at American Axle (AXL:) -- the main parts supplier to automaker General Motors (GM:) -- voted to accept a new employment contract and return to work next week. The strike had lasted about three months and forced GM to idle several of its manufacturing plants.

Still, GM lost ground after the company said the strike is expected to bleed $1.8 billion out of pretax second-quarter earnings, having held back production on some 230,000 vehicles. Other work stoppages caused by finalizing local union agreements will spur a further $200 billion in pretax losses this quarter, said the company. Furthermore, GM expects "only a portion of this lost production will be recovered," considering the harsh economic environment and a market shift away from the sorts of vehicles the strike impacted.

GM shares lost 4.5%, making it the Dow's worst-performing component recently, and American Axle gave up 4.2%.

At the same time, airline stocks were pummeled after Standard & Poor''s placed a number of carriers on credit watch with negative implications, citing ballooning fuel prices. The Amex Airline Index tumbled 4.2%. U.S. Airways (LCC:NYSE) , whose stock rating was also yanked down to underperform from outperform at Credit Suisse, plummeted 19.5%.

United parent UAL (UAUA:NYSE) sank 9.3% after saying it will raise all of its fares, and American Airlines parent AMR Corp. (AMR:NYSE) , which said earlier this week that it will slash domestic capacity and charge customers for checked bags in order to offset pain caused by fuel prices, lost 4.6%.

Continental (CAL:NYSE) , Delta (DAL:NYSE) , and Northwest (NWA:NYSE) lost at least 4.5% apiece.

Also, CNBC reported that JPMorgan Chase (JPM:NYSE) , another Dow member, has laid off at least 200 investment-banking executives over the past couple of days, according to people at the firm. The network said the move was unrelated to JPMorgan''s plan to make room for incoming Bear Stearns (BSC:NYSE) employees by cutting into its own staff.

in March JPMorgan agreed to take Bear out in a highly discounted Federal Reserve-backed deal, as the latter firm stood on the brink of collapse.

Shares of JPMorgan were down 1.7%.

On the sparse winning side was Anheuser-Busch (BUD:NYSE) . Shares shot up 7.7% after the Financial Times reported that Belgium-based beer giant InBev is hammering out a $46 billion takeout attempt on the Budweiser brewer, citing unnamed sources. The per-share bid is expected at $65 a share, said the paper.

In earnings, information-technology firm CA (CA:) issued bullish full-year guidance prompted by a 30% leap in bookings compared with last year, even as a tax charge dragged fiscal fourth-quarter results well below analyst estimates. Shares were climbing 3.9%.

Also, clothing retailer Gap (GPS:) booked a climbing profit of $249 million, or 34 cents a share, but that fell short of the Street's consensus. Sales also slipped from a year earlier to a lower-than-expected $3.38 billion. Shares shed 1.8%.

Aeropostale (ARO:) , another apparel seller, edged ahead of last quarter's bottom-line consensus as the company achieved sizable year-over-year gains in both earnings and revenue. The stock saw action on both sides of the flat line, and closed down a nickel at $32.67.

As for notable analyst actions, Merrill bumped up Apple's (AAPL:NYSE) price target to $215, and Goldman Sachs added the stock to its Conviction Buy List, as both brokerages cited positive expectations for the tech giant's iPhone product. Shares ratcheted up 2.3%.

Morgan Stanley upped Dell (DELL:NYSE) to overweight while cutting Sun Microsystems (JAVA:NYSE) to underweight. Dell shares were better by 1.4%; Sun stock declined 2.5%.

Treasury prices were rising. The 10-year note rose 18/32 in price to yield 3.84%, and the 30-year bond jumped 26/32 in price, yielding 4.57%.

Markets abroad were mostly falling. The Nikkei 225 in Tokyo added 0.2% overnight, but the Hang Seng Index in Hong Kong slid 1.3%. Among European bourses, the FTSE 100 slumped 1.5% and Germany's Xetra Dax plunged 1.8%. The Paris Cac surrendered 1.9%.

Stocks Wallow in Financials'' Woes.......


Into the close...Monday...6/2/2008


Wall Street took a dive Monday as U.S. investors fretted over a high-profile ouster in the financial space and other signs that the credit crisis has not yet abated, but equity measures finished well off their worst levels after oil futures cooled off a bit.

The Dow Jones Industrial Average, which plunged as many as 210 points earlier, ended the day down 134.5 points, or 1.06%, to 12,503.82. The S&P 500 dropped 14.71 points, or 1.05%, at 1385.67, and the Nasdaq Composite was worse by 31.13 points, or 1.23%, to 2491.53.

Stocks found some relief after crude oil retreated from its sizable earlier gains, finishing up just 41 cents at $127.76 a barrel.

Hank Smith, chief investment officer with Haverford Investments, believes that the market's weakness makes it extraordinarily attractive right now, though he said that "the wild card, in some respects, is oil. Because clearly $3.75- and $4-a-gallon gas seems to be the breaking point for consumers." The national average for gas at the pump is currently $3.975 -- another record high -- according to AAA.

Smith added that it's worrisome "when you start to see commodity costs spill over into broader areas and start being used as excuses for price increases in other sectors." He specifically pointed to Dow Chemical (DOW:NYSE) , which announced last week that it would be hiking prices across the board in order to offset the pain of surging commodities costs.

Despite the market's last-gasp attempt at recovery on Monday, stocks'' breadth was dismal, with declining issues trouncing advancers by a 7-to-3 margin. Volume remained as thin as ever, reaching just 1.83 billion shares on the New York Stock Exchange and 1.97 billion shares on the Nasdaq.

Financials were hit particularly hard after Wachovia (WB:NYSE) said that CEO Ken Thompson has been forced out by the board a few weeks after the bank disclosed that its first-quarter loss was 80% higher than it had originally reported. Thomson had been stripped of his chairman title in the wake of those losses. Shares ended down 1.7%.

"There are a number of things weighing on this market, not the least of which is that Wachovia just joined the parade of banks making changes in the executive suite," said Art Hogan, chief market analyst with Jefferies.

The NYSE Financial Sector Index sank 1.5%.

Other chiefs pushed out in recent months, also amid massive writedowns, have been Citigroup''s (C:NYSE) Chuck Prince, Merrill Lynch's (MER:NYSE) Stan O''Neal, and Bear Stearns'' James Cayne.

"Unfortunately, when we get these kinds of reminders of how bad things in the financial sector can be, even with the recent pullback in valuation, I think it's difficult to mount any significant rally here," Hogan said.

At the same time, Washington Mutual (WM:NYSE) announced that it will be splitting its chief executive and chairman roles. Stephen Frank will assume the chairman spot, while Kerry Killinger remains CEO. The stock dipped fractionally to $9.

Furthermore, Standard & Poor''s slashed its ratings on Merrill Lynch, Morgan Stanley (MS:NYSE) , and Lehman Brothers (LEH:NYSE) , and revised its outlooks on Bank of America (BAC:NYSE) and JPMorgan Chase (JPM:NYSE) to negative. Shares lost between 1.3% and 8.1%.

S&P also put Wachovia on CreditWatch with negative implications while removing Citigroup from the same, but also assigned Citi a negative outlook. All told, S&P now has mostly negative rankings on large financial institutions. Citi shares were off 1.9% lately.

As stocks pulled back, the yield on the 10-year Treasury note ducked back under the 4% level. Recently, the note was jumping 24/32 in price to yield 3.97%. The 30-year bond was up 23/32 in price, bringing the yield down to 4.67%.

The slide in U.S. shares also came amid suffering European exchanges as Britain's largest lender to landlords, Bradford & Bingley, sliced the price of its rights offering and stoked fears that credit-related losses are continuing to spread.

The FTSE 100 lost 0.8%, the Germany's Xetra Dax sank 1.2%, and the Paris Cac plunged 1.6%. Asia markets fared better, however. Tokyo's Nikkei 225 climbed 0.7% overnight, and Hong Kong's Hang Seng Index jumped 1.2%.

Also on Monday, mobile operator China Unicom (CHU:NYSE) announced it will take out fixed-line provider China Netcom (CN:NYSE) in a stock swap worth $23.8 billion (185 billion Hong Kong dollars).

Shares of Marriott International (MAR:NYSE) gave up 2.2% after the hotel operator said it now expects revenue per available room to grow just 2% in the second quarter, down from its prior forecast of 3% to 5%.

Meanwhile, fertilizer concern Intrepid Potash (IPI:) said its fiscal first-quarter earnings quintupled from last year to $33.1 million on sales that ramped up 75% at $84.4 million. Still, the stock finished down 2.2%.

Elsewhere, the Financial Times reported that Japan-based carmaker Toyota (TM:) is considering shaving down its U.S. revenue guidance amid dwindling sales of its larger vehicles. Toyota shares closed up 0.5% on the NYSE.

In notable analyst actions, insurance firm Progressive (PGR:) had its rating raised to outperform at Friedman Billings, and Keefe Bruyette upgraded Sovereign Banc (SOV:) . Logging company Weyerhaeuser (WY:) was cut to hold from buy at Deutsche Bank.

Progressive shares bumped up 1.8% as Sovereign rose 1.2%. Weyerhaeuser shares lost 1.6%.

Friedman Billings also boosted the price targets of several coal producers, among them Peabody Energy (BTU:) , Patriot Coal (PCX:) and Arch Coal (ACI:) . Peabody and Arch gained 4.9% apiece as Patriot jumped 10.9%.

Back in commodities, gold futures finished up $5.50 to $897 an ounce. As for currency markets, the U.S. dollar settled up a tenth of a cent against the euro at $1.5540, and rose 0.8% against the British pound, while yielding 1% to the yen.

Earlier, the Institute for Supply Management put its national factory-activity index at 49.6 in May -- a full point higher than the prior month and better than the consensus estimate. Still, that was a bit below the break-even level of 50. Another potentially troublesome aspect of the report was a bulging list of commodities, the prices of which are rising. The ISM said that only two of the commodities it tracks -- methanol and zinc -- have stepped back in price since April.

Ian Shepherdson, chief U.S. economist with High Frequency Economics, wrote that a healthy pickup in export orders is helping to boost overall orders, but that the gains aren't strong enough to halt losses of manufacturing jobs. The export strength, he said, "is dead in line with the performance implied by the weakening of the dollar over the past year and will likely persist for a few more months yet."

"Overall, soft but not catastrophic," said Shepherdson, "but remember this is a deeply atypical, consumer-led downturn."

Meanwhile, the Commerce Department said construction spending was down just 0.4% in April, a little ahead of the 0.6% consensus. Data from March was revised to minus 0.6% from the originally released negative 1.1%.

Stocks Crescendo, End on a High Note.......


Into the close...Thursday...6/5/2008


Stocks in the U.S. soared into the finish Thursday as investors snatched up equities amid good news from various slices of the corporate world, even as crude-oil prices stormed higher late in the session.

The Dow Jones Industrial Average jumped 213.97 points, or 1.73%, to 12,604.45, with especially strong support from Verizon (VZ:NYSE) and Wal-Mart (WMT:NYSE) . The S&P 500 advanced 26.85 points, or 1.95%, at 1404.05, and the Nasdaq Composite gained 46.8 points, or 1.87%, to 2549.94.

"Probably the most encouraging thing was that the market had staying power even though oil went up $5," said Fred Dickson, vice president and market strategist with D.A. Davidson. "But we continue to see very volatile market conditions, and with traders reacting to every piece of news flow, I'm skeptical this will hold very long, given the spike in oil."

Crude briefly let some of the air out of equities Thursday as futures rocketed $5.49 to $127.79 a barrel, intensifying what were already fairly strong gains earlier in the day. But investors quickly brushed that aside, and likewise seemed to ignore the fact that gas at the pump is now only a penny away from the $4 mark, with the national average reaching a new record of $3.989 a gallon.

Dickson noted that the market instead appeared to propel forward on "retail mania" as that sector turned out some decent numbers. "It doesn't take much to move the market 200 points in any direction," he said. "That's just the way it is. So I'll be surprised if I wake up tomorrow and see futures up if oil takes off to $130."

Bruce Zaro, chief technical strategist with Delta Global Advisors, said, "I think what investors are looking for is just some evidence that the economy is possibly moving forward, or at the very least not going into an extended or an accelerated downturn. They're looking for some thread to say that consumers are hanging in there."

That, said Peter Morici, a business professor with the University of Maryland and former director of economics at the U.S. International Trade Commission, is precisely what makes tomorrow's official jobs report so monumentally important.

"Job losses," he wrote in a Forbes column Thursday, "are pushing down household disposable income and consumer spending, and that might send second-quarter GDP growth into negative territory."

"If payroll jobs decline for a fifth straight month in May," he warned, "it will be hard to deny that the economy is in a modern recession, a period of malaise and protracted angst -- lethargic growth interrupted by periods of contraction -- of difficult-to-predict duration."

As for currency markets, the U.S. dollar weakened by 0.9% against the euro to settle at $1.5588, but climbed by 0.6% against the yen to 105.65.

Stocks'' breadth was nonetheless strongly positive. Advancing issues trounced decliners by a 4-to-1 margin on the New York Stock Exchange, which saw roughly 2.16 billion shares change hands. Volume reached 2.22 billion shares on the Nasdaq as winners outran losers 7 to 3.

Zaro noted that short-term technical indicators -- reflecting such data as the ratio of equities above their 10-week moving averages, and of stocks making new highs as opposed to new lows -- have been negative for the past four weeks. "It would probably take a couple of more days of this kind of action that we've seen today to reverse that to the upside," he said.

Zaro noted that short-term technical indicators have been negative for the past four weeks, reflecting such data as the ratio of equities above their 10-week moving averages, as well as of stocks making new highs as opposed to new lows. "It would probably take a couple of more days of this kind of action that we've seen today to reverse that to the upside," he said.

Still, he said, 54% of stocks on the NYSE are flashing technical buy signals, and longer-term indicators continue to tilt positive despite having edged down in recent weeks.

On the corporate front, Verizon more than recovered from a loss in the prior session after confirming it will buy Alltel for $28.1 billion via its Verizon Wireless joint venture with Vodafone (VOD:NYSE) , a pact that will make it the largest U.S. mobile carrier. The deal, news of which broke yesterday, comes just months after Alltel was taken private by TPG Capital and Goldman Sachs (GS:NYSE) . Verizon shares ended up 5.4% at $38.96.

On the heels of that, said Dickson, could be "a huge acceleration of merger announcements" amid a looming White House turnover. Dickson pointed out that presumed Democratic presidential nominee Barack Obama has thus far said that, if elected, he'll take a much stricter tact on regulatory reviews of mergers and acquisitions.

"So I think there's going to be a scramble of people, particularly in more highly regulated industries like telecom and communications and media, to get some deals done," he said.

Retailers were also in focus, with many of the nation's chain stores reporting better-than-expected monthly results. Wal-Mart, the world's biggest store operator, said same-store sales -- those at locations open a year or longer -- climbed 3.9% in May, excluding fuel sales, and its shares were up 2.2%. Total revenue bumped up 9.8% to $31.04 billion. Wal-Mart stock tacked on 3.7% to $59.80.

TJX (TJX:NYSE) , which operates the T.J. Maxx and Homegoods chains, said comps were up 2% in May. That figure jumped 9% at Costco (COST:NYSE) last month, as well. TJX shares added 2.2%, and Costco rose 3.8%.

"It's hard to extrapolate how much of that is due to the Bush administration's helicopter checks," said Dickson, "but some of it is obviously making its way through."

The government's tax-rebate checks, aimed at rousing the sluggish U.S. economy, began shipping out in last month.

"The administration is certainly putting a lot of hope in that," said Zaro. "It doesn't really amount to a lot, relative to the GDP, but I think those little bits and pieces, if you will, are important for the psychology of the market."

Meanwhile, Target (TGT:NYSE) said last month's comparable sales eased 0.7%, and Gap (GPS:NYSE) reported a 14% drop, but shares of both closed higher. Limited (LTD:NYSE) saw mixed trading on word of a 6% comps decline. The stock finished down 7 cents at $18.86.

Over in the financial space, Deutsche Bank's Mike Mayo recommended buying Lehman Brothers (LEH:) stock, saying that "worst-case scenarios" are already baked into the price. A Bernstein analyst kept his market perform rating on the stock.

Those moves came a day after Merrill Lynch upgraded Lehman to a positive ranking, and all three analysts have said that Lehman won't fall apart in the same manner that Bear Stearns, now part of JPMorgan Chase (JPM:NYSE) , did three months ago.

Lehman's cash problems led to speculation of a collapse almost immediately following the Bear debacle in March, and earlier this week the stock took a beating on rumors that the brokerage continues to struggle mightily. Recently, however, shares bounced 7.8% at $33.85.

In other positive analyst research, United Airlines operator UAL (UAUA:) was upgraded by both Lehman and Soleil a day after announcing it will cut down its fleet and lay off about 1,000 more workers by year-end than it had originally planned on doing. Big early gains were tapering off recently, but the stock still blasted 10.6% higher.

Spiking fuel costs and a generally difficult macroeconomic environment have forced several airlines to make similar moves, among them Continental Airlines (CAL:NYSE) , which today said it will cut domestic mainline departures by 16% starting in the September and plans to lay off 3,000 employees. Further, CEO Larry Kellner and president Jeff Smisek said they would cut their salaries for the rest of the year and forego benefits from their 2008 incentive program.

Continental shares moved up 4.8%, and Northwest Airlines (NWA:) jumped 15% on a Lehman upgrade. Yesterday the carrier announced that its traffic had picked up by 4.3% in May.

Also helping keep the mood cheery was the Labor Department, which said that the number of people filing for unemployment benefits slid to 357,000 last week, down by 18,000 from the prior week's upwardly revised figure. Economists were expecting 372,000 claims, on average.

At the same time, another confirmation emerged on the ravaged state of the housing market as the Mortgage Bankers Association said foreclosure starts, and the rate of loans in the process of foreclosure, are at a 29-year record high.

Back in analyst calls, Royal Bank of Scotland (RBS:) was lifted to buy from hold at Citigroup, and teen apparel retailer Hot Topic (HOTT:) was upped to outperform at Friedman Billings. RBS shares were up 4.8% on the NYSE, and Hot Topic soared 16.9%.

On the other hand, Cowen & Co. downgraded Acrobat software maker Adobe Systems (ADBE:) to neutral from outperform, pushing the stock down 0.8%. UBS slapped a sell sticker on bulldozer maker Caterpillar (CAT:) , and Motorola (MOT:) was cut to underperform at Oppenheimer. Caterpillar and Motorola finished up less than 1% apiece.

Returning to commodities, gold futures dropped $8.30 to close at $875.50 an ounce.

Treasury prices were sinking. The 10-year note shed 15/32 in price to yield 4.04%, and the 30-year bond was off 17/32 in price, yielding 4.73%.

Foreign markets were mixed. The Hang Seng Index in Hong Kong tacked on 0.6%, but the Nikkei 225 in Tokyo gave up 0.7% overnight, but In Europe, London's FTSE 100 added 0.4% as Germany's Xetra Dax lost 0.3%, and the Paris Cac was down 0.2%.

Blue-Chips Wobble, Don't Fall Down.......


Into the close...Monday...6/9/2008


Stocks closed a rocky session mixed Monday as blue-chip stocks managed eke out a marginal recovery following the previous session's giant selloff, even as tech shares finished to the downside.

The Dow Jones Industrial Average, up roughly 120 points earlier, wavered late in the session before closing up 70.51 points, or 0.58%, to 12,280.32. The S&P 500 clawed its way up from a late pullback to end up 1.08 points, or 0.08%, at 1361.76.

The Nasdaq Composite, which was weak for virtually the entire session, dropped 15.1 points, or 0.61%, to 2459.46 amid losses in big tech names Apple (AAPL:NYSE) -- which unveiled its new 3G-enabled iPhone today -- as well as Cisco (CSCO:NYSE) and Google (GOOG:NYSE) .

"Considering what happened last week, I have to say that this is a pretty poor bounce-back," said Phillip Roth, chief technical market analyst with Miller Tabak. Referring to a longer-term rebound in equities over the past three months, he added, "The bear market rally looks over."

Roth believes equities will eventually slide past the low point reached in March as Bear Stearns, now a part of JPMorgan Chase (JPM:NYSE) , nearly collapsed. He added, however, that stocks "might not crack those lows imminently."

Crude oil, which ramped higher by more than $10 a barrel in the last session and helped yank down the Dow by some 400 points, remained at extraordinarily high levels today. Still, futures saw a bit of profit-taking in the wake of news that Saudi Arabian oil minister Ali al-Naimi has called Friday's massive gains "unjustified," according to the Saudi Press Agency. Futures were off $4.19 to $134.35 a barrel.

Even so, energy names were doing well, with oil-and-gas giants Exxon Mobil (XOM:NYSE) and Chevron (CVX:NYSE) adding 2.6% and 1.7%, respectively. BP (BP:NYSE) bumped up 2.5%.

Further, the nationwide average for gas prices at the pump hit the $4 milestone on Sunday, according to AAA, and today it was at another all-time high of $4.023 a gallon.

Roth noted that gains in energy stocks were disproportionately supporting the S&P.

"Stocks are up and interest rates are up, and the leading stocks are energy and basic-materials stocks," Roth said. "That's the message that investors believe this is an economic boom, which is wacky. I call this a negative feedback loop. You can't go up with yields getting higher."

The 10-year note saw choppy trading today but ended with a price drop of 21/32, which pushed the yield up to 3.99%. The 30-year bond moved slipped 1/32 in price, yielding 4.63%.

"I'm still saying there's a good stockpile of cash to buy stocks if people aren't scared enough to do it," said Bill Stone, chief investment strategist with PNC Wealth Management, noting that the total amount of household cash rose to $8.56 trillion as of May 26. "But the fear trade's definitely back again as of Friday."

Despite the positive finish, stocks'' breadth was poor. Decliners outran advancers by a 3-to-2 margin on the New York Stock Exchange, which saw some 2.19 billion shares change hands. On the Nasdaq, volume reached 1.87 billion shares as losers beat winners 7 to 3.

On the data side, the National Association of Realtors said pending-home sales swelled 6.3% in April, far better than the economists'' consensus for a 1% drop and up from a March decline of 1%.

As for currency markets, the U.S. dollar reversed an early dip as crude oil held in negative territory, firming by 0.7% against the euro at $1.5650 and settling up 1% against the yen to fetch 106.07. The dollar index, which measures the greenback against a basket of its major counterparts, was better by 0.7%.

But the dollar remains very weak, having dropped by 18.5% against the euro since the start of 2008. Treasury Secretary Henry Paulson today told CNBC that he would never take intervention off the table in order to stabilize the weak dollar, in essence echoing the same concern for the greenback's plight voiced by Federal Reserve chairman Ben Bernanke last week. The central-bank chief acknowledged that the softening of the dollar can aggravate inflation.

Back in commodities, gold futures finished down 90 cents to $898.50 an ounce.

Among companies, Lehman Brothers (LEH:) announced plans to raise $6 billion through an offering for common and preferred stock and said it expects to post a fiscal second-quarter loss of $2.8 billion, or $5.14 a share. Word of a cash-raising and a big loss has been circulating since last week. Shares slid 8.7%.

"I think the market hates unknowns more than even large knowns," said Stone, "so perhaps getting Lehman out of the way and ''fessing up to their big loss is a positive overall, even though it's not necessarily a positive for the stock as of this moment."

For now, the financial group was performing poorly as it dealt with some other negative news, including a report from a Swiss newspaper that UBS (UBS:NYSE) could see another $3.9 billion in writedowns in the fiscal second quarter in addition to the $19 billion it has already reported. Shares of the Swiss banking giant surrendered 3.9%.

UBS was, moreover, hit with negative analyst research along with Citigroup (C:NYSE) and Merrill Lynch (MER:NYSE) .

In another dire forecast on financials, Oppenheimer analyst Meredith Whitney said the trio could write down another $10 billion thanks to their exposure to MBIA (MBI:NYSE) and Ambac (ABK:NYSE) , which lost their perfect financial-strength ratings last week.

Citi stock surrendered 2.3% as Merrill fell 3.2%. Shares of MBIA and Ambac sank around 10% apiece.

Moreover, a BlackRock analyst told reporters in Singapore that while the worst of the global credit crisis is behind, he expects it to stretch over another two to three years, according to media reports.

The NYSE Financial Sector Index plunged 1.8%.

On the brighter side, lender CIT (CIT:NYSE) finished 3.2% higher after scoring $3 billion in long-term securities-based financing from Goldman Sachs (GS:NYSE) .

Staying in the financial space, Hilb Rogal & Hobbs (HRH:) rocketed some 42% after Britain-based Willis Group (WSH:NYSE) , a fellow insurance broker, agreed to take it out for $46 a share, or $2.1 billion. That includes $400 million in debt assumption. Willis shares shed 6%.

McDonald's (MCD:NYSE) was among the best-performing Dow components after saying same-store sales, or those from locations open a year or longer, jumped 7.7% last month as foreign markets saw especially good numbers. U.S. comps were up 4.3% from a year earlier. Shares moved up 4.1%.

Meanwhile, Bloomberg reported that the Securities and Exchange Commission may recommend this week that the major credit-rating agencies -- Moody's, Standard & Poor''s, and Fitch Ratings -- be forbidden from advising investment banks on how to achieve high-end rankings for their asset-backed securities, according to people familiar with the matter.

Returning to research calls, Lehman Brothers upgraded Northwest Airlines (NWA:NYSE) and United Airlines operator UAL Corp. (UAUA:NYSE) to overweight, and UAL was furthermore upped to hold from sell at Soleil. Still, Northwest shares lost 4.2% and Northwest was down 1.6%.

Motorola (MOT:NYSE) was downgraded at Oppenheimer, and UBS lowered bulldozer maker Caterpillar (CAT:CAT) to sell. Cowen & Co. cut Acrobat software maker Adobe Systems (ADBE:NYSE) to neutral from outperform.

Markets abroad were mixed. In Asia, Tokyo's Nikkei 225 plunged 2.1% overnight, and Taiwan's main index dropped 1.8%. Hong Kong and China were closed. Among European bourses, London's FTSE 100 fell 0.5%, and Frankfurt's Xetra Dax rose 0.2%. The Paris Cac was better by 0.1%.

Lackluster Finish for U.S. Stocks.......


Into the close...Tuesday...6/10/2008


New York's major indices went out mixed Tuesday as hawkish words from the Federal Reserve chief left stocks unable to sustain any sincere forays into positive territory, notwithstanding a leaping dollar and an encouraging development in the blistering oil market.

Stocks had an erratic session, with the Dow Jones Industrial Average roaming in and out of the green throughout the day before closing up 9.44 points, or 0.1%, to 12,289.76.

The index enjoyed particularly strong support from Coca-Cola (KO:NYSE) , which was upped to buy from hold at Deutsche Bank, and financial components Citigroup (C:NYSE) , JPMorgan Chase (JPM:NYSE) and AIG (AIG:NYSE) .

Broader indices, meanwhile, returned to negative territory following a bit of short-lived strength earlier, though both closed off their lows for the day. The S&P 500 surrendered 3.32 points, or 0.2%, to 1358.44, and the Nasdaq Composite lost 10.52 points, or 0.4%, to 2448.94.

"The market is undergoing a state of real nervousness here," said Peter Cardillo, chief market economist with Avalon Partners. "The fact that [Fed chairman] Ben Bernanke and other Fed members are continually talking about the risks of higher inflation and hinting that the Fed is going to have to raise interest rates to combat inflation, I think, is really weighing heavily on stocks."

As the new day began, traders were dealing with a speech from leader of the central bank, who said the jump in oil costs "has added to the upside risks for inflation and inflation expectations," even as his expectations for a "substantial downturn" have simultaneously diminished. He added that the Fed "will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for inflation."

At the same time, Dow Jones quoted Dallas Fed President Richard Fisher as saying he is forecasting "anemic" growth, but not a recession, and Reuters said the official would be willing to accept a slower economy if that meant inflation would be contained. Also, the Boston Fed's Eric Rosengren reportedly said inflation was running at an "undesirable" level.

Those comments would appear, once again, to suggest that the Fed won't cut interest rates again following its 325-point easing campaign over the past few months. In fact, fed funds futures today were pricing in roughly 56% odds that the Fed will raise rates at its Aug. 5 gathering. The chances of a quarter-point hike by the September meeting are now set at 100%, and the prospect of a 50-basis-point climb by October is likewise fully priced in.

Meanwhile, crude oil earlier soared to a new high shy of the $138 mark, but reversed to slide $3.04 at $131.31 a barrel after news broke that Saudi Arabia's oil output was boosted by nearly 500,000 barrels a day this quarter at 9.54 million, according to CNBC. The network cited sources in the Saudi Oil Ministry.

Still, gas prices at the pump hit another record high, jumping 2 cents from yesterday to $4.043 a gallon, according to AAA. That's nearly a dollar higher than last year.

Rising oil prices were among the main factors driving up April's U.S. trade deficit, or the amount by which imports outweighed exports, to $60.9 billion. Analysts were looking for minus $60 billion, and that compares with March's upwardly revised figure of negative $56.5 billion.

"The trade deficit heightens the risk of recession and surging unemployment," wrote Peter Morici, a business professor with the University of Maryland and former chief economist at the U.S. International Trade Commission. "Ben Bernanke''s most recent comments about oil-driven inflation only serve to distract attention from these issues and aggravate risks."

"Bernanke in recent comments has emphasized that western central banks stand ready to resist oil-induced recession, when in fact oil price increases are far beyond the control of the Federal Reserve and other central banks to affect," Morici continued. He added that the Fed chief's words "cause markets to believe the Fed will raise interest rates as we travel into a recession and this drives equity prices down, compounding the panic created by rising oil prices."

Following Bernanke''s observations, the U.S. dollar jumped by more than a percent against the euro, the yen, and the pound, and barreled 1.6% higher against the Swiss franc.

Gold futures slid $23.50 to $871.20 an ounce.

Foreign markets were uniformly lower, and one of the hardest hit was China's CSI 300, which plummeted 8.1%. The Nikkei 225 in Tokyo dropped 1.1% overnight, and the Hang Seng Index in Hong Kong sank 4.2%. Among European exchanges, London's FTSE 100, Germany's Xetra Dax and the Paris Cac were all down 0.7% or more.

On the U.S. corporate front, chipmaker Texas Instruments (TXN:) narrowed its second-quarter outlook, partially citing weak demand for handheld devices. Shares fell 2.9%.

Elsewhere, both Citigroup and Lehman Brothers bumped up their Apple (AAPL:) price targets a day after the company released its 3G-enabled iPhone, after which the stock added 2.2%.

Separately, shares of Lehman Brothers (LEH:NYSE) tumbled 6.7% after Wachovia downgraded the stock to market perform from outperform.

Kirk Kerkorian''s Tracinda said its offer to buy up to 20 million shares of Ford (F:NYSE) generated a tremendous response, with more than 1 billion shares of the automaker being tendered. However, Tracinda will keep to its plan to limit the purchase to 20 million, spending $170 million overall. Ford shares slumped 3.8%.

Yields on government bonds forged higher as investors pulled out of Treasury securities. The 10-year note was down 26/32 in price to yield 4.10%, and the 30-year bond shed 1-3/32 in price, yielding 4.70%.

The Dow.......

Essentially 2 of the 3 indices are negative but the transportations aren't really confirming it with their volume.



Dow Theory is a heterodox theory on stock price movements that is used as the basis for technical analysis. The theory was derived from 255 Wall Street Journal editorials written by Charles H. Dow (1851–1902), journalist, founder and first editor of the Wall Street Journal and co-founder of Dow Jones and Company. Following Dow's death, William P. Hamilton, Robert Rhea and E. George Schaefer organized and collectively represented "Dow Theory," based on Dow's editorials. Dow himself never used the term "Dow Theory," nor presented it as a trading system.

The six basic tenets of Dow Theory as summarized by Hamilton, Rhea, and Schaefer are described below.
Contents
[hide]

* 1 Six basic tenets of Dow Theory
* 2 Analysis
* 3 References
* 4 Further reading
* 5 External links

Six basic tenets of Dow Theory

1. The market has three movements

(1) The "main movement", primary movement or major trend may last from less than a year to several years. It can be bullish or bearish. (2) The "medium swing", secondary reaction or intermediate reaction may last from ten days to three months and generally retraces from 33% to 66% of the primary price change since the previous medium swing or start of the main movement. (3) The "short swing" or minor movement varies with opinion from hours to a month or more. The three movements may be simultaneous, for instance, a daily minor movement in a bearish secondary reaction in a bullish primary movement.

2. Trends have three phases

Dow Theory asserts that major market trends are composed of three phases: an accumulation phase, a public participation phase, and a distribution phase. The accumulation phase (phase 1) is a period when investors "in the know" are actively buying (selling) stock against the general opinion of the market. During this phase, the stock price does not change much because these investors are in the minority absorbing (releasing) stock that the market at large is supplying (demanding). Eventually, the market catches on to these astute investors and a rapid price change occurs (phase 2). This occurs when trend followers and other technically oriented investors participate. This phase continues until rampant speculation occurs. At this point, the astute investors begin to distribute their holdings to the market (phase 3).

3. The stock market discounts all news

Stock prices quickly incorporate new information as soon as it becomes available. Once news is released, stock prices will change to reflect this new information. On this point, Dow Theory agrees with one of the premises of the efficient market hypothesis.

4. Stock market averages must confirm each other

In Dow's time, the US was a growing industrial power. The US had population centers but factories were scattered throughout the country. Factories had to ship their goods to market, usually by rail. Dow's first stock averages were an index of industrial (manufacturing) companies and rail companies. To Dow, a bull market in industrials could not occur unless the railway average rallied as well, usually first. According to this logic, if manufacturers' profits are rising, it follows that they are producing more. If they produce more, then they have to ship more goods to consumers. Hence, if an investor is looking for signs of health in manufacturers, he or she should look at the performance of the companies that ship the output of them to market, the railroads. The two averages should be moving in the same direction. When the performance of the averages diverge, it is a warning that change is in the air.
Both Barron's Magazine and the Wall Street Journal still publish the daily performance of the Dow Jones Transportation Index in chart form. The index contains major railroads, shipping companies, and air freight carriers in the US.

5. Trends are confirmed by volume

Dow believed that volume confirmed price trends. When prices move on low volume, there could be many different explanations why. An overly aggressive seller could be present for example. But when price movements are accompanied by high volume, Dow believed this represented the "true" market view. If many participants are active in a particular security, and the price moves significantly in one direction, Dow maintained that this was the direction in which the market anticipated continued movement. To him, it was a signal that a trend is developing.

6. Trends exist until definitive signals prove that they have ended

Dow believed that trends existed despite "market noise". Markets might temporarily move in the direction opposite the trend, but they will soon resume the prior move. The trend should be given the benefit of the doubt during these reversals. Determining whether a reversal is the start of a new trend or a temporary movement in the current trend is not easy. Dow Theorists often disagree in this determination. Technical analysis tools attempt to clarify this but they can be interpreted differently by different investors.

Analysis

There is little academic support for the profitability of the Dow Theory. Alfred Cowles in a study in Econometrica in 1934 showed that trading based upon the editorial advice would have resulted in earning less than a buy-and-hold strategy using a well diversified portfolio. Cowles concluded that a buy-and-hold strategy produced 15.5% annualized returns from 1902-1929 while the Dow Theory strategy produced annualized returns of 12%. After numerous studies supported Cowles over the following years, many academics stopped studying Dow Theory believing Cowles's results were conclusive.

In recent years however, Cowles' conclusions have been revisited. William Goetzmann, Stephen Brown, and Alok Kumar believe that Cowles' study was incomplete [1] and that Dow Theory produces excess risk-adjusted returns.[1] Specifically, the return of a buy-and-hold strategy was higher than that of a Dow Theory portfolio by 2%, but the riskiness and volatility of the Dow Theory portfolio was lower, so that the Dow Theory portfolio produced higher risk-adjusted returns according to their study. Nevertheless, adjusting returns for risk is controversial in the context of the Dow Theory. One key problem with any analysis of Dow Theory is that the editorials of Charles Dow did not contain explicitly defined investing "rules" so some assumptions and interpretations are necessary.

Many technical analysts consider Dow Theory's definition of a trend and its insistence on studying price action as the main premises of modern technical analysis.

Stocks End Slightly Higher.......


Into the close...Thursday...6/12/2008


Stocks in New York closed in the green Thursday, though the major averages fell off their session highs as oil rebounded from an early decline and Yahoo! (YHOO:NYSE) shares sank in the afternoon.

The Dow Jones Industrial Average finished up 58 points, or 0.5%, at 12,141.74, and the S&P 500 tacked on 4.4 points, or 0.3%, at 1,339.87. The Nasdaq climbed 10.4 points, or 0.4%, at 2,404.35.

Yahoo! confirmed no agreement with Microsoft (MSFT:NYSE) could be reached as the software giant was "unequivocally" not interested in pursuing an acquisition of all of Yahoo!, "even at the price range [$33 a share] it had previously suggested," Yahoo! said. Yahoo! ended down 10% at $23.50

Earlier, Wall Street had been significantly higher as investors digested a bid for Anheuser-Busch (BUD:NYSE) and positive retail sales. However, a selloff in oil reversed course and put selling pressure on equities. Light, sweet crude for July delivery settled up 36 cent at $136.74 a barrel.

Anheuser-Busch, which surged after the prior close on word that Belgium's InBev has offered to acquire the Budweiser seller for $46 billion, was still showing a gain. The stock gained 5.1% to $61.34.

Traders were also buoyed by retail sales data for May, which rose 1%, or twice the expected rate, aided by consumers spending their stimulus checks. Excluding auto sales, retail sales were up 1.2%, topping the 0.7% forecast.

Lehman Brothers (LEH:NYSE) announced it was removing Chief Financial Officer Erin Callan and Chief Operating Officer Joseph Gregory from their roles. The stock sank 2.6% to $23.13.

Brothers Grim 



Ian Lowitt, the firm's co-chief administrative officer, will succeed Callan as CFO and Herbert McDade III, who headed the firm's equities division, will replace Gregory as president and chief operating officer. Callan will remain with the firm in a senior capacity within its investment banking division.

Elsewhere in the financial space, Citigroup (C:NYSE) is reportedly close to shutting down Old Lane Partners, the hedge fund it bought last year for more than $800 million and that was previously run by CEO Vikram Pandit. The Wall Street Journal said the firm has seen returns dwindle and top managers bolt.

Thornburg Mortgage (TMA:NYSE) was also in the headlines, saying it had a loss of $3.3 billion in the first quarter, in no small part because of declines in the fair market value of the lender's mortgage-backed securities and scrutinized loan portfolios.

Despite the setback in Lehman's shares, the financial arena overall was in positive territory. The NYSE Financial Sector Index was up 2%, and the KBW Bank Index was better by 2.7%.

As for the technology group, Palm (PALM:Nasdaq) said its Centro will be sold by Verizon Wireless, a joint venture of Verizon (VZ:NYSE) and Vodafone (VOD:NYSE) , starting Friday. To date, Palm has sold more than 1 million units of the Centro.

Back on the data side, the Labor Department said initial jobless claims totaled 384,000 last week, about 14,000 more than had been predicted. Another report from the government said import prices rose 2.3% last month, a bit less than the consensus forecast.

Treasury prices were diving. The 10-year note was down 22/32 in price, lifting the yield to 4.16%, and the 30-year bond was losing 23/32 to yield 4.74%.

Among markets overseas, Tokyo's Nikkei shed 2.1%, and Hong Kong's Hang Seng surrendered 1.3%. Europe was in the green, with London's FTSE up 1.1% and Frankfurt's Dax adding 0.9%.

Inflation Data Boost U.S. Stock Futures.......


Into the close...Friday...6/13/2008


Stock index futures perked up Friday after the newest round of government inflation data came in essentially as economists were expecting, easing for the moment worries about the effects of high commodity prices filtering down to the retail level.

Futures on the S&P 500 were up 5 points at 1348.30 and were 6 points above fair value. Nasdaq 100 futures were advancing 14 points to 1953 and were 17 points ahead of fair value.

The mood on Wall Street improved after the Labor Department said the consumer price index rose 0.6% last month, just slightly ahead of what had been forecast. The core rate, which excludes food and energy, matched estimates with a 0.2% uptick.

Taking the longer view, the CPI was up 4.2% year over year and was on the warm side, but the core rate again was in line, increasing 2.3%.

Following the report, the dollar was holding on to its gains against the euro, the yen and the pound. Treasury prices came off their lows, pushing yields downward. Recently, the 10-year note was down 3/32 and yielding 4.22%, and the 30-year bond was off by 9/32, yielding 4.78%.

On the stock side, the technology sector will be in focus again as investors wait to see whether Yahoo! (YHOO:Nasdaq) can rebound from the previous session's selloff. Late Thursday, word came down that Microsoft (MSFT:Nasdaq) would halt its attempt to take over the Internet portal, sending its shares down 10%.

Providing something of an offset was news that Yahoo! will, however, pursue a search pact with Google (GOOG:Nasdaq) .

Still, the late selloff in Yahoo! combined with a rebound in oil prices to cut in to what had been a sizable rally on Wall Street last time out.

This time on the commodities side, crude oil was losing $1.48 to $135.26. Gold was off $7.10 at $864.90.

Meanwhile, a report from RealtyTrac said that last month foreclosure filings rose 48% from the previous year and 7% from April. All told, 261,255 homes across the nation were subject to at least one foreclosure filing.

Stocks Offer Mixed Bag.......


Into the close...Monday...6/16/2008


Stocks in New York continued trading mixed Monday afternoon as traders absorb earnings news, analyst actions and a new high for oil.

The Dow Jones Industrial Average was down 47 points at 12,260, and the S&P 500 was losing 1.5 points at 1,358. The Nasdaq was better by 10 points at 2,465.

As the new week began, investors learned that Martin Sullivan is out as CEO of American International Group (AIG:) and will be replaced by AIG's chairman, Robert Willumstad. Stephen Bollenbach, an AIG director and a former CEO of Hilton Hotels, was named lead director.

The insurance giant's board had held a special meeting this weekend to consider Sullivan's fate.

Meanwhile, Lehman Brothers (LEH:NYSE) , which last week ousted its chief financial officer and chief operating officer, posted a $2.8 billion second-quarter loss, matching its recent warning, owing to additional writedowns, new trading losses and bad hedges.

Also in focus were three Dow components who received analyst downgrades. GE (GE:) was cut to neutral from overweight at JPMorgan, while AT&T (T:) and Verizon (VZ:) were lowered to neutral from buy at UBS.

On the positive side, Citigroup lifted its price targets on a series of agriculture stocks -- Agrium (AGU:NYSE) , Mosaic (MOS:NYSE) , Potash (POT:NYSE) , CF Industries (CF:NYSE) and Terra Industries (TRA:NYSE) .

Elsewhere, the staff of the Federal Communications Commission has reportedly proposed that the agency finally grant clearance to the merger of XM Satellite Radio (XMSR:) and Sirius Satellite Radio (SIRI:) , which would bring to a close a long regulatory review of the deal.

On the commodities side, oil was up $1.92 at $$136.78 a barrel, despite word that Saudi Arabia may boost production next month to about 9.7 million barrels a day.

Earlier, crude reached an all-time high just short of $140. Gold was rising $15.20 to $888.30 an ounce.

The dollar was for the most part weaker, but it rose against the yen. Treasury prices were little changed. The 10-year note was up 1/32, yielding 4.25%, and the 30-year bond was down 6/32, yielding 4.80%.

As for the Day's economic news, the Federal Reserve Bank of New York said its economic index for June fell to negative 8.7 from minus 3.2 in May, indicating a continuing contraction. Economists were looking for a reading of negative 2.

Wall Street Ends Lower.......


Into the close...Tuesday...6/17/2008


Stocks in the U.S. struggled for much of the session Tuesday and closed lower as investors shrugged off decent monthly inflation data and an earnings beat from Goldman Sachs (GS:NYSE) .

The S&P 500 lost 9 points to 1351. The Nasdaq was off by 17 points at 2458, and the Dow Jones Industrial Average shed 109 points to 12,160.

"Heading into the opening, traders were looking for down energy and up financials. When the reverse happened, it put pressure on the overall market," said Tony Dwyer, equity market strategist for FTN Midwest Securities.

Before the opening bell bell, Goldman reported earnings of $4.58 a share in the second quarter, trouncing estimates. Revenue of $9.42 billion was also much better than expected. However, shares of Goldman gave back earlier gains and were recently slightly off their Monday close.

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That good news failed to keep the broader financial sector from falling on continued concern about the regional banks. Suntrust Banks (STI:NYSE) was falling hard, off 8% on a Friedman Billings re initiation with an underperform rating. Regions Financial (RF:NYSE) also stumbled, losing 6.3%.

Adding to the worry, analysts at Goldman predicted banks would need up to $65 billion in new capital to stem losses from the credit crunch. Goldman said that a turnaround for the banks probably wouldn't occur before early 2009.

Goldman lowered its price targets for Wachovia (WB:NYSE) and Washington Mutual (WM:NYSE) , while cutting its earnings forecast for Bank of America (BAC:NYSE) . Wachovia and Washington Mutual each lost more than 4%, while Bank of America slipped 2.6%.

A government report showing that the core producer price index, a measure that reveals wholesale-level inflation, was up 0.2% in May, in line with projections further boosted the market. The number excludes food and energy costs. Including those prices, the overall PPI was on the high side, climbing 1.4%, compared with the 1% consensus target.

During the past year, the core PPI is up 3%, while the total number has surged 7.2%. As with the monthly data, the year-over-year numbers were as expected on the core but a bit hot on the headline number.

"When you're up on the headline number over 7% year over year, that's not something people want to buy stocks based on," said Robert Pavlik, chief investment officer at Oaktree Asset Management.

Former Federal Reserve President William Poole said on Bloomberg TV this morning that the Fed may reverse course and begin raising rates to help combat inflation.

Separately, another data set revealed that housing starts fell to 975,000 last month, around 5,000 below what economists predicted and down from the revised 1 million in April. Building permits came in at 969,000, roughly 9,000 ahead of estimates.

Pavlik said that though the housing starts data were slightly disappointing, "you might be seeing some semblance of a bottoming process in the housing starts and the building permits. The pace of the decline is slowing.

"It seems as though we've reached a bottom in March. I'm somewhat optimistic or at least hopeful that that's going to hold. But none of these reports are going to be fueling any buying right now."

The Fed also reported that industrial production declined 0.2% in May after posting a 0.7% decline in April. Analysts were expecting an improvement of 0.1%.

"Capacity utilization overall, you saw 79.4% vs. 79.7%," said Pavlik. "It's not really good news, but ... fewer factories using their entire production capability does relieve some inflation concern, if you're trying to find lemonade out of lemons."

In its report, the Fed said that a strike at GM (GM:NYSE) supplier American Axle (AXL:NYSE) had little impact on May vehicle output. GM shares were up 1%, placing the stock among the Dow's gainers.

Reflecting the slowdown, fellow Dow component Wal-Mart (WMT:NYSE) announced it would lower capital expenditures for its fiscal 2009 to between $13 billion and $14 billion. Shares slipped 1.2% to $58.64.

Turning to commodities, oil, which has been extremely volatile lately, was losing 79 cents to $133.37 a barrel. Gasoline prices were at $4.078 a gallon, down minutely from yesterday. Gold was down 60 cents to $886.30 an ounce.

The materials sector was among the market's bright spots. Agricultural products provider Monsanto (MON:NYSE) and miner BHP Billiton (BHP:NYSE) were each adding more than 3.5%.

Meanwhile, the transportation sector suffered on concerns that flood damage to rails and bridges in the Midwest would impact profits. Union Pacific (UNP:NYSE) was recently trading down 3.8%.

The energy patch was rising nearly across the board, led by natural gas companies Chesapeake Energy (CHK:NYSE) and Anadarko Petroleum (APC:NYSE) . Dow components Chevron (CVX:NYSE) and ExxonMobil (XOM:NYSE) were also higher.

The dollar was slightly down against the euro and the yen, and rising against the British pound. Treasury prices, meanwhile, were rallying. The 10-year note was up 14/32 in price, yielding 4.22%, and the 30-year bond was adding 6/32 to yield 4.78%.

Overseas, most major markets were in the green, though Tokyo's Nikkei 225 crept to the downside. The Hang Seng in Hong Kong was up 0.1%. In Europe, London's FTSE was up 1.2%, and Frankfurt's Dax rose 1%.

Elsewhere, Best Buy (BBY:NYSE) ticked down 4% after posting better-than-expected first-quarter results, with revenue of $8.99 billion and earnings of 43 cents a share.

Tough Day for Stocks.......


Into the close...Wednesday...6/18/2008


Stocks on Wall Street closed in the red Wednesday as traders digested a weak outlook from FedEx (FDX:NYSE) and a sharp drop in earnings at Morgan Stanley (MS:NYSE) .

The Dow Jones Industrial Average slid 131.24 points, or 1.1%, to 12,029.06, and the S&P 500 lost 13.12 points, or 1%, to 1337.81. The Nasdaq surrendered 28.02 points, or 1.1%, to 2429.71.

The session got under way with quarterly results from the third investment bank of the week, Morgan Stanley, which topped profit estimates by 3 cents a share in the latest quarter. Still, that was down some 60% from a year earlier.

By comparison, on Monday Lehman Brothers (LEH:NYSE) said it lost nearly $3 billion in its most recent quarter, while Goldman Sachs (GS:NYSE) easily surpassed estimates a day ago.

Regional bank Fifth Third (FITB:Nasdaq) was also in the headlines after announcing that it will sell some businesses, offer $1 billion in preferred stock and substantially reduce its dividend. The stock slumped 27.3% to $9.26.

Paul Nolte, director of investments at Hinsdale Associates, said Fifth Third represents "another financial hitting the skids" and called Goldman Sachs'' recent good news an anomaly.

"The rest of them are suffering," Nolte said. "The problems of subprime are still with them."


Elsewhere, FedEx posted a quarterly loss and offered disappointing projections for the fiscal first quarter and 2009, sending its shares down 2.1% to $82.60.

"FedEx has grown up to be a bellwether for transportation as a whole and how we're moving goods around the U.S.," said Nolte. The company's "earnings numbers and comments today certainly indicate that the economy is not on the mend."

Pessimism spread to the broader market, leaving all but four of the Dow's 30 components trading in the red. Leading the decliners, GM (GM:Nasdaq) gave up nearly 6%. This morning, Deutsche Bank cut its industry outlook for the auto sector.

Fellow automaker Ford (F:Nasdaq) also sold off. The company met with billionaire investor Kirk Kerkorian's Tracinda Corp. to discuss restructuring plans.

Nearly across the board, consumer discretionary stocks such as Wal-Mart (WMT:NYSE) and McDonald's (MCD:NYSE) took a hit.

"The slowdown in retail spending is reflecting the fact that a lot of consumers have probably already spent the checks they already got from the administration," Fred Dickson, chief market strategist at DA Davidson, said. "Investors are getting the sense that the economy is slowing."

Dickson also pointed out that the market is in the middle of an options-expiration week, which means "price moves are amplified in the direction of the current price trend."

On the commodities side, crude for July delivery rose $2.67 to $136.68 a barrel, and Brent gained $2.72 to $136.44 a barrel.

President Bush today called on Congress to repeal a ban on offshore oil and gas drilling, while the Energy Department announced that crude oil supplies fell by 1.2 million barrels last week, less than analysts'' estimate of closer to 2 million barrels. Gasoline prices at the pump retreated slightly, to $4.075 a gallon from $4.078.

Overseas, Asia's major markets were in the green overnight. Tokyo's Nikkei was up 0.7%, and the Hong Kong Hang Seng was better by 1.2%. Europe, though, was a different story, and most indices declined.

Stocks on Wall Street Go Out Lower.......


Into the close...Tuesday...6/24/2008


Stocks on Wall Street tested both positive and negative territory before closing lower Tuesday, as traders weighed rumored merger activity in the financial sector against the latest U.S. housing and consumer confidence data.

The Dow Jones Industrial Average closed down 34.93 points, or 0.3%, at 11,807.43. The S&P 500 lost 3.71 points, or 0.3%, to 1314.29, and the Nasdaq was off 17.46 points, or 0.7%, at 2368.28.

Potential merger activity in the financial sector helped pick the market up for a time, but ultimately couldn't lead stocks into the green. UBS (UBS:NYSE) shares rose 6.9% to $22.03 on rumors that the company may be bought by HSBC (HBC:NYSE) .

The Associated Press also reported that Wachovia (WB:NYSE) has hired Goldman Sachs (GS:NYSE) to examine its loan portfolio and evaluate alternatives. Wachovia shares rose 5.6% to $17.86, and Goldman climbed 1.9% to $181.98.

Other financial names, such as Bank of America (BAC:NYSE) , Citigroup (C:NYSE) and JPMorgan Chase (JPM:NYSE) traded higher.

"The market came into the day pretty much oversold," said Bruce Bittles, chief investment strategist at RW Baird. "Pessimism has been rising here. You would expect some bounces among the way."

Bittles added that a poor consumer confidence reading, which dropped to 50.4 in June from 58.1 in May, is actually a bullish signal. "Consumers are going to hold back at the mall. It keeps inflation down, and it keeps interest rates down. I think we're going to see some pressures on inflation subside." He said that gold and silver have already come down a bit, and he predicted oil would eventually follow.

"The steady dollar is also bullish," said Bittles. He said that more strength for the currency would be deflationary, and further weakness would exacerbate inflation.

Meanwhile, the Federal Reserve began its latest meeting in order to discuss rates, inflation and the economy. The central bank won't conclude the gathering until Wednesday, at which time it will announce any decision on rates and release a statement that should offer insight into officials'' views on the future.

This time around, no change in the cost of borrowing is expected, but many experts believe the Fed could begin to unwind its series of cuts later this year as part of its bid to fend off inflation.

Inflationary concerns have been magnified in recent months, largely owing to the staggering run-up in commodities, which has pushed prices for food and energy to in some cases record levels. Crude oil futures ended up 26 cents to $137 a barrel. Gasoline prices slipped to $4.069 from $4.072 on Monday. Gold closed up $4.40 at $891.10 an ounce.

Before the open, traders got a look at the state of the housing market via the Standard & Poor''s/Case Shiller home price index. The index for 20 metropolitan areas fell 15.3% year over year for April and 1.4% sequentially.

Despite the decline in home prices, the homebuilder sector rallied. Lennar (LEN:NYSE) led the way higher, rising nearly 3.9% at $14.72. Earlier in the day, Credit Suisse initiated ratings coverage on the sector, and said it might see a turnaround next year.

Greg Church, founder and CEO of Church Capital Management, said that the housing data and consumer confidence numbers certainly weren't helping the market.

Of the prospects of the Fed raising interest rates, Church said "They're probably poised to hold here. They have themselves in a little bit of a pickle. They cut and they're damned, and if they raise they're damned. There are just too many forces moving in both directions." He said that if the Fed were to raise rates, such an action would be more of a gesture than a signal of a series of rate hikes for the future.

As for the continued rise in crude prices, "Unless it drops $20, it's not going to make too much of a difference right now," said Church.

Jeff Saut, senior vice president and chief economist at Raymond James, said that the recent bearish economic data shouldn't startle market observers. "I don't know why it should be any surprise. FedEx (FDX:NYSE) came out ... and telegraphed things were slowing. Yeah, I think things are slow, but I don't think we're going into a recession." As for the consumer confidence index, "I don't pay much attention to the consumer index. You might as well go out on Broadway and count noses."

"The Fed has let their mouths do the heavy lifting already. I don't think the Fed is going to raise rates for another couple months," said Saut.

Treasury prices were stronger. The 10-year note was up 18/32 in price, yielding 4.09%, and the 30-year bond was adding 29/32, yielding 4.64%. The dollar was marginally higher against euro and the pound, but falling slightly against the yen.

Around the world, many major markets came under selling pressure. The Nikkei in Tokyo shed 0.1% to 13,850, and the Hong Kong Hang Seng surrendered 1.1% to 22,456. Selling was even more pronounced in Europe, where London's FTSE slid 0.6% to 5635 and Frankfurt's Dax tumbled 0.8% to 6536. The Paris Cac was worse by 0.8%.

On the corporate side, one of the losers was UPS (UPS:NYSE) . Following the previous close, the package carrier cut its quarterly guidance, citing high fuel costs and the weak economy. Shares of UPS were down 6% to $62.26.

Increasing commodity prices were also weighing on several other stocks.

Dow Chemical (DOW:NYSE) announced this morning plans to raise prices by 25% and add transport surcharges to move its product. The company cited rising costs for energy and raw materials as reason for the price increases.

GM (GM:NYSE) , a Dow stock, is set to unveil a series of moves meant to help sell trucks and SUVs, including long-term no-interest financing. An Associated Press report said GM plans to boost prices on 2009 models.

Also, NYSE Euronext (NYX:NYSE) said it has agreed to buy a 25% stake in the Doha Securities Market for $250 million. NYSE Euronext, the operator of the New York Stock Exchange, was itself created by a series of mergers.

In the technology arena, Nokia (NOK:NYSE) reached a deal to acquire Symbian, a maker of software for phones. Ericsson (ERIC:NYSE) owns a stake in Symbian that it will sell to Nokia.

The Wall Street Journal reported that Internet company Google (GOOG:NYSE) announced plans to help advertisers find out which Web sites their target markets frequent. comScore (SCOR:Nasdaq) , which traditionally provides that service, saw shares drop 23% to $21.45 on the news.

Breadth was middling. Advancers outpaced decliners by 7-to-6 on volume of 1.34 billion shares at the New York Stock Exchange. The Nasdaq saw advancers beat decliners by 7-to-4 on volume of 2.19 billion.

Stocks Settle With Modest Gains.......


Into the close...Wednesday...6/25/2008


Stocks in the U.S. ended higher Wednesday after the Federal Reserve voted to leave overnight bank lending rates unchanged, but the major averages finished the session below their best levels.

The Dow Jones Industrial Average, ahead by more than 100 points for a time, settled up just 4.4 points at 11,811.83, and the S&P 500 added 7.68 points to 1321.97. The Nasdaq was the best performer, up 32.98 points at 2401.26.

As expected, the Fed opted to leave its fed funds target interest rate unchanged after concluding a two-day meeting. The question surrounded what the Fed's policymaking arm, the Federal Open Market Committee, would offer in its assessment of the economy.

The central bank finds itself in a difficult spot, and it acknowledged as much in its statement that accompanied the rate decision. While downside risks to growth remain, they have been diminished, the Fed said, though it did express concern about the state of the labor market. At the same time, Fed officials believe inflationary pressures are a risk to the economy.

"Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters," the Fed said. "The [FOMC] expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high."

A months-long easing campaign in the wake of the credit crisis had dropped the overnight lending rate from 5.25% last summer. The Fed has been stuck between keeping the mortgage meltdown from dragging the economy into a recession and dealing with worries about resource-driven price inflation.

While the Fed has moved aggressively to lower borrowing costs, most experts believe no further rate reductions are forthcoming, and that instead, the next change, when it does occur, will be a hike.

"I think there was some feeling out there that they may change course and raise rates, but they stayed the course, and that's why we're seeing a mildly positive reaction at this point," said Matt King, chief investment strategist at Bell Investment Advisors.

Earlier, European Central Bank President Jean-Claude Trichet signaled that ECB officials could be close to lifting rates on the continent in a bid to cool off inflation there.

Chip Hanlon, president of Delta Global Advisors, said that the market had priced in its expectation that the Fed would remain on the sidelines. "It would take a surprise from the Fed to move the market," he said. "I think today is more about oil."

Crude oil inventories increased by 803,000 barrels, compared with expectations for a decline of 1.1 million barrels. Oil fell on that news, but slowed its decline after the Fed statement. Oil closed down $1.72 to $134.55 a barrel. Gold ended down $9.30 at $882.30 an ounce.

"My guess is that the way the bigger money is taking it is that the statement wasn't strong enough to skyrocket the dollar, so it wasn't enough to short-circuit oil," said Joseph Clark, founder and managing partner at the Financial Enhancement Group. He said the market, lacking fundamental catalysts, will probably remain range-bound in the immediate future.

Among companies in the headlines, MasterCard (MA:NYSE) agreed to pay $1.8 billion to settle litigation brought by American Express (AXP:NYSE) , which had alleged the company conspired to keep it out of the bank-issued credit card market. MasterCard ended up 3.4% at $289.79, and American Express was down 2.8% at $40.94.

Staying in financials, Britain's Barclays (BCS:NYSE) , stung by the same financial slowdown that has deviled its U.S. counterparts, set plans to raise nearly $9 billion through a stock offering. Shares were recently up 4.5% at 4.49. The financials had rallied earlier in the day, but finished with mixed results.

As for earnings, crop-science concern Monsanto (MON:NYSE) said its third-quarter earnings jumped more than 40%, while revenue surged 26% to $3.59 billion. The company also raised its forecast again.

Cereal maker General Mills (GIS:NYSE) wasn't as fortunate, saying its fourth-quarter profit dropped as the positive effects of commodity hedges wore off. Still, the numbers were in line with its preview issued last week.

After the close today, traders will be taking in financial results from Nike (NKE:NYSE) , Oracle (ORCL:NYSE) and Research In Motion (RIMM:NYSE) .

The tech sector saw a broad rally as Jabil Circuit (JBL:NYSE) forecast earnings that would beat the Street's expectations. Jabil shares tacked on 16% to $16.57. Nokia (NOK:NYSE) also led the sector, up 5.8% at $26.09.

Elsewhere, JPMorgan initiated ratings coverage on the pharmaceutical sector. It put a neutral rating on Wyeth (WYE:NYSE) , Eli Lilly (LLY:NYSE) and Bristol-Myers (BMY:NYSE) . Schering-Plough (SGP:NYSE) garnered an overweight rating.

AT&T (T:NYSE) saw shares rise on a Bernstein upgrade to outperform from market perform. Shares ended the day up 0.6% at $34.47. Sprint (S:NYSE) shares closed up 5.4% at $8.55.

Boeing (BA:NYSE) fell 6.9% to $69.64 after Goldman Sachs downgraded the stock to sell. Honeywell (HON:NYSE) , Textron (TXT:NYSE) and others in the defense space fell alongside Boeing.

On the data side, the Commerce Department said durable-goods orders were unchanged in May, whereas economists were looking for a decline of 0.5%. The U.S. Census Bureau and the Department of Housing and Urban Development also released May new-home sales. The government found that, as expected, new single-family homes sold at a seasonally adjusted annual rate of 512,000, down from 525,000 in April.

Treasury prices were on the decline. The 10-year note fell 4/32 in price to yield 4.10%. The 30-year was down 8/32 to yield 4.64%. The dollar was losing ground against the euro and the yen.

Abroad, markets were also climbing. London's FTSE added 0.6%, and Frankfurt's DAX gained 1.3%. The Paris Cac jumped 1.4%. In Asia, Japan's Nikkei lost 0.1%, and Hong Kong's Hang Seng was up 0.8%.

Breadth on the New York Stock Exchange was modestly bullish. Advancers beat decliners 5-to-2 on volume of 1.4 billion shares. On the Nasdaq, advancers trounced decliners 9-to-2 on volume of 2.15 billion shares.