It almost looked like old times Thursday as the financial and technology stocks led a rally, though it began on shaky ground. The market opened lower as investors tried to cope with higher-than-expected jobless claims and an attack by the administration on credit-card companies.
But support by underwriters of recent offerings buoyed the financials, and Apple (AAPL) and Research In Motion (RIMM) had a strong day. Multiline insurers led the financial gains as they recovered from earlier rating problems, and Moody’s assisted the banks by putting Bank of America (BAC) on review for a possible rating upgrade.
The Wall Street Journal reported that Standard & Poor’s notes that “460 companies in the S&P 500 have now reported quarterly results, with earnings down 39% in the quarter and sales off 18%. While it’s certainly a marked improvement from the fourth quarter, when the index’s constituents posted the first quarterly loss in index history, such a decline is still alarming.”
Before the opening, it was announced that initial jobless claims increased 32,000 to 637,000 last week. The total number of unemployed climbed to a record 6.56 million.
At the close, the Dow Jones Industrial Average (DJI) was up 46 points to 8,331, the S&P 500 (SPX) gained nine points, closing at 893, and the Nasdaq (NASD) rose 25 points to 1,689.
The NYSE traded 1.5 billion shares with advancers ahead of decliners by 5-to-2. On the Nasdaq advancers led decliners by 2-to-1 on volume of 715 million shares.
The June crude oil contract rose 60 cents to $58.62 a barrel, and the Amex Energy SPDR (XLE) rose 14 cents to $49.05.
Gold for June delivery rose $2.50 to $928.40 an ounce, and the PHLX Gold/Silver Index (XAU) closed at $49.05, up 14 cents.
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What the Markets Are Saying
Yesterday’s mixed close did little to solve the market’s current dilemma, which is the failure to break through the double top at S&P 500 (SPX) 944 to 930. And while the intraday low of the Dow (DJI) and the S&P 500, as well as the NYSE Composite (NYA), held almost exactly on the 20-day moving average, volume contracted on all exchanges.
Sentiment indicators, which prior to last week were neutral, are turning negative. The American Association of Individual Investors (AAII) weekly sentiment survey on Wednesday showed that the public is bullish for the second consecutive week while letter writers, too, are bullish. Further, insider buying has contracted for the third consecutive week.
Today is May options expiration, so we should expect virtually anything to happen as traders cover their positions. But despite the possible volatility, try to focus on yesterday’s intraday low of Dow (DJI) 8,273.90 and S&P (SPX) 882.52, since a close below those numbers would penetrate the 20-day moving average and set the stage for more selling.
Today’s Trading Landscape
Earnings to be reported include: Abercrombie & Fitch Co, Anglogold Ashanti Ltd, Aspen Technology, Astea Int’l, Baldwin Technology, Chaparral Energy, Companhia de Saneamiento Basico, Cycle Country Accessories, Enterra Energy Trust, Fuqi Int’l, Fusion Telecomm Int’l, Gushan Environmental Energy Ltd, JCPenney, Jinpan, Multi-Color Corp, Nexxus Lighting, Palatin Technologies, Panasonic Corp, Pharmathene, Sinovac Biotech Ltd, Spire, Teekay Corp, and Teekay Tankers Ltd.
In terms of economic reports, the April Consumer Price Index (the consensus expects 0%), March Consumer Price Index excluding food and energy (the consensus expects 0.2%), April Empire State Fed Manufacturing Survey (the consensus expects negative 10), February Treasury International Capital, March Industrial Production (the consensus expects negative 0.6%), March Capacity Utilization (the consensus expects 69%) and the Mid-May Reuters/Univ Michigan Sentiment Index (the consensus expects 67) are all due today.
