On Friday, stocks advanced again despite an employment report that clearly spelled recession. Analysts had expected the worst from the report and they got it, as the unemployment rate in March climbed to 8.5%, the highest in 25 years.
But instead of unemployment, the market’s focus was on technology after Research In Motion (RIMM) announced Q4 revenues and earnings that exceeded expectations. RIMM rose more than 20% and was up better than 32% for the week. Three brokers removed sell ratings on the stock as analysts were impressed by the company’s ability to reduce costs and maintain sales during a period of economic recession.
Along with RIMM, other technology stocks advanced, and the Nasdaq (NASD), with its heavy emphasis on tech stocks, led the other indices.
At the close the Dow Jones Industrial Average (DJI) had gained 40 points, finishing at 8,018. The S&P 500 (SPX) was up eight points at 843, and the Nasdaq (NASD) gained 19 points to close at 1,622.
On the New York Stock Exchange, 1.5 billion shares traded with advancers over decliners by more than 2-to-1. The Nasdaq traded 721 million shares and advancers there were ahead by 8-to-5.
The markets extended their gains for the fourth-consecutive week with the Dow up 3.1%, the S&P 500 up 3.3%, and the Nasdaq ahead by 5%. Of the major indices, the Nasdaq is the only one ahead for the year, up 2.8%, while the Dow is down 8.6% and the S&P 500 is off 6.7%.
On Friday, the May crude oil contract fell 13 cents, closing at $52.51 a barrel, as massive job losses cut demand. But the Amex Energy SPDR (XLE) rose 88 cents to $46.02 and is challenging the March 23 high of $46.58 with a strong buy signal from the stochastic.
The April gold contract fell $11.80, to end at $895.60 an ounce, and the PHLX Gold/Silver Index (XAU) fell $6.85, closing at $127.56.
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What the Markets Are Saying
With the best four-week performance since 1938 (with the markets up more than 23%) behind us, many analysts are wondering whether or not that sort of performance can be maintained.
This weekend, Drew Kanaly of Kanaly Trust said he was “highly skeptical” that the rally could run anymore than a couple more weeks and attributed it to extreme oversold readings following Treasury Secretary Tim Geithner’s “ill-received speech of Feb. 10.”
And Mark Arbeter of Standard & Poor’s agreed with him. But Mark is still looking for the S&P 500 (SPX) to run to “875 to 890 before a major correction sets in.”
Sean Brodrick of UncommonWidonDaily.com is sticking with gold, silver, and the Market Vectors Gold Miners ETF (GDX). Sean said he also likes the ProShares Ultra-Short S&P 500 (SDS) as a way to play the short side of the market and I’ve regularly included the chart of the SDS as a favorite. He also points to volume as the key trigger to the next decline saying, “Keep an eye on volume. If volume starts to fall off while the major indices keep rising, that could be a sign the rally is about to end.”
All agree that there is a lot of anxiety among portfolio managers and analysts regarding the next round of earnings. Drew Kanaly puts it this way, “Finally, with the end of the first quarter of 2008 fast approaching, some portfolio managers may have experienced ‘performance anxiety’ — buying stocks so as not to miss the rally.”
And our own Michael Shulman of ChangeWave said, “The rallies will end, company profits will be anemic, the market will wake up, and the headwinds against short positions will subside. Be ready when they do.”
I would add that the recent rally in technology stocks could continue past Easter. But a run in a volatile sector has been a characteristic of the final phase of most bear-market rallies. Traders can profit from fast trading in the sector, but the chances of a market reversal are very high, thus most investors should use the rally by as an opportunity to lighten up on their losers.
Today’s Trading Landscape
Earnings to be reported include: Apogee Enterprises (APOG), Immucor (BLUD) and Kayne Anderson Energy Development Co. (KED).
There are no major economic reports due today.
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