Stocks Still Can’t Break Out

15-Apr-2011

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The market finishes where it started — again.
By Michael Goodman

Despite some peaks and valleys, stocks are almost exactly in the spot where they closed two days ago, as few assets outside of gold and silver have been able to show a sustainable move higher.

On Thursday, the Dow Jones Industrial Average rose 14 points to 12,285, the Nasdaq fell 1 points to 2760 and the S&P 500 hung flat at 1315.

The latest market session was the reverse of Wednesday’s high-open-fade-to-the-close, as stocks in the U.S. began lower in the wake of flat trading in Japan and a European selloff, only to churn higher to a flat finish.

Oil pushed itself back above $108 a barrel, and has now traded above $105 for about three weeks. Gold and silver also pushed higher in response to a weaker dollar and the strength in crude prices. Shares of mining and pipeline companies were among the top outperformers.

As is the way, airline stocks were hit hard by the move higher in oil, and the downtrend in the sector going back to November is very much intact. Delta Air Lines (NYSE:DAL) fell 2.7%, while U.S. Airways (NYSE:LLC) dropped 2.4%.

Even more broadly bearish was the downturn in financial stocks on Thursday. The SPDR Financial Select Sector (NYSE:XLF) exchange-traded fund fell 0.8%. JPMorgan Chase (NYSE:JPM) dropped for a third straight session — and by 2.8% on Thursday — as concerns about the company’s traditional banking business amid a sluggish housing recovery seem to have some stamina.

The XLF is now down 3.3% since April 6, and has underperformed the S&P 500′s loss in the past 5 days by about 1.5 percentage points. Which is the outlier?

The bullish view is that stocks are looking as if they’re putting in a floor after a weeklong selloff, and that oil prices — as long as they don’t move significantly higher — suggest confidence in global demand not dropping off a cliff.

On the other hand, bank stocks are definitely showing a reluctance that housing and consumer-related worries are behind us.

On the third hand, did you catch Google’s (NASDAQ:GOOG) earnings after the closing bell? The search giant’s stock slipped 4.5% in after-hours trading Thursday after the company missed (!) Wall Street’s earnings estimates despite revenue that beat expectations by jumping 29.1% from a year ago.

As alluded to in this space Wednesday, not too many earnings underperformances — especially by darling’s in the tech sector — are baked into the expectations of stock market optimists.

From where Friday’s market is now likely to open, a third straight flat finish might be a heroic showing.


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