Stocks got off to a great start today thanks to a better-than-expected leading indicators reading. The leading index increased 0.1%, better than the flat reading analysts were expecting. I wouldn’t read too much into this piece of data, though, because it is pretty much a compilation of previously announced data. For some reason, CNBC kept highlighting it and said stocks were trading higher because of it.
The main reason stocks were higher in the morning was upgrades to technology stocks. Amazon.com was added to Goldman Sachs’ “conviction buy” list and had its price target increased to $98. AMZN was up about 10% midday. Goldman also upgraded the entire chip sector. Texas Instruments was upgraded to “buy” from “hold” at Citigroup and it was also added to Citi’s top picks list. Merrill Lynch also named technology as its top sector. All the tech names got a big boost from this news, but don’t chase these names. The NASDAQ has had a huge run up lately and these big banks are just a little late to the game. The easy money has already been made.
At about 12:30 pm, the market began to sell-off after the SanDisk CEO said sales were “soft” last month. Shares of SanDisk finished the day down 7.5%. Technology stocks went from market leader to market laggard. The CEO blamed rising gas prices as the reason why consumers have tightened their budgets. This news caused a large sell-off that caused stocks to finish mixed. The major indices were up about 1% midday.
Financials were also weak on the day after Citigroup cut earnings estimates at Goldman Sachs, Morgan Stanley, and Lehman Brothers.
Crude oil was once again in the news. OPEC President Chakib Khelil said “there is no shortage (of supply).” Also,
The Microsoft-Yahoo deal was back in the news. Microsoft proposed a new deal that would not involve buying Yahoo outright. Instead, Yahoo would just carry search ads from Microsoft.
In other news:
- Lowe’s reported earnings that beat analysts’ expectations, but the company offered very cautious guidance.
- Union Pacific was upgraded to “buy” from “hold.” This upgrade caused the transports to rally and hit a new all-time high.
- Take a look at Solar Fun. This stock has been up 50% the last few trading days.
- The Senate announced a $300B housing bill that will be sponsored by Fannie Mae and Freddie Mac to help troubled home owners.
Talk on the street:
- Why are the transports rallying to record highs with crude oil approaching $130 per barrel? Usually, the transports are a leading indicator for the economy and with them rallying to record prices is the economy in better shape than some think? Railroads are moving this index higher because there is high demand to ship commodities across the country.
- Is Cisco going to buy EMC?
- The economy is ready to rebound. The recent Fed rate cuts will soon be felt by big businesses and the tax rebates will stimulate consumer spending. Too many people are bearish right now and the market continues to rally. Just wait until these bears turn into bulls. Then the market will really take off higher.
DJIA 13,028.16 +41.36 (+0.32%)
Nasdaq 2,516.09 -12.76 (-0.50%)
S&P 500 1,426.63 +1.28 (+0.09%)
NYSE Volume 3,718,190,000
2-Yr Bond 2.42% -0.05
10-Yr Bond 3.83% -0.02
30-Yr Bond 4.56% -0.02
Crude Oil (June) 127.05 +0.76
Nat Gas (June) 10.954 -0.140
Gold (June) 905.80 +5.90
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