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Market Update 070323
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4:20 pm : For a second straight day, stocks looked rather lethargic as investors again lacked significant data needed to more convincingly support a week of sizable gains.

For the week, the S&P 500 surged 3.5%, logging its best performance in four years, while the Nasdaq turned in a similar performance. However, their minimal gains Friday suggests the sustainability of such a rally, predicated largely on revised Fed language that didn't indicate any imminent rate cut no less, will come in question next week as the first quarter comes to a close and fund managers rebalance their portfolios.

The Dow also closed slightly higher, posting just enough of an advance to turn positive for the year and extend its winning streak to five days; but that was largely due to a 5.5% surge in General Motors (GM 31.99 +1.67) which accounted for 13 of the Dow's 19 point gain. Shareholders applauded news that GM will pay stock bonuses to top executives for the first time since 2003 while autos were also in focus following reports that Magna International (MGA 75.42 +0.41) teamed up with a private equity partner to pay between $4.6 bln and $4.7 bln for Chrysler Group (DCX 82.36 +4.76).

With the Fed recently saying in its policy directive that "the adjustment in the housing sector is ongoing," today's housing data at 10:00 ET was anticipated to set a more definitive tone. Initially, the bulls got what they were hoping for as existing home sales unexpectedly rising 3.9% in February to 6.69 mln, the fastest pace in three years, eased some of the overblown fears of a housing crisis leading to recession. However, the report also greatly reducing the rationale behind the Fed cutting rates anytime soon prompted a reversal in bonds that also took some steam out of equities.

Oil prices climbing back above $62/bbl didn't help matters much either. Fortunately for the bulls, oil closed off its best levels yet offered enough of an incentive for the Energy sector to provide some notable leadership. Crude for May delivery surged amid renewed geopolitical tensions after the British Ministry of Defense confirmed that 15 Naval personnel were seized by Iran. Such worries contributed to a cautionary tone going into the weekend. DJ30 +19.87 NASDAQ +4.44 SP500 +1.57 NASDAQ Dec/Adv/Vol 1431/1593/1.65 bln NYSE Dec/Adv/Vol 1368/1853/1.28 bln

3:30 pm : The Dow and S&P 500 are extending their reach to the upside going into the close, but gains are still modest at best. Sure, the Dow's winning streak remains intact, but a 32-point gain offers little to get overly excited about during what has been a rather quiet day of trading.

It is also worth noting that below average volume offers even less confidence about today's gains carrying over into next week as participation on behalf of buyers today has been limited. The NYSE did not surpass 1.0 bln shares until 20 minutes ago. DJ30 +32.05 NASDAQ +0.92 SP500 +3.01 NASDAQ Dec/Adv/Vol 1395/1601/1.35 bln NYSE Dec/Adv/Vol 1364/1828/1.06 bln

3:00 pm : Investors head into the final hour of trading trying to gain enough momentum to keep sellers from getting in the last word during what has been an impressive performance for the equity markets.

The Dow is up about 3.1% and the Nasdaq is up about 3.5%. The S&P 500, though, is up an even stronger 3.6% for its best weekly performance since March 2003, further underscoring the broad-based nature of this week's rally. DJ30 +27.64 NASDAQ +6.03 SP500 +2.01 NASDAQ Dec/Adv/Vol 1418/1553/1.26 bln NYSE Dec/Adv/Vol 1378/1782/990 mln

2:30 pm : Split industry leadership continues to dictate today's lackluster performance as equities still trade sideways for the most part. Of the five sectors trading higher, Energy (+0.5%) is back in the lead but that's also in sympathy with a safe-haven bid in oil prices going into the close of trading on the NYMEX.

Crude for May delivery look like they'll settle up 1.0% near $62.30/bbl as traders don't want to be short the commodity over the weekend barring a potential conflict with Iran; gasoline futures have hit $2 a gallon (+2.2%), their highest level since Aug 21, 2006. Industrials (+0.3%) now ranks second with the other three sectors trading higher merely struggling to hold onto gains. DJ30 +9.70 NASDAQ +2.53 SP500 +0.11 NASDAQ Dec/Adv/Vol 1485/1495/1.17 bln NYSE Dec/Adv/Vol 1435/1724/912 mln

2:00 pm : Directionless trading still plagues all three indices as stocks remain stuck a relatively narrow range. Mixed market internals further underscore the lack of certainty on both the bullish and bearish side of the aisle.

As reflected in the A/D line, advancers on the NYSE hold a 17-to-14 edge over decliners while advancing and declining issues on the Nasdaq are now evenly matched. The ratio of up to down volume also paints a neutral picture on both the Big Board and the Composite. DJ30 +16.75 NASDAQ -2.28 SP500 +1.30 NASDAQ Dec/Adv/Vol 1494/1453/1.08 bln NYSE Dec/Adv/Vol 1440/1696/836 mln

1:30 pm : The indices continue to languish around the unchanged mark as stocks fail to take advantage of oil slipping to its lowest levels of the session. Crude for May delivery has slipped back below $62/bbl and is retracing morning lows. While that provides some relief for consumers going into the weekend, Energy (+0.2%) subsequently relinquishing most of its intraday gains removes some notable leadership from one of the broader market's only areas of support throughout today's session. The sector was up 1.0% earlier.

Fortunately, oil's pullback is helping a transportation group already benefiting from strength in Railroads, today's best performing S&P industry group (+3.0%). CSX Corp. (CSX 41.28 +1.40) is surging 3.5% after its CEO said he expects a stronger second half in 2007. Union Pacific (UNP 103.88 +3.51) is up 3.5% amid renewed speculation of a takeover. The Industrials sector (+0.4%) now paces the way among the five sectors trading higher. DJ30 +15.35 DJTA +1.4% NASDAQ -3.00 SP500 +0.48 NASDAQ Dec/Adv/Vol 1506/1428/1.00 bln NYSE Dec/Adv/Vol 1364/1751/760 mln

1:00 pm : The market's latest attempts by the bulls to more aggressively argue that stocks remain undervalued at current levels have been met with some resistance. While the pullback on all three major indices is modest in scope, the lack of conviction on the part of buyers further underscores the market's cautious near-term approach in an environment where modest prospects for earnings growth limit the upside potential for the stock market.

As a reminder, forecasts for operating earnings on the S&P 500 in aggregate have been coming down over the past two months. Earnings estimates for the first quarter have drifted down from 8% two months ago, to 6% last month, to 5% or less currently. DJ30 +20.67 NASDAQ -1.58 SP500 +1.56 NASDAQ Dec/Adv/Vol 1418/1502/908 mln NYSE Dec/Adv/Vol 1293/1795/690 mln

12:30 pm : The market kicks off the afternoon session trading at improved levels; but the rebound has not been nearly enough to make a significant change in the standings. The bulk of recent buying activity has been centered on a turnaround in Technology, paced by strength in semiconductors and computer storage.

The latter, which ranks as today's fourth best performing S&P industry group (+2.1%), is getting a lift from a 3.6% surge in SanDisk (SNDK 45.08 +1.58) and an analyst upgrade on Network Appliance (NTAP 38.58 +0.93); both have helped the Nasdaq inch into positive territory. The sector is also getting some help from Motorola (MOT 17.90 +0.40), which is recouping some of yesterday's 6.6% sell-off following reports that billionaire investor Carl Icahn has increased his holdings in MOT to 2.7%. DJ30 +34.93 NASDAQ +1.33 SOX +1.3% SP500 +3.39 NASDAQ Dec/Adv/Vol 1372/1513/820 mln NYSE Dec/Adv/Vol 1235/1844/620 mln

12:00 pm : Given the scope of this week's rally and a lack of overwhelming data this morning to justify such sizable gains, it's not overly surprising to see stocks trading with little conviction midday.

With the Fed recently saying in its policy directive that "the adjustment in the housing sector is ongoing," today's existing home sales report at 10:00 ET was anticipated to set a more definitive tone. While an unexpected increase of 3.9% in February sales to an annual rate of 6.69 mln, up from 6.44 mln in January, alleviated some of the overblown fears of a housing crisis leading to recession, the report also greatly reduced the rationale for any Fed easing. That reality check, in turn, prompted a reversal in bonds and took some steam out of equities.

There have also been only a couple of earnings reports. Nike (NKE 106.82 -1.78) posted better than expected Q3 earnings but then issued soft gross margin guidance. Freddie Mac (FRE 62.82 +0.58) posted of $480 mln loss in Q4 but said it plans to buyback an additional $1 bln shares.

Throw in a 1.2% surge in oil prices, which are now back above $62/bbl, and Energy's gains can only provide so much leadership to offset weakness in more influential sectors like Health Care and Technology. Crude for May delivery is adding to yesterday's 3.5% rally amid renewed geopolitical tensions after the British Ministry of Defense confirmed that 15 Naval personnel were seized by Iran. Such worries are contributing to a cautionary tone going into the weekend. DJ30 +21.42 NASDAQ -1.20 SP500 +2.40 NASDAQ Dec/Adv/Vol 1405/1454/726 mln NYSE Dec/Adv/Vol 1288/1748/550 mln

11:30 am : More of the same for stocks as the blue-chip indices and Nasdaq continue to trade in opposing directions. Helping the Dow turn positive for the year, stay on pace for its best weekly performance since July 2006 and potentially log a complete week of gains has been General Motors (GM 31.43 +1.11), which is up 3.7%.

Shareholders are applauding news that GM will pay stock bonuses to top executives for the first time since 2003, which further reflects the ongoing success of GM's turnaround efforts. Autos have also been in focus after a KeyBanc Capital Markets analyst said Magna International (MGA 75.51 +0.50) has teamed up with a private equity partner to pay between $4.6 bln and $4.7 bln for Chrysler Group (DCX 81.40 +3.80).DJ30 +22.56 NASDAQ -0.60 SP500 +2.22 NASDAQ Dec/Adv/Vol 1355/1448/600 mln NYSE Dec/Adv/Vol 1246/1735/450 mln

11:00 am : The major averages still trade in split fashion as investors continue to reassess the true significance of today's housing data. A weakening Financials sector is stalling some of this morning's momentum while the absence of leadership from Health Care and Technology are also taking away from the fact that seven out of 10 sectors are now positive.

Tech is under modest selling pressure after a judge ruled that Qualcomm (QCOM 42.74 -0.61) withheld key information during its long-standing legal battle with Broadcom (BRCM 32.30 +0.19). Electronic Manufacturing Services (-3.4%), the day's worst performing S&P industry group following disappointing guidance from Jabil Circuit (JBL 22.50 -2.43), is also weighing on the sector.DJ30 +19.95 NASDAQ -0.55 SP500 +1.55 NASDAQ Dec/Adv/Vol 1339/1407/500 mln NYSE Dec/Adv/Vol 1281/1630/360 mln

10:30 am : Stocks spiked to morning highs within the last 30 minutes as investors received some reassurance that the housing market isn't rolling over. At the top of the hour, existing home sales unexpectedly rose 3.9% in February to an annual rate of 6.69 mln, up from 6.44 mln in January; economists were forecasting a 2.2% drop.

While the data keep home sales well above the recent bottom and ease some of the overblown fears of a housing crisis leading to recession, the report also greatly reduces the rationale for any Fed easing. That has been reflected in bonds, which have turned negative on the news, as well as stocks, which are now relinquishing much of what was just gained. As a reminder, the worst of the housing problem exists in the "new" home sales sector, not in sales of "existing" homes. New home sales, which will be out on Monday, run at close to a 1 mln annual rate, and are thus much lower than existing home sales. DJ30 +11.99 NASDAQ -1.27 SP500 +1.12 NASDAQ Dec/Adv/Vol 1181/1464/342 mln NYSE Dec/Adv/Vol 1055/1746/230 mln

10:00 am : The indices continue to vacillate around the unchanged mark as investors anxiously wait for clarity on the housing picture. From a sector standpoint, Energy is pacing the way higher; but its modest 0.4% gain also coming at the expense of surging oil prices is not acting as an offset to declines in seven of the S&P 500's 10 sectors.

Fortunately for the bulls, Utilities is today's worst performer; but a 0.3% pullback on one of the least influential sectors is also having a minimal impact on the broader market. DJ30 -2.16 NASDAQ -1.03 SP500 -0.39 NASDAQ Dec/Adv/Vol 1062/1386/150 mln NYSE Dec/Adv/Vol 1092/1398/64 mln

09:40 am : The market opens with little fanfare, but that's not all that surprising given the temptation to question the sustainability of this week's sizable market gains.

Oil prices climbing above $62/bbl this morning amid renewed geopolitical tensions are also stalling momentum from earlier in the week while investors await housing data to set a more definitive tone to today's action. Existing Home Sales for February will be out at the top of the hour. DJ30 -3.25 NASDAQ +0.17 SP500 -0.68 NASDAQ Vol 82 mln NYSE Vol 42 mln

09:15 am : S&P futures vs fair value: -0.8. Nasdaq futures vs fair value: -3.8.

09:00 am : S&P futures vs fair value: -0.5. Nasdaq futures vs fair value: -3.0. Sentiment continues to deteriorate heading into the opening bell as futures trade now signals a potentially lower start for stocks. Meanwhile, investors are sifting through commentary from Philadelphia Fed President Plosser; but since he's not a Voting Fed official and his prepared remarks did not touch on Fed policy, the market's focus has returned to geopolitical developments which are likely to keep equity traders sidelined going into the weekend. In fact, Treasuries have caught a modest safe-haven bid; but bond traders remain more fixated on housing data for signs of stabilization or further slowing amid lingering worries tied to subprime mortgage misfortunes.

08:30 am : S&P futures vs fair value: +0.4. Nasdaq futures vs fair value: -2.0. The S&P 500 and Nasdaq 100 futures have weakened since the last update, taking a bearish cue from a turnaround in oil prices amid renewed geopolitical tensions. Crude for May delivery was consolidating some of yesterday’s 3.5% surge but has since spiked higher and turned positive ($62.44/bbl +1.2%) after the British Ministry of Defense confirmed that 15 Naval personnel were seized by Iran.

08:00 am : S&P futures vs fair value: +1.2. Nasdaq futures vs fair value: +0.3. Early indications are pointing to a relatively sluggish start for stocks as investors still lack overwhelming data to justify the market's huge run-up so far this week. With no earnings reports of note, outside of Nike (NKE) following up better than expected Q3 results with soft gross margin guidance, and the Fed recently saying in its policy directive that "the adjustment in the housing sector is ongoing," investors may be waiting for today's Existing Home Sales (10:00 ET) report to set a more definitive tone.