Stocks have seen some volatility since the Federal Reserve revealed the parameters of the government's stress tests of the largest financial institutions, although the major averages have managed to remain firmly in positive territory.
In an interview with RTT News, Craig Peckham, equity trading strategist with Jefferies & Company discussed the continuation of the rally based on what we're hearing out of corporate America.
Peckham explained why he worries the market is getting ahead of itself with the latest gains. He said that while this rally is definitely grounded in some good fundamental dynamics.the primary concern is that we end up being wrong about the timing of economic recovery.
In economic news, a Commerce Department report showed a modest decrease in new home sales in March, although the annual rate of new home sales came in well above economist estimates due to an upward revision to February sales.
The report showed that new home sales fell 0.6 percent to an annual rate of 356,000 in March from a revised February rate of 358,000. Economists had expected new home sales to remain unchanged compared to the 337,000 originally reported for the previous month.
Earlier, a separate report from the Commerce Department showed that durable goods orders fell 0.8 percent in March following a downwardly revised 2.1 percent increase in February. Economists had expected orders to fall 1.5 percent.
Meanwhile, in corporate news, Ford (F) posted first-quarter results that beat expectations, with the auto giant reported a narrower than expected loss.
The company reported an after-tax net loss of $0.75 per share, but analysts expected a loss per share of $1.23. While the loss continues to indicate weakness in the auto sector, the better-than-expected result shows that improvements are being made at Ford.
Meanwhile, Microsoft's (MSFT) third quarter earnings met expectations after excluding special charges. The software giant reported third quarter earnings of $0.33 per share, including two charges that reduced earnings by $0.06 per share. Analysts had expected Microsoft to earn $0.39 per share.
In other news, banks will be notified privately today regarding their performance in the stress tests conducted by federal regulators, but the results will not be made public until May 4th.
While the Federal Reserve revealed details of how it conducted stress tests, traders have largely shrugged off the news, citing a lack of detail.
In recent trading, the major averages have pulled back well off their highs for the session, although they currently remain firmly positive. The Dow is currently up 88.80 at 8,045.86, the Nasdaq is up 29.20 at 1,681.41 and the S&P 500 is up 9.39 at 861.31.
Despite the recent pullback, a majority of the Dow components remain in positive territory, helping to keep the blue chip index above the unchanged line.
Following the release of quarterly results that pleased investors, American Express (AXP) is turning in one of the Dow's best performances, posting a gain of 19.9 percent on the day. With the advance, the stock has risen to its highest level in over five months.
American Express reported first-quarter income from continuing operations attributable to common shareholders of $0.32 per share, down from $0.89 per share a year-ago. On average, analysts expected the company to report earnings of $0.12 per share.
Microsoft (MSFT), DuPont (DD), and Bank of America (BAC) are also showing noteworthy advances. While Microsoft is rising 8.6 percent, DuPont and Bank of America are up 4.8 percent, and 4.3 percent, respectively.
At the other end of the spectrum, Wal-Mart (WMT), Johnson & Johnson (JNJ) and IBM (IBM) are posting notable losses.
Housing stocks are also holding onto strong gains in mid-afternoon trading, benefiting from a positive reaction to the new home sales data. The Philadelphia Housing Index is up 5.9 percent, rising to its best intraday level in six months.
Gold, oil services, and steel stocks are also showing notable gains, with the Amex Gold Bugs Index up 6.3 percent, while the Philadelphia Oil Services Index and the Amex Steel Index post gains of 5.2 percent and 4.1 percent, respectively.
Meanwhile, brokerage and health insurance stocks are some of the only losers of the session, with the Amex Securities Broker/Dealer Index down 2.2 percent, while the Morgan Stanley Healthcare Payor Index is down 1.2 percent.
In overseas trading, stock markets across the Asia-Pacific regions closed mostly lower on Friday, with Japan's benchmark Nikkei 225 Index closing down 1.6. Hong Kong's Hang Seng Index bucked the downtrend, however, edging up 0.3 percent.
Meanwhile, the major European markets ended Friday's session near their highs of the day, with the U.K.'s FTSE 100 Index closing up 3.4 percent, while the French CAC 40 Index and the German DAX Index rose 3.1 percent and 3.0 percent, respectively.
In the bond market, treasuries are well off their lows of the day but remain below the unchanged line. Subsequently, the yield on the benchmark 10-year note is up 5.6 basis points at 2.983 percent.
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