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Stocks Eke Out Gain as Techs Rise

Friday, 11 Jun 2010 | 4:00 PM ET

Stocks eked out a gain Friday after struggling all day as investor weighed a better-than-expected reading on consumer sentiment against a disappointing retail-sales report.

The Dow Jones Industrial Average rose about 40 points, or 0.4 percent, after gaining 273.28, or almost 3 percent in the prior session.

The S&P 500 and Nasdaq also gained with the tech-heavy Nasdaq up more than 2 percent. The CBOE volatility index, widely considered the best gauge of fear in the market, fell below 30.

Some experts attributed the selloff to investors taking cautious positions ahead of the weekend.

“Over the past 6 to 8 weeks, going into the weekend has been a dangerous prospect,” said Marc Pado, U.S. strategist at Cantor Fitzgerald & Co. “Things that have happened in Europe has come to light in the weekend and traders have learned that it’s better to get out of long positions before the weekend and reestablish them afterwards if nothing happens.”

Pado said investors should add to risk positions over the next few weeks ahead of the earnings season.

"Small, domestic technology stocks will be strong and I think that retail has a good chance for a solid bounce," he recommended.

Consumer sentiment jumped to 75.5in a mid-June reading, the highest since January 2008, according to the latest University of Michigan and Reuters survey. That's up from 73.6 at the end of May and better than the 74.5 expected.

The retail sector rebounded after the consumer sentiment reading.

Earlier, a government report showed retail sales fell 1.2 percent in May despite projections that they would increase 0.2 percent. It was the largest decline in eight months as consumers slashed spending on everything from cars to clothing. Building materials saw one of the biggest declines, falling 9.3 percent.

However, the decline was "very narrowly concentrated" and the report was "much more positive" than the headline figures suggest, Nomura economists wrote in a research note to clients.

"Overall recent retail sales reports show a cooling in consumer spending growth from Q1 but not outright retrenchment."

And business inventories rose 0.4 percent in April; economists had expected a 0.5-percent gain.

Oil prices slid under $75 a barrel amid renewed concernsabout the economic recovery in the world's largest energy consumer.

BP denied an earlier report from the UK times saying the firm is planning to defer their dividend payouts to investors. There's a rising backlash from the UKover the US's tough talk with the company which has slashed the company's market cap in half. An estimated 10 percent of pensions in the UK include the oil giant's stock.

BP shares continued to rise after gaining more than 12 percent in the previous session.

The Investment Outlook
Discussing what's next for stocks following disappointing retail numbers, with Ronald Sloan, Invesco and Tom Lydon, ETF Trends.

The dollar rose against the euroand gold rose above $1,220 an ounce as buyers took advantage of recent declines.

The head of investment banking at JPMorgan Chase said the company's second-quarter earnings performance could be affected by a reduction in client risk appetites.

Separately, JPMorgan and Morgan Stanley are expected to lead the undewriting rolefor the GM IPO.

Earlier this week, Rochdale analyst Dick Bove cut his price target and earnings forecaston JPMorgan, saying the brokerage is "facing challenges in its business model almost everywhere." Bove also cut his price targets on Bank of America and Goldman Sachs .

MasterCard shares fell after Susquehanna cut the credit card issuer's price target to $276 from $287. Rivals Visa and Capital One also traded lower.

Dell has set aside $100 million for a potential settlement with the SEC, which has been probing the company's accounting practices and relationship with chipmaker Intel .

Elsewhere in tech land, Research In Motion and Motorola have settled a patent dispute over mobile technology.

Though techs are the day's leaders, the sector is among the week's laggards followed by consumer staples and industrials. Materials, telecom and energy were the week's leaders as investors juggled risk against safety.

Dow component Caterpillar and Navistar are working out a $586 million truck and engine manufacturing deal with China's Anhui Jianghuai Automobile, a source told Reuters.

The health care sector rose after Barclays Capital raised its rating on the pharmaceuticals sector to "positive" from "neutral," citing upside to the revenue from new products offsetting any possible impact from patent expiration.

A couple of other upgrades in the pharma sector, including Bristol-Myers Squibb and Pfizer.

Meanwhile, a U.S. congressional committee investigating the recent recall of Johnson & Johnson's children's medicine said it is concerned about the manufacturer's cooperation, raising the prospect that new measures—such as issuing of subpoenas—could be invoked.

Wendy's/Arby's shares jumped after the fast-food chain said it was approached by an unnamed group interested in possibly acquiring the company.

In today's Fed speak, Philadelphia Fed President Charles Plosser said the U.S. central bank should start selling mortgage-related assets "sooner rather than later" to avoid sowing the seeds of future inflation.

Coming Up Next Week:

MONDAY: Fed's Bullard speaks; SEC's Schapiro speaks; BoJ monetary policy meeting; Box office futures decision expected
TUESDAY: Fed's Bullard speaks; Empire State survey; import & export prices; credit card default rates expected; E3 video game conf.; Earnings from Best Buy
WEDNESDAY: Weekly mortgage apps; PPI; housing starts; industrial production; weekly oil inventories; Fed's Plosser speaks; Disney insider trader hearing; China trade hearing; Earnings from FedEx
THURSDAY: CPI; weekly jobless claims; current accounts; leading indicators; Philadelphia Fed survey; BP CEO testifies
FRIDAY: Quadruple witching; S&P indexes rebalanced

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