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Stocks Hold Strong Gains Amid Light Volume

Abby Schultz, JeeYeon Park
Thursday, 24 Mar 2011 | 3:58 PM ET

Stocks held strong gains in the final hours of trading Thursday as investors appeared to shrug off persistent global concerns and focus on growth prospects in the U.S. economy.

The Dow Jones Industrial Average rose more than 80 points a day after the blue-chip index gained 67 points amid light volume.

Among Dow components, Hewlett-Packard, Home Depot , and Wal-Mart led the gainers, while Bank of America and Cisco fell.

The S&P 500 rose above 1,300 at the open and has traded solidly above that critical level most of the session. The tech-heavy Nasdaq also gained. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to nearly 18.

Most key S&P sectors gained, led by consumer discretionary, technology and telecom.

The stock market has proven to be extremely resilient lately, rising persistently on light volume once investors shook off the shock of multiple disasters in Japan on March 11. Volume was light again Thursday, with only 700 million shares changing hands on the New York Stock Exchange floor in the final minutes of trading.

After dropping 6.4 percent through March 16 on the news in Japan, the S&P 500 had climbed back more than 4 percent as of Wednesday's close. Today, the broad market index has broken through its 50-day moving average to rise above 1,309.

Energy stocks have largely pushed the index higher as oil prices have surged to record levels and the nuclear disaster at Japan's Fukushima plant have raised concerns about the future of nuclear energy. Anadarko Petroleum is up 10.6 percent since March 16, while coal producer Massey has gained 10.9 percent.

The Federal Reserve said Thursday that it would begin holding quarterly press conferencesafter the Federal Open Market Committee's meeting minutes are released. The first announced session, after the policy-making committee meets on April 27, will be the first regularly scheduled briefing by a Fed chairman in the institution's history.

Unrest in the Middle East and Libya continued to support the price of oil, although prices slipped later in the session amid profit taking, and some concerns with weak durable goods orders in the U.S.

U.S. light sweet crude, fell to $105.60 a barrel, while London Brent crude fell slightly to just under $116 a barrel.

Gold prices retreated to close at $1,435 an ounce after hitting a record high of $1,447.40 earlier in the session. Silver also retreated slightly after hitting a 31-year high of $38.13.

Polish Your Portfolio: Gold vs. Silver
Insight on which metal is a better bet, with Joshua Brown, Fusion Analytics Investment Partners and Thomas Winmill, The Midas Funds.

And further adding to geopolitical worries, two large 7.0-magnitude earthquakes struck near north Thailand's borderwith Myanmar and Laos, according to the U.S. Geological Survey. There was no immediate word on any casualties or damage.

Financial stocks were among the laggards. Morgan Stanley traded flat to lower after Meredith Whitney Advisory Group cut its first quarter earnings estimate on the investment bank to 35 cents a share from 59 cents.

Bank of America fell for a second day after news the Fed didn't give the banking giant approval to raise its dividend, but Capital One traded slightly higher even after the Wall Street Journal reported the bank also didn't receive approval to raise its dividend. Also, S&P Equity Research cut the bank to "sell" from "hold."

In M&A news, Walgreen was up slightly after announcing it would buy online retailer drugstore.com , for about $29 million in cash. Drugstore.com skyrocketed more than 100 percent on the news.

On the earnings front, Best Buy shares declined even after the electronics retailer posted strong quarterly profitsthanks to a boost in its mobile business.

ConAgra gained despite reporting a lower quarterly profit due to rising commodity prices.

Red Hat led the tech sector higher, gaining more than 15 percent after reporting a 43 percent jump in quarterly results. In addition, Baird raised its rating on the firm to "outperform" from "neutral." Micron also jumped despite reporting an 80 percent drop in profits and deteriorating margins. In addition, at least three brokerages raised their price targets on Micron.

Oracle and Research In Motion were slated to report earnings after-the-bell Thursday.

Caterpillar rose after the company said it would invest $5 billion in expansion of its production capacity during its analyst meeting on Wednesday. In addition, Jefferies raised its price target on the firm to $125 from $120.

In Europe, Portugal’s Prime Minister Jose Socrates resigned on Wednesday after parliament rejected his government's latest austerity measures, designed to help Portugal avoid having to seek an international bailout. Many analysts believe a bailout is now inevitable.

Despite the negative news, stocks continued to move higher much of the week, although trading has been light. Only 545 million shares changed hands on the New York Stock Exchange floor in mid-afternoon trading.

One reason is while the news out of Portugal is worrisome, the possibility of the eurozone country needing a bailout has been discussed for several months.

"Although it looks horrible, there's not an investment professional who invests in the eurozone who hasn’t priced that into their thinking," said Phil Orlando, chief market strategist at Federated Investors.

The same is true of the events in Japan and the Middle East, which is why investors are more focused on the U.S. economy and its implications for the U.S. stock market, Orlando said. While the economic numbers this morning were mixed, more signs in the manufacturing and consumer sector are pointing to the economy's growing strength, he said.

Job growth, too, may soon turn the corner. The number of individuals filing initial claims for unemploymenthas been less than 400,000 in five of the past seven weeks, Orlando noted.

"That’s the level when economy is producing a robust number of jobs," he said, adding that the government's nonfarm payrolls figures will soon reflect that strength. "We will see a series of 200,000 to 300,000 positive nonfarm jobs gains a month until the middle of this year," he said.

Also in Europe, European leaders were meeting in Brussels Thursday, but were not expected to endorse a full package of measures to attack the sovereign debt crisis, despite the fact that they had been expected to do so for months.

"The key at the end of the day is whether Spain comes through this,” Larry Kantor, global head of research at Barclays Capital told CNBC. Kantor expected a resolution to the crisis, but not at this week’s summit.

European shares rose to a two-week closing high, boosted by strong results from retailers.

Moody's Investors Service downgraded debt ratings on 30 Spanish banks, mostly smaller and regional institutions. Moody's said the outlook for the banks remains weak.

On the U.S. economic front,durable goods in February fell 0.9 percent in February compared with a 3.6 percent rise in January, the Commerce Department said Thursday. Ex-transportation, durable goods fell 0.6 percent in February compared with a 3.0 percent drop in January.

Jobless claims, meanwhile, fell by 5,000 last week to 382,000, according to the Labor Department. The four-week moving average dropped to 385,250, the lowest level in more than two-and-a-half years, and the fourth week below 400,000. Economists surveyed by Reuters said claims would fall to 383,000 from 385,000, the level previously reported.

On Tap This Week:

THURSDAY: Money supply; after-the-bell earnings from Oracle, Research In Motion.
FRIDAY: USDA food prices outlook; GDP revision, corporate profits, consumer sentiment.

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