Stock Market News for August 14, 2009

Investors chose to brush aside a report showing a surprise drop in retail sales, sending stocks mildly higher Thursday as retailer Wal-Mart’s better-than-expected earnings and a positive debt auction helped markets hold on to Wednesday’s rally.  Trade was choppy earlier in the session as stocks looked for direction but some bargain hunting towards the end lifted the markets.  Surprising second quarter economic growth from French and German economies also lifted sentiments on the Street.

The Dow Jones industrial average added 37 points, or 0.4%, and closed at its highest point since November 4.  The broad S&P 500 index added 7 points, or 0.7%, and closed at its highest level since October 6.  The tech-heavy Nasdaq gained 10.63 points, or 0.5%, ending at its highest point since October 1.  On the New York Stock Exchange 776 million shares exchanged hands and advancing stocks outpaced those that fell two to one.  The Vix "fear factor" index, fell 2.9% to 24.71.

Treasury prices rose after an auction of $15 billion 30-year bonds met with strong demand.  The 30-year rose 1 20/32 in price and its yield declined to 4.432%; the 10-year was up 30/32 in price as its yield declined to 3.604%. This week the government issued a total of $75 billion of debt. 

Financials led the gainers yesterday on news that John Paulson’s hedge fund bought stakes in Bank of America (NYSE:BAC - Analyst Report).  Bank of America shares surged 6.7% to $17 and were the leading gainers on the DJIA.  Basic material shares rose 2.7%.  On the DJIA Alcoa (NYSE:AA - Analyst Report) shares gained 5.8%.  An increase in metal prices sent shares of Freeport McMoran (NYSE:FCX - Analyst Report) up 4.9% and Newmont Mining (NYSE:NEM - Analyst Report) 2.5%.  Ford (NYSE:F - Analyst Report) shares increased 2.6% on its announced plans to increase current quarter production by 100,000 vehicles, with additions to the fourth quarter as well.

Technology shares advanced 1%.  Barclay's (NYSE:BCS - Analyst Report) raised its price target on Apple (NASDAQ:APPL) shares to $208, citing its product pipeline. JP Morgan (NYSE:JPM - Analyst Report) raised its price targets for Dell (NASDAQ:DELL - Analyst Report) to $13 from $10 and Hewlett-Packard (NYSE:HPQ - Analyst Report) to $49.50 from $40.

Nevertheless, consumer spending, which accounts for a whopping 70% of the US economy, remains a concern.  Yesterday’s report which showed a surprise 0.1% fall in retail sales, versus estimates of a 0.8% growth, did raise some doubts on demand side growth assumptions from the consumer sector.  The drop indicated that the "cash for clunkers" program may have stolen from alternative purchases and perhaps from future purchases as well.

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