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An Uneven Path Higher

By Joseph Lisanti Stocks had been in a tight trading range since breaking out to the upside just before the start of the war in Iraq. But some good corporate earnings reports helped the S&P 500 to close above the 900 level last week for the first time since mid-January. Because of profit taking late in the week, the index closed just below 900.

Through Apr. 25, about two-thirds of the companies in the S&P 500 had reported earnings for the most recent quarter. So far, the reports have painted a mixed picture. Some consumer staples companies, including makers of household products and personal care items, have posted better-than-expected gains. High oil prices helped energy exploration and production companies do the same.

Technology companies have reported varied results. It remains troubling that some tech companies still can't predict when their businesses will improve.

Although stocks fell the very day that Saddam Hussein's statue was pulled down in Baghdad, the stock market has been moving higher, albeit irregularly, ever since. In the 11 trading sessions following the defeat of Saddam Hussein, the S&P 500 rose six times and fell five. But the moves were, on average, greater as the market rose. The average gain in the rising sessions was 1.3% vs. an average decline of 0.8% on the days the index fell.

It is clear that the end of the shooting in Iraq did not produce a quick rise in stock prices that many, including us, expected. Nevertheless, the market appears to be attempting a slow, uneven climb.

Many problems, both domestic and international, remain. But consumer spending is strong, and surveys lately have shown a rebound in consumer confidence. Interest rates continue to hover near four-decade lows, fueling home buying and mortgage refinancing. Capital spending is still a question mark, but companies eventually will have to replace outmoded gear.

We continue to advise keeping 65% of investment assets in equities. Lisanti is editor of Standard & Poor's weekly investing newsletter, The Outlook

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