Stocks ended mixed after a half-hearted rally in the blue chips fizzled towards the end of the session. The Nasdaq Composite was the only major index to spend the day in positive territory after some glimmers of hope for networking giant Cisco Systems (CSCO ) emerged.
Arthur Hogan, chief market analyst at Jefferies & Co. says much of the weakness in the Dow Jones Industrial Average was a result of selling pressure in Exxon Mobil (XOM ) shares on lower oil prices, and profit taking in IBM (IBM ) stock. The analyst believes the broader market is showing signs of strength, as investors are "more afraid to miss the rally than are worried about facing more downside risk."
Heading into the May 15 FOMC meeting, the analyst expects investors to scrutinize economic data closely in hopes of finding insight into Fed policy. "The camp that believes the Fed is going to ease again at the May 15th meeting is still well populated so I think that they will be watching economic data with a microscope, especially the employment numbers that come out on Friday." Hogan expects the jobs numbers to provide some a direction as to where the market is going to go. He believes that the market is at a juncture in time where good news about the economy is becoming bad news for Wall Street. "We're in an easing mode when we get positive economic news, which we do need desperately, but sometimes the market sells off a bit in anticipation of that being the end of the Fed easing environment."
Hogan expects the Fed to cut rates another 50 basis points, either at one meeting on May 15 or 25 basis points in each of the May and June meetings, regardless of how positive some of the economic data may be. However, he remains cautiously optimistic over the long run and sees some choppy trading ahead. "We'll have another violent pre-reporting season from corporate America in the second quarter," he says. "I think that the trend though will be higher and we've worked our way out of a bottom, but I just don't think it's going to be a V-shape on the way back up."
Among today's stocks in the news, Eastman Kodak (EK ) reported that it sees 5% to 7% annual revenue and EPS growth once the economic downturn ends.
The Dow Jones Industrial Average shed 23.10 points, or 0.21%, to 10906.87. The Nasdaq Composite index gained 52.31 points, or 2.41%, to close at 2220.55. Meanwhile, the broader S&P 500 rose 0.98 points, or 0.08%, to 1267.42.
Treasuries are higher. Bonds are likely to stay in a range ahead of key payroll data on Friday and there is little of importance for the market until then.
The Financial Times-Stock Exchange 100 index ended lower by 23.80 points, or 0.40% to 5904.20 even though the April CBI retail index rose to 32% from 30% and the construction index rose to 57.3 from 56.9. In Germany, the DAX Index closed lower by 65.50 points, or 1.05%, to 6199.01 following a report that the German manufacturing index fell to 49.3 in April from 51.1 in March. In France, the CAC 40 lost 67.12 points, or 1.19%, to 5572.91.
In Asian trading, Japan's Nikkei index lost 3.82 points (0.03%) to close at 14,421.64. In Hong Kong, the Hang Seng surged 428.20 points, or 3.20%, to close at 13814.24.
By Alan Hughes in New York