Traders-Blog.com

Stocks ended higher today to finish a mostly flat week, as investors preferred to tread cautiously ahead of an upcoming Federal Reserve meeting on interest rates. A soft housing report led some to believe the Fed would bring an end to its rate hiking campaign soon, but gains were modest as some investors worried about slowing economic growth.

Today, the Dow Jones Industrial Average rose 9.68 points to 11,279.97, the broader Standard and Poor’s 500 Index was up 1.28 points at 1,302.95, and the Nasdaq Composite Index closed up 12.67 points at 2,312.82. For the week, the Dow closed flat, the S&P dipped 0.3% and the tech-rich Nasdaq gained 0.3%.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by 19 to 12 on volume of 1.4 billion shares. On the Nasdaq, advancers topped decliners by 19 to 10 as 1.9 billion shares exchanged hands.

Investors are particularly sensitive ahead of next week’s Federal Reserve policy meeting, at which the central bank is expected to boost its key short-term interest rate to 4.75%. The market is likely to see choppy trading ahead of the Tuesday meeting. Investors however, are not worried about the quarter-percentage point increase, but are waiting to see if the commentary will point to one, two or more interest-rate increases.

Stocks today received a boost after a bigger-than-expected decline in new homes sales in February. This report offered a sharply contrasting view to Thursday existing-home sales data. New-home sales slumped 10.5% to 1.08 million units in February, their lowest level since May 2003, against the expected 1.21 million. This report saw bond prices rally, sending yields lower. However, investors fear that strong data will see the Fed pursuing its course of higher interest rates as it attempts to slow the pace of economic growth and keep inflation at bay.

Personal bankruptcies skyrocketed a record 30% in 2005 as debtors rushed to file petitions. This is in response to the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), which went into effect on Oct. 17, 2005. Bankruptcies filed in the federal courts totaled close to 2.1 million in 2005, up from 1.6 million petitions filed in 2004. This is the largest number of bankruptcy petitions ever filed in any 12-month period in the history of the federal courts.

Shares of Google Inc. surged 7% to $365.80 after Standard & Poor’s said it would add the leader in Internet search to its benchmark S&P 500 Index at the close of trading March 31. The decision puts Google on the shopping list of hundreds of mutual-fund managers who run portfolios that track components of the S&P 500. Google will replace Burlington Resources that closed up $0.52 to $90.80, which is being bought by ConocoPhilips which closed up $0.60 to $61.72.

Lucent Technologies jumped up $0.24 to $3.06, on news that it is in advanced discussions with French telecom gear maker Alcatel to form a combined company with a market cap of nearly $34 billion. Stock of Alcatel closed up $0.32 to $15.77. This could signal the start of a new wave of consolidation in the telecommunications-equipment industry. The merger would give Alcatel, Europe’s second-largest telecom-gear maker, better access to U.S. telecom operators.

Shares in Palm Inc. rose as much as 6.5% after the company posted forecast-beating quarterly results on the back of strong demand for its Treo handheld communications devices. Palm also offered a profit outlook ahead of Wall Street estimates.

Stock of Cephalon tumbled $9.67 to $63.64, after a FDA panel recommended against approval of the company’s Sparlon, attention-deficit disorder drug, for treatment of ADHD in children and teens over safety concerns. Further, J.P. Morgan downgraded the drug company to neutral from overweight, as the approval is likely to be delayed.

Crude-oil futures ended higher, finding support from data showing the first drawdown in U.S. supplies in six weeks, and amid continued concerns about supplies from Nigeria, Iran and Iraq. This extended Thursday’s $2 jump with the crude delivery for May rising 35 cents at $64.26 a barrel on the New York Mercantile Exchange.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter