Traders-Blog.com

Stocks rose for a fifth straight day with the Nasdaq logging its biggest weekly point gain in more than four years, extending a rally powered by tamer than expected inflation data that lifted hopes the Federal Reserve has stopped raising interest rates.

Today, the Dow Jones industrial average closed up 46.51 or 0.4% to 11,381.47, the broader Standard & Poor’s 500 closed up 4.82 or 0.4% to 1,302.30, and the Nasdaq composite closed up 6.34 or 0.3% to 2,163.95. The Nasdaq ended the week 5.5%, it’s best performance since the week ending May 30, 2003. The Dow finished the week 2.6%, while the S&P gained 2.8%.

Market breadth was positive. On the New York Stock Exchange, winners beat losers 18 to 13 on volume of 1.34 billion shares. On the Nasdaq, advancers edged out decliners 15 to 13 on volume of 1.72 billion shares.

The major gauges have rallied this week on upbeat earnings from Hewlett-Packard and others, falling oil prices following a cease-fire in the Israel-Hezbollah war, and relief about the Federal Reserve. Next week will be light on economic news, with a report on existing home sales, durable orders and new home sales. Investors also took in comments from President Bush, who said that the 2006 budget deficit would be less than expected.

U.S. consumer sentiment sank in early August with the UMich consumer sentiment index dropping to 78.7 from 84.7 in July. Economists were expecting it to slide to 83.6. Inflation fears spiked, with consumers expecting prices to rise 4.2% over the next 12 months. This could be a red flag for the Feds.

Shares of Microsoft Corp. shot up 4.4% to $25.79 after it said it expects to spend about $3.8 billion buying back 155 million shares of its common stock at a price of $24.75 a share. The company also said the authorization for its ongoing share repurchase program has been boosted by $16.2 billion, to $36.2 billion and it will buy through 2011.

Stock of Dell fell 2.8% to $21.64 after the company reported a second-quarter profit that fell almost 50% from a year ago. The company also reported quarterly revenue that rose from a year earlier and modestly surpassed analysts’ expectations. However, profits have been substantially lower than a year ago due to increased competition from rival Hewlett-Packard. It reported sales of $14.1 billion, and earnings of $502 million. Additionally, it also disclosed that it has been under an informal investigation by the SEC for the past year.

In comparison, stock of Hewlett-Packard Co. rose 72 cents or 2% to $35.15 2%, after the company reported a fiscal third-quarter profit surge and issued an earning forecast for the current quarter that topped Wall Street expectations. The quarterly net income rose by nearly $1 billion from a year earlier, and sales rose just over 5%. It also said it plans to buy back $6 billion worth of H-P stock.

Ford Motor Co. saw its stock slide 2.1% or $0.17 to $8 after deciding to reduce its North American auto production in an effort to lower the supply of several models, ease pressure on sales incentives and lower dealer inventory costs. The fourth-quarter production is being cut by 21%, or 168,000 units, from year-earlier levels. The company said the new production plan will result in downtime at more than 10 assembly plants through the end of 2006

Shares of Gap closed down 3.8% to $16.65 after the apparel giant pared its full-year profit view in the wake of a second-quarter profit that tumbled 53%. The company has expressed disappointment with consumers’ first takes on new apparel lines and accessories at Gap, Old Navy and Banana Republic outlets.

U.S. light crude oil for September delivery added $1.08 to settle at $71.14 a barrel on the New York Mercantile Exchange.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter
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