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Thursday, April 05, 2007

Microsoft and Altria help Dow to register modest gains


While jobs survey and factory orders come out weaker than expected, Microsoft and Altria give the required boost to the market

US Market eked out modest gains on Wednesday after the indices were a bit hit after a slew of weaker than expected economic reports. ISM Services unexpectedly fell to lowest level since April 2003 and smaller than expected rise in factory orders further set weak pace for 2007 manufacturing activity. But the news that made headlines today was Iran-UK relations where Iran President announced that all 15 Britons were to be set free. The news improved overall sentiment and pushed oil prices lower. Dow and Nasdaq poised to close higher for a fifth straight day.

16 out of 30 stocks closed higher today. For the day (4 April, Wednesday) the Dow Jones Industrial Average closed higher by 19.75 points at 12530.05, Nasdaq higher by 8.36 points at 2458.69 and S&P 500 higher by 1.6 points at 1439.37. Altria, Home Depot, Microsoft and Honeywell were the main Dow winners. GM and AT&T were the biggest Dow laggards. With today’s gain, Dow is 0.5% higher for the year. On a sectoral basis, Telecom and Utilities were the day's biggest laggards

Microsoft was responsible for 5 points of the Dow's gain. The software giant was up 2.3% to $28.50 due to boost in third-quarter profit estimates from analysts at Citigroup. Higher demand for Vistas was the major reason behind this upgrade. An analyst upgrade on Semiconductor Equipment, the day's seventh best performing S&P industry group, provided additional sector support. Cigarette giant Altria generated 6 points of the blue-chip index's gain with a 1.1% gain to $70.44.

On the earnings front, Best Buy today reported fiscal fourth-quarter earnings of $1.55 per share, 3 cents ahead of expectations. But the stock was down 2.5% to $47.89 as Wall Street worried about the guidance issued by the company. Rival Circuit City reported a fiscal-fourth-quarter loss of 7 cents per share, down from a profit of 81 cents per share a year ago, blaming discounts the company had made during the holiday shopping season. Circuit City shares were down 0.4% to $18.21.

Good housing erases subprime worries for the moment, chain store sales data boosts Retailers

The market received an early boost from stumbling oil prices after Iran said it will release 15 British naval personnel it had captured in Gulf waters. Iran is the world's fourth largest producer of crude oil. Though market opened in a split mode with Dow in the red, the indices improved within half an hour to inch the Dow and S&P 500 into positive territory. Of the four sectors trading higher, Technology was pacing the way.

At 10.30ET, some economic data came out and ISM Services unexpectedly fell to 52.4 in March, the lowest reading since April 2003, while employment slumped to just above growth at 50.8. The prices paid component climbed to 63.3 from 53.8 a month earlier. Split industry leadership continues to dictate this morning's market action, with strength in Tech, Health Care and Staples providing the bulk of support.

GM, the worst performer on the Dow, lost 1.4% after DaimlerChrysler said it's in talks with "interested parties regarding future options" for its unit Chrysler division. AT&T fell 1.3% amid reports that it's acquiring a stake in the parent company of Italian carrier Telecom Italia SpA for roughly $1.74 billion.

Meanwhile, in a testimony before mortgage bankers in Autin, Texas, Dallas Fed President Fisher said that he did not discuss the outlook for interest rates or inflation in his prepared remarks. Fisher did say, however, that the economy is "strong enough to weather the storm" and that subprime problems may be "blessing in disguise.

Crude-oil futures for light sweet crude for May delivery closed at $64.38/barrel (lower by $0.26/barrel or 0.4%) on the New York Mercantile Exchange. Crude prices fell today for the second consecutive day after tensions between Iran and UK eased to a large extent. But crude prices pared losses today after an Energy Department report showed that U.S. gasoline supplies plunged for an eighth week. Prices are down 2.8% from a year ago.

Trading volumes showed 1.4 billion shares exchanging hands on the New York Stock Exchange and 1.7 billion on the Nasdaq stock market. Advancing issues outpaced decliners by 17 to 14 on the NYSE, while decliners outpaced gainers by 15 to 14 on the Nasdaq.

Tomorrow, weekly initial jobless claims data and March Nonfarm Payrolls data will be released before market opens. Trading will be closed Friday in observance of the Good Friday holiday.