Thursday Wrap - Dow +0.25%, S&P +0.39%, NQ +0.39%

by: Roy Mehta

Despite a horrible housing number, stocks managed to finish mostly positive Thursday. The Dow Jones Industrial Average rose 34.79 points (+0.25%), Standard & Poor's 500 index increased 5.96 points (+0.39%), and the Nasdaq finished up 10.56 (0.39%). Volume was not significant at 1.18 billion shares, and advancers beat decliners by a ratio of about 2:1.

There was a flurry of economic data reported Thursday. The final 2nd quarter GDP number came in revised down slightly to 3.8%, still a solid quarter, but below expectations. The Labor Department announced jobless claims actually dropped by 15,000 to 298,000; economists expected the number to rise 5,000 to 320,000 (full story). The market barely had any time to rally off thatnews before it was hit with by another housing bombshell. New-home sales dropped a very disappointing 8.3% (economists expected only a 5.2% drop), reconfirming that this housing market is not close to a bottom(full story). The U.S. 10-year Treasury note ran up 13/32 in price, now yielding 4.57%.

The materials (+1.0%), energy (+0.9%), and financial (+0.8%) sectors had nice runs, while utilities (-0.7%) and consumer discretionary (-0.1%) were the only sectors to not finish in positive territory. Sallie Mae (+9.1%) jumped on investors' hope that the company will renegotiate its $25 billion buyout deal with J.C. Flowers(full story). Bear Stearns (-2.0%) fell back after a CNBC reporter said that Bear Stearns was not in any talks with outside investors to sell a stake in the company. KB Home (+2.6%) had a solid day despite reporting a loss in the 3rd quarter (full story). Finally, Starbucks (-2.6%) was lowered to a sell rating at Bank of America. Crude rallied up $2.58 to $82.88/barrel.

Friday's economic news includes Personal Income and Consumption (8:30 AM), National Association of Purchasing Management - Chicago Index (9:45 AM), Constructions Spending (10:00 AM), and Consumer Sentiment (10:00 AM). The major indexes are right near major resistances, as they are trading close to record levels. If volume is as light tomorrow as it has been for the last couple days, do not expect indexes to rally through those record levels for new highs.

Sources: Yahoo,
Commentary: Wider Losses and Dim Outlook at Rite AidShort Thesis on Starbucks Playing Out
Stocks/ETFs to watch: BSC, SBUX, SLM, KBH
Unrelated: Funny Article: Chuck Norris's Tears Might Solve Credit Crunch: Mark Gilbert

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