Stocks rose Thursday after mostly falling for three days as traders scooped up beaten-down financial and retail stocks. The buying was subdued after a worse-than-expected weekly unemployment report added to concerns that the economic recovery might not come as quickly as hoped. The advance came as the market grappled with another reminder of the strained job market. The Labor Department’s weekly data showed more workers filing for unemployment benefits. New claims jumped to 637,000, above what economists had forecast. Some traders had been expecting an increase in weekly unemployment claims because of expected shutdowns among the nation’s automakers. The Dow rose 46.43, or 0.6 %, to 8,331.32. The S&P 500 index rose 9.15, or 1 %, to 893.07, while the Nasdaq rose 25.02, or 1.5 %, to 1,689.21.

Morning Outlook

Stocks soared forward overnight in Asia where investors were encouraged by data showing Japanese machinery orders in March fell less than expected. Japan’s Nikkei 225 stock average gained 171.29 points, or 1.9 %, to 9,265.02, and Hong Kong’s Hang Seng added 249.01, or 1.5 %, to 16,790.70.
The economy of the 16 countries that use the euro shrank by a massive 2.5 % in the first quarter; far more than the consensus expectation of 2%. This is the 4th consecutive quarter the euro zone has seen a decline in GDP.

Germany’s economy shrank 3.8 % as demand for its high value goods, such as cars and machinery diminished. Germany’s DAX was up 0.4 % at 4,755.11. French GDP declined by 1.2 %, however the CAC 40 rose 0.8 % at 3,182.35.

Investors are awaiting premarket data which are expected to show that industrial production fell in April but at the slowest pace in six months. However Wall Street retreated heading into the last trading day of the week as Dow Jones industrial average futures fell 37, or 0.5 %, to 8,249. Standard & Poor’s 500 index futures fell 5.80, or 0.7 %, to 883.70, while Nasdaq 100 index futures fell 8.75, or 0.7 %, to 1,345.

On the Corporate Front

According to a bankruptcy court filing, Chrysler LLC wants to eliminate roughly a quarter of its 3,200 U.S. dealerships by early next month. General Motors Corp. says it is notifying 1,100 dealers that it will not renew their franchise agreements when they expire at the end of September of 2010. About 187,000 jobs could be lost from the closing of GM and Chrysler dealerships.

The Treasury Department has agreed to extend billions in taxpayer funds to six major life insurers to sure up their capital positions. Although the amount of TARP money received by each is not known, The Hartford Financial Services Group, Lincoln Financial Group, Allstate Corp., Ameriprise Financial Inc., Principal Financial Group Inc. and Prudential Financial Inc. are insurers who received preliminary investment approval.

Economic Calendar

8:30 AM
Consumer Price Index (CPI): Measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation. The consensus is for no change month over month from March to April, with a 0.1% gain excluding food and energy.

9:15 AM
Industrial Production: The index of industrial production measures the physical output of the nation’s factories, mines and utilities. The consensus is for a production decline of 0.6% for the month of April as the manufacturing component continues to lag; this would be the 6th straight drop, after declining 1.5% in March.

9:55 AM
Consumer Sentiment: Consumer sentiment is directly related to the strength of consumer spending, by questioning 500 households each month on their financial conditions and attitudes about the economy. The consensus reading for May is 67, up from April’s reading of 65.1; however economic optimism may dissipate as the job market continues to decline.

Markets turned positive again on Tuesday on light volume after a surprise surge in housing starts; led by multifamily construction, new starts jumped 22.2%. At the closing bell, the Dow rose 178.73, or 2.5 %, to 7,395.70. The Standard & Poor’s 500 index rose 24.23, or 3.2 %, to 778.12, while the Nasdaq composite index rose 58.09, or 4.1 %, to 1,462.11. The Russell 2000 index of smaller companies rose 17.23, or 4.5 %, to 403.59. Financials led the broader S&P index, with a 6.6% gain in the sector. The volume of shares traded doesn’t show the greatest of investor conviction, but buying is buying and a rally is a rally!

Morning Outlook

Stocks advanced overseas following Wall Street’s rally. Japan’s Nikkei 225 stock average added 23.04 points, or 0.3 %, to 7,972.17 while the Japanese central bank said it was increasing its purchase of government bonds to keep ample cash in the monetary system. Hong Kong’s Hang Seng index gained 239.08 points, or 1.9 %, to 13,091.03. South Korea’s Kospi rose 0.5 % to 1,169.95.In Europe. Britain’s FTSE 100 dipped 0.1 %, while Germany’s DAX rose 1.2 % and France’s CAC 40 advanced 0.8 %.

Wall Street looks to open slightly lower on Wednesday. Dow Jones industrial average futures fell 35, or 0.47 %, to 7,372. Standard & Poor’s 500 index futures declined 3.40, or 0.44 %, to 771.90, while Nasdaq 100 index futures fell 0.25, or 0.02 %, to 1,190.00.

On the Corporate Front

General Mills’ (GIS) fiscal third-quarter profit dropped 33 % as the stronger dollar hurt international sales. Sales rose 4% to $3.54 billion. Earnings fell to $288.9 million, or 85 cents per share, compared with $430.1 million, or $1.23 per share, a year ago. Analysts had expected a profit of 88 cents per share. The company upped its 2009 outlook to a range of $3.87 to $3.89 per share; below analysts’ expectations of $3.94 per share.

Economic Calendar

8:30 AM
Consumer Price Index (CPI): Measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation. The consensus for February is for an increase of 30 basis points. However, excluding food and energy, the forecast is for an increase of 20 basis points. These figures are unchanged from January’s report.

10:35 AM
EIA Petroleum Status Report: The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S. As oil prices have ticked up as OPEC continues production cuts to meet its quota, it will be interesting to see if demand has continued to taper off as well.

2:15 PM
FOMC Meeting Announcement: The Federal Open Market Committee will conclude its meeting and is widely expected to keep the fed funds range at 0%-0.25%. However, look for any comments regarding the direction of the economy and plans regarding other monetary policy tools, such as monetary stimulus or inflation targeting.

In a very volatile session, the major indices rose on the day. Holding off a break of 8,000, the Dow rose 12.35, or 0.15%, to 8,212.49: this was the averages first gain in six days. The Standard & Poor’s 500 index rose 1.12, or 0.13%, to 843.74 and the technology-heavy Nasdaq composite index rose 22.20, or 1.49%, to 1,511.84.The Russell 2000 index of smaller companies rose 9.45, or 2.09%, to 462.62.

Congress agreed to give the remaining $350 billion from the troubled asset relief program to President-elect Obama. In the Senate the vote was 52-42 in favor of releasing the funds. The plan has been heavily criticized by the American public as the use of funds has not reaped any benefits for the average American under the Bush Administration.

Morning Outlook

The global marketplace gained some momentum heading into the last trading day of the week. starting in Asia as Japan’s Nikkei 225 Stock Average rose 206.84, overnight to 8,230.15; a gain of 2.58%. In Europe, the FTSE 100 index of leading British shares was up 99.41, or 2.41% to 4,220.52, while Germany’s DAX gained 128.01 points, or 2.95% to 4,464.74.

Futures in the U.S. continue the global advancement. Dow Jones industrial average futures rose 129 points, or 1.58 %, to 8,291. Standard & Poor’s 500 index futures jumped 13.50 points, or 1.62%, to 852.90, while Nasdaq 100 index futures gained 18.50 points, or 1.57%, to 1,195.75.

On the Corporate Front

Intel Corp. reported a fourth-quarter profit plunged 90% from the previous year. However, with their revised guidance they did meet analyst’s expectations. Sales fell 23% to $8.2 billion. For the year, Intel earned $5.3 billion, 24 percent lower than a year ago, on sales of $37.6 billion, a 2% decline. Shares rose 2.1% in after hours trading.

Bank of America and the Treasury Department are near an agreement that will provide $20 billion in new government support. This news first came out yesterday, where BAC was not happy with the terms of the Merrill Lynch deal. The company also reported a quarterly loss after paying preferred dividends of $2.39 billion, or 48 cents per share, down sharply from a profit of $215 million, or 5 cents per share, a year ago. BofA cited rising credit costs, significant writedowns and trading losses in its capital markets businesses amid the deepening economic recession. They also cut their quarterly dividend to one penny, it had been 64 cents earlier last year.

Merrill Lynch, who had been acquired by BAC late last year, posted a loss of $15.31 billion, or $9.62 per share, for the period.

Citigroup (C) posted its fifth straight quarterly loss, tallying $8.29 billion or $1.72 per share. Analysts expected a loss of $1.31 per share. . As a result, the company plans to split up into two entities, Citicorp and Citi Holdings.

Economic Calendar

8:30 AM
Consumer Price Index (CPI): Measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation. The consensus for December is for a decrease of -9 basis points. However, excluding food and energy, the forecast is for an increase of 10 basis points. Just more data on the deflationary environment the economy faces.

9:15 AM
Industrial Production: The index of industrial production measures the physical output of the nation’s factories, mines and utilities. The consensus is for a production decline of 1% from November to December on slowing demand for goods.

10:00 AM
Consumer Sentiment: AKA how bad do you think the economy is? Consumer sentiment is directly related to the strength of consumer spending, by questioning 500 households each month on their financial conditions and attitudes about the economy. The consensus reading for January is 59, below last month’s reading of 60.1.

Plain and simple, the worst drop in the Dow since 9/11. So where are we 500 points later? The economic fundamentals are just not there. Today is critical, we lost two major banks over the weekend, and Washington Mutual and AIG are on life support. The dollar was sluggish, oil dropped precipitously, and gold rose as a hedge to the dollar.

The markets look to open sharply lower as S&P and Moody’s cut AIG’s credit rating, putting them on credit watch. Nice to see they are late to the party. Today’s trading will be based on what happens with AIG, a company that has a trillion dollar balance sheet. The Fed said they would not step in to lend aid. It will be interesting to see if that holds up seeing the bid/ask price has dropped $2 in premarket trading. It’s a mute point to try to gauge if a Fed rate cut would help the economy because the street is expecting one. And reaction is always about expectations…

Economic Calendar

7:45 am
ICSC-UBS Store Sales: This weekly measure of comparable store sales at major retail chains, published by the International Council of Shopping Centers, is related to the general merchandise portion of retail sales. It accounts for roughly 10 percent of total retail sales.

8:30 am
Consumer Price Index (CPI): Measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation. The consensus for August is for a decrease of -10 basis points. However, excluding food and energy, the forecast is for an increase of 20 basis points. You can bet that the Fed has a close eye on this data.

2:15 pm
The Federal Reserve will announce their target Fed Funds rate, as well as the discount rate for member banks to go directly to the Fed for liquidity. Only unexpected moves will affect the financial markets, and I think they see right through a 25 basis point cut.