Sam Collins

Will Market 'Agree' to Rally?

by Sam Collins   03/04/09

After the big sell-off on Monday, it was expected that buyers would emerge Tuesday -- and stocks did open higher, but only to spend the remainder of the day bouncing off of Dow (DJI) 6,700. The major indices closed lower for the fifth-straight session and ended at new 12-year lows.

In testimony before the Senate Budget Committee, Chairman of the Federal Reserve Ben Bernanke said that the near-term outlook for the economy is weak and will likely be worse than most economists predicted.

He said, "The recent near-term indicators show little sign of improvement," and "Although the near-term outlook for the economy is weak, over time, a number of factors should promote the return of solid gains in economic activity in the context of low and stable inflation."

Economists at Goldman Sachs backed (GS) much of the chairman's statistics, confirming that their forecast says that the U.S. economy will fall 7.0% in Q1.

The auto industry continued to post horrible sales with General Motors (GM), reporting sales for February that were off 53% and Ford (F) said its numbers fell 48%. Toyota (TM) said it would seek help from the Japanese government.

At the close, the Dow Jones Industrial Average (DJI) was off 37 points to 6,726, the S&P 500 (SPX) fell four points to 696, and the Nasdaq (NASD) was off two points, closing at 1,321. The New York Stock Exchange traded 1.9 billion shares, with decliners ahead of advancers by 2-to-1, which was mirrored by the Nasdaq as it traded 985 million shares.

Crude oil (April contract) rose $1.50 to $41.65, and the Amex Energy SPDR (XLE) closed at $38.31, up 19 cents.

Gold (April contract) was lower for the seventh-straight session, closing at $913.60, off $26.40. The April contract has fallen more than 9% since closing above $1,000 on Feb. 20. The PHLX Gold/Silver Index (XAU) gained $3.43, closing at $113.46.