Sam Collins

Are Stocks a Poor Investment?

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The Wall Street Journal began its weekend edition commentary on Friday's market this way: "The Dow Jones Industrial Average hit a new 2009 high Friday on the two-year anniversary of its record [high] close, as investors remained optimistic about coming third-quarter earnings." 

The story also points out that even though the Dow is 51% above its March bear market low, it is still more than 30% lower than the record close of 14,164.53 made on Oct. 9, 2007. More on that in the "What the Markets Are Saying" segment.

Technology stocks led a broad rally Friday, as IBM (IBM) and Intel (INTC) drove the Dow Jones Industrial Average (DJI) to a new annual high. The buying in IBM was triggered by a favorable report from Barclay's technology analyst and the stock rose 2.98%.

Earlier in the week, Dow member Alcoa (AA) reported better-than-expected earnings. Those earnings propelled Alcoa to an 11% gain for the week and gave investors confidence to close out the week with a gain of 4%.

But traders are concerned about the public's lack of acceptance of the bull market. Again on Friday, despite the new high for the year in the Dow, volume was extremely low and has been for a month. It was pointed out last week that most of the public is still stuck in zero-yielding money market funds and bonds while stocks have been soaring. 

In addition to IBM and Intel making big gains, NCR Corp. (NCR) jumped 8% after an unannounced change in management, and Cree (CREE) rose 5.4% when JPMorgan Chase (JPM) started coverage of the stock with an "overweight" rating. 

At the close, the Dow gained 78 points to 9,865, the S&P 500 (SPX) was up 6 points to 1,071, and the Nasdaq (NASD) rose 15 points to 2,139. 

The NYSE traded 990 million shares with advancers over decliners by 3-to-2. On the Nasdaq, advancers were ahead by just less than 2-to-1 with volume of 581 million shares.

November crude oil rose 8 cents to $71.77 a barrel, and the Energy Select Sector SPDR (XLE) fell a nickel to $56.16. 

December gold fell $7.70 an ounce to $1,048.60, and the PHLX Gold/Silver Index (XAU) lost 84 cents, closing at $176.38.

For the week, the Dow rose 4%, and the S&P 500 and the Nasdaq both rose 4.5%.

What the Markets Are Saying

Let's get back to the comment by the Wall Street Journal this weekend that the market is still more than 30% lower than the record close of 14,164.53 made on Oct. 9, 2007. Yes, and believe it or not, it and its companion stock indices are "still lower than the closing price of each of the major indices 10 years ago."

So, are stocks a poor investment?