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Market Recap: Financials Lead a Flat Tape


Banks shrug off Merrill's loss, poor economic news.

Stocks edged higher for another day. The Dow Industrials gained +1.22, or +0.01% to 12620, the S&P 500 added +0.85 points, or +0.06% to 1365, and the Nasdaq Composite fell -8.28 points, or -0.35% to 2341.

Financials led the markets to the upside even after Merrill Lynch (MER) reported its third quarterly loss. The company said 1Q EPS came in at -$2.20 per share, $0.21 below consensus estimates of -$1.99 per share; revenues were also below estimates coming in at $2.93 billion. Further, Merrill said it would cut about 3,000 more jobs due in part to the credit conditions that forced the bank to write down approximately $6.5 billion in debt, according to Bloomberg.

Despite the gloomy numbers, financial stocks took off. "The reaction to news is more important than the news itself," said Toddo. "The question we must all ask is whether the piggies will lead the poke higher or if the poke itself has room to ketchup to where the piggies currently live."

MER ended the day +4.05% to $46.71. Other gainers on the day include Lehman Brothers (LEH) +4.6% to $43.64, Morgan Stanley (MS) +2.2% to $46.42, and Goldman Sachs (GS) added +1.8% to $172.10. See Toddo's Random Thoughts.

Economic data was far from a happy picture. Weekly initial jobless claims ticked higher to 372k, up from 357k last week. Although leading indicators were inline with an increase of 0.1%, the Philadelphia Fed, which measures manufacturing in the region declined to -24.9 from -17.4 in March. The level was the lowest since 2001. A reading less than zero indicates a contraction. See Professor Kevin Depew's Five Things You Need To Know.

Elsewhere, IBM (IBM) shares added +2.17% to $123.72. The tech giant impressed the Street, not only beating estimates but forecasting 2008 profit above its previous projections. IBM said full-year profit will climb to $8.50 per share versus its February prediction of $8.25 per share.

But all eyes were on Internet giant Google (GOOG) reporting its earnings. After the closing bell the company surprised the Street as well, with 1Q earnings of $4.84 per share, $0.32 better than consensus figures of $4.52 per share. Total revenues without deducting traffic acquisition costs were $5.19 billion, largely inline with estimates of $5.12 billion. Shares surged +17% to $530.

As for other tech notables, Apple (AAPL) closed +2.2% to $157. Research In Motion (RIMM) gained +1.29% to $121.65, and Baidu (BIDU) jumped +5.6% to $334.78.

Commodities paused after a strong session the prior day. Crude oil fell -0.13 to 114.80. Gold declined -6.40 to 938.70. Silver declined -0.125 to 18.20, and copper lost -4.60 to 394.20.

For more, read Professor Lance Lewis' column Stagflation: So Obvious Even A Caveman Can See It.

The dollar index added +0.241 to 71.649.

For more Buzz insight, check out Minyanville's Buzz Bits.

Below is a recap of some of the idea flow on today's Buzz & Banter. Please note that stocks may appear in both bullish and bearish categories, due to long and short term trades by our many Minyanville professors.

Some bullish trade or investment ideas: SPX, GS, CAVM, BIDU, QQQQ, IWM, EEM, AMSC, DRYS, GNK, MA, PCU, ALTR, SPY, MRB, NGD, CSCO, IBM, NOK

Some bearish trade or investment ideas: NFLX, DHR

One day left! Have a good night!
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