Stock Market Update - Tue Apr 10 16:20:01 EDT 2007

[BRIEFING.COM] Stocks closed higher Tuesday, but market gains were modest in scope given a lack of corporate news, no scheduled economic data, and a sense of caution that typically precedes the start of earnings season, especially one in which 14 consecutive quarters of double-digit profit growth for the S&P 500 are likely to come to an end. Alcoa (AA 34.90 +0.03), the best performing Dow component last quarter (+13.6%), was scheduled to officially kick things off with its Q1 report after the closing bell.

Speaking of the blue-chip index, it finished to the upside for an eighth consecutive day, recording its longest winning streak since March 2003. However, had it not been for respective gains of 1.6% and 1.0% in Citigroup (C 52.41 +0.83) and Exxon Mobil (XOM 77.59 +0.79), which rank as two of the most heavily-weighted constituents on the S&P 500, the Dow's streak would have been snapped.

Among the nine sectors finishing in positive territory, Energy was the only one posting a respectable gain; but its 1.4% advance was tied primarily to a rebound in oil prices, which is bearish for equities. Crude for May delivery rose 0.6% to $61.89/bbl as yesterday's sharp 4.3% sell-off and the possibility that weekly gasoline inventories fell for a ninth week renewed buying interest. The remaining eight sectors trading higher averaged gains of only 0.15% while below average volume on the NYSE also offered little conviction on the part of buyers.

Technology was in focus following upgrades on a few notable sector components (e.g. ORCL +1.5%, AMAT +4.0%, and ADSK +3.8%), as well as upbeat analyst commentary on Intel (INTC 20.69 +0.59). However, Seagate Technology (STX 21.90 -1.56) warning that Q3 revenue will miss forecasts left investors questioning the sector's growth prospects. Tech is expected to be one of the S&P 500's biggest earnings drivers this year.

A market increasingly sensitive to weak data, especially from the housing sector, viewed a 37% drop in Q2 net sales orders at D.R. Horton (DHI 21.65 -0.39) as a reason to keep selling homebuilders (-1.2%), this year's worst performing S&P industry group (-20.1%). A report from Equifax/Moody's that showed the national mortgage delinquency rate hit an all-time high of 2.87% in Q1 also took some steam out the Consumer Discretionary sector's recent recovery efforts.

Separately, Fed Governor Mishkin saying the current rate of inflation remains too high and that policy makers will need to raise interest rates if price gains don't moderate also stalled momentum following such last week's surprise rally.

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