Stocks drift higher

[Neil D]

This is the 2nd article of good news that I have seen in the last week.[..and major factor in figuring that next year, we may be coming out of the recession....I know, I know..."didn't you read that article that you posted, Neil?" it don't look like it. I know, I am an optimust....But things have a way of changing. and the closer we come to Obama's inauguration, the better...Oh, Merry Christmas everyone...

Major indexes rise in quiet trading as investors mull the latest economic data. Markets to close early.

NEW YORK (CNNMoney.com) -- Stocks rose modestly Wednesday as investors picked through a raft of reports on the economy released before the holiday-shortened session got under way.

The Dow Jones industrial average (INDU) was up 0.4% with about one hour left in the session. The Standard & Poor's 500 (SPX) index added 0.3% and the Nasdaq composite (COMP) advanced a few points.

Stocks fell Tuesday after two housing reports showed declines in sales of new and existing homes. A government report also showed the economy contracted in line with economists' expectations.

Trading is expected to be light, with many market participants on vacation. U.S. stock markets will close early at 1 p.m. ET and remain shut on Thursday for the Christmas holiday.

In addition to light participation, many investors have closed their books for the year and are not planning to make any large moves until 2009.

"We're looking for a pretty quiet, low- volume session," said Todd Salamone, director of trading at Schaffer's Investment Research in Cincinnati. "Most of the major market-moving news is out there already."

Salamone added that the market is hovering in the middle of its recent trading range and that it will probably stay there "barring any unexpected news."

Still, the market had a full roster of economic reports to digest, including one that showed a spike in jobless claims and another weak reading on personal spending.

"I think we'll continue to see unemployment rise and continue to see consumer spending drop," said Dean Barber, president of Barber Financial Group in Kansas City, Kan. These declines, combined with a high level of consumer debt, could result in a "prolonged and painful scenario" for the economy, he added.

Barber said he expects the Dow to retest its November lows in the weeks ahead, and that it could bottom out around 5,000 sometime in 2010.

"The market has factored in some bad news, but there's a lot out there that people don't really understand yet," he said.

Jobs: Before the opening bell, the Labor Department said weekly claims for unemployment benefits rose more than expected.

New jobless claims rose to 586,000 in the week ended Dec. 20. That's an increase of 30,000 from the previous week's revised figure of 556,000, and is more than the 558,000 total forecast by economists.

Wednesday's report revealed the highest number of jobless claims since Nov. 27, 1982, when initial filings hit 612,000.

Income and spending: The Commerce Department said both personal income and spending decreased in November.

Personal income dipped 0.2% after a modest 0.3% increase in October. The reading was expected to be flat.

Personal spending fell 0.6% versus a decline of 1% the month before. But the figure was better than the 0.8% decline that economists were expecting.

Durable goods: New orders of durable manufactured goods fell for the fourth month in a row, according to the Census Bureau.

Durable goods orders fell 1% to $1.9 billion in November. Excluding orders related to transportation, new orders increased 1.2%.

Still, the decline was not as sharp as had been expected. Economists had forecast durable goods orders to sink 3.1% after plummeting 6.2% in October - the biggest decline since 2006.

Sam Bullard, an economist at Wachovia Economics Group, said the decline "suggests order growth for durable goods should remain challenged throughout 2009."

Mortgages: As mortgage rates fall, applications for home loans and refinancing activity surged last week, according to the Mortgage Bankers Association.

The MBA's overall Market Composite Index, a measure of mortgage loan application volume, shot up 48% on a seasonally adjusted basis for the week ending Dec. 19.

The increase was driven by a 62.6% jump in the group's Refinance Index. But the Conventional Purchase Index also increased 17.7%. The only component of the overall index to fall was the Government Purchase Index, which largely tracks FHA loans, which slipped 3.4%.

Bonds: The benchmark 10-year note rose 3/32 to 114 31/32, and its yield held steady at 2.17%. The 10-year yield dipped below 3% in November for the first time since the note was first issued in 1962.

Lending rates were mixed. The 3-month Libor rate held steady at 1.47%, according to Bloomberg. The overnight Libor edged up to 0.15% from 0.12% Tuesday. Libor is a key bank lending rate.

Other markets: In global trading, Asian markets ended lower with the Hang Seng in Hong Kong falling 0.26%. Major indexes in Europe fell in a holiday-shortened session. The DAX index in Frankfurt was closed.

The dollar fell versus the euro and the yen.

U.S. light crude oil for February delivery was down $1.33 at $37.65 a barrel in New York. Crude prices fell sharply after the government reported an unexpected decline in crude inventories.

COMEX gold for February delivery was up $5.40 to $843.50 an ounce.

Gasoline prices fell overnight to a national average of $1.655 from $1.659 a gallon, according to a survey of credit-card swipes released Monday by motorist group AAA.

All news is bad news in real estate right now. Have you recently bought a house anyway? Send your story and photos to realstories@cnnmoney.com and you could be featured in an upcoming article.

[Dr. Shane]

I just invested yesterday so I was checking my portfolio today and noticed a number of my stocks are up. But my portfolio is still down overall by 18% so that is a mixed bag. I was down almost 30% at one point so I guess it is headed in the right direction.

BTW: I invest $100 a month in my personal portfolio (I am not rich). I invest a little more than twice that much each month in my 401K - which does a lot better than my personal picks.

[Neil D]

I have never said that you will gain back all your value of your stocks in one day, or 3 months or even 3 years....

As for your value of your stocks rising this week, I'd say that you are begining to gain your investment's value back...

As for your "mixed bag" comment, sheesh Shane, is there nothing that we can show you that will elicit a positive/hopeful comment from you?

[fccool]

If the retail industry will survive the holiday shopping season, perhaps the stocks may inch up a bit. But overall, I think that retail is in trouble. And in our economy, if retail is in trouble... it effects almost all other sectors.

As far as the stock market goes... it is fundamentally broken. Originally people who invested in companies did have a thorough knowledge of companies operations and had interest in area of company operational scope. So, their interest was for company to succeed so that they would get paid their share of income through dividends. P/E ratio meant a world.

Today's "investors" are speculators in that sense. They don't have any interest in company's success or failure other than relatively short term incomes that it generate. Thus the price of the stock is not valuated in P/E ration... but overall demand for that stock... and that demand is not based on something substantial... but a rumor, a speculation. So, some speculators have a vested interest in company tanking, and it is all my rumor is better than yours deal. I would not call this "investing". Gambling is a better term.

PS... I don't think that many retailers will survive the holiday season based on my yearly trip to some of the retail giants over the past couple days. Two years ago I had to wait 1 hr in parking lot just to get our. Not so this year. I guess we'll wait and see.

[Dr. Shane]

There was wild speculation going on in the 1920s which is what led to the market becoming overvalued and crashing in 1929.

[Bravus]

The Dow has been bouncing around in the 8000s for a while now, and really hasn't established an upward trend yet. I suspect it might be at least second quarter if not third of 2009 before it really gets serious about rising again.

[Pockey]

I don't see any upward trend either. Maybe from Oct lows, but the volume has been too low this week to say it's going one way or the other.

There may be a rally leading up to the inauguration, but it wouldn't surprise me to see things tank again right after that.

[tkbrannon]

Hmm not sure if things will get better.

There is an interesting video series on youtube about money as debt

really opened my eyes... http://www.youtube.com/watch?v=vVkFb26u9g8

Its about fractional reserve banking.

[fccool]

exactly why things can't get better without reforming the system. Rearranging chairs on the deck of sinking Titanic will do no good.

[Dr. Shane]

The market didn't cause the problem. The problem was caused by a combination of government involvement in the banking industry and the Federal Reserve playing with interest rates to fuel the economy thus creating an artificial boom.

The current system of buying and selling stocks and bonds didn't cause this recession unless we want to lump the banks buying and selling junk mortgages as part of the market.

[Neil D]

...The problem was caused by a combination of government involvement in the banking industry and the Federal Reserve playing with interest rates to fuel the economy thus creating an artificial boom.

The current system of buying and selling stocks and bonds didn't cause this recession unless we want to lump the banks buying and selling junk mortgages as part of the market.

Hmmmmmm.....I would tend to think that it was the lack of goverment oversight that caused the current system to sell junk mortagages....Won't say who was in power when that happened...cause he hasn't left office yet...

[Dr. Shane]

When I stated "government involvement" that includes oversight or lack thereof. It wasn't the system of buying and selling stocks that brokerage firms are doing. It was, in part, banks buying and selling junk mortgages. And both Republican and Democrat Congressmen and Senators were up to their eye balls in looking the other way.

I don't mind saying that it was Congressman Barney Frank that said 'if it isn't broke don't fix it' when the Bush Administration tried to increase oversight on Fannie Mae and Freddie Mack. Of course when a man pushes a snow ball down a hill and it eventually builds up and runs over someone's cabin should we blame the man that pushed the ball in the first place of the man at the bottom of the hill that wasn't able to stop it?

[fccool]

Looking at the larger picture though, it was the government oversight that encouraged people divert their savings into the stock market. In fact, the government oversight is the reason that a "legal person" of a corporation can exist. Without the government protection and sanctions that favor such "legal person" there would be much less stock trading going on today, because the corporate owners would be directly responsible for the losses and mis-conduct as much as they claim responsibility for the gains today.

I really don't like the idea behind the churches incorporating for this reason. They do so in order to seek a legal identity to assign ownership to and "protect its members" by means of channeling the lawsuits towards a fictitious name instead of letting individuals be held responsible and accountable and help out these individuals if legal problems do arise. Instead, the churches are willingly subjected themselves to indirect state control in return for member tax deductions.

The corporate veil should never be used as mechanism to dupe the outsiders, but its exactly what it provides a great opportunity for a CEO to do. And many CEOs today have a vested interest in boosting the speculative short term value of the stock because of their salaries are paid in stock.

Therefore the misrepresentation of the profits would be more common in the present system, but take away the "limited liability" veil, and you'd have a completely different picture.

[Dr. Shane]

The stock market produces a better return than a savings account. The interest a savings account or even a CD pays sometimes isn't even enough to keep up with inflation. People wanting to save for the future need to divert their money from a savings account and to something with a little better payback.

[fccool]

In most cases the CD rate is not enough to keep up with inflation, especially considering the products that CPI basket consists of. But that's not a market problem... that's monetary system problem that creates for such high rates. Inflation is not normal in free competitive market. Ideally the productivity increases and the prices fall because of the high availability of products. The solution is a system reform instead of trying to keep up with the problem by beating it in its own game.

Stock market of today is essentially a pyramid scheme. People who get in first get the most out of it, people who get in last are on the loosing side. It's basic supply/demand principle. Over the past decade or so the stocks went back to the bubble craze of being valued based on speculative demand for the stocks and not based on P/E. You know that....

It's no better than company handing out IOUs saying that it will make millions soon and pay people back. Stock market is a fairly risky investment, as it proved itself. It's one thing if several people pulling capital together understanding the company and business that they invest in, and better yet, they are directly involved in that business. It's a totally different thing when they throw money at the stock market expecting it to boomerang with some and more. Unfortunately, this is the kind of "investing" that you see people choose for retirement.