What’s the Story?

by CC April 20, 2012 8:58 am • Commentary


U.S. stock-index futures gained ground Friday on an ongoing stream of positive earnings and as the world’s top finance officials gather in Washington.

Futures on the Dow Jones Industrial Average DJM2 +0.38% gained 73 points to 12,975. S&P 500 Index futures SPM2 +0.50% rose 6.3 points to 1,378.8, while Nasdaq 100 futures NDM2 +0.47% gained 11.25 points to 2,694.75.

General Electric Co. GE +1.36% reported operating earnings came in at 34 cents a share in the first quarter while sales slipped to $38.33 billion. Analysts polled by FactSet Research were looking for a profit of 33 cents a share on sales of $33.75 billion.

In Ford’s largest industrial expansion in 50 years, the car maker is investing $5 billion to double its production capacity and number of sales outlets in China by 2015. The WSJ’s Deborah Kan speaks with reporter Sharon Terlep from the floor of the Ford factory in Chongqing.

Oil-services firm Schlumberger Ltd. SLB +3.51% matched analysts’ forecasts with first-quarter profit of $1.3 billion, or 97 cents a share. Sales slipped to $10.61 billion but topped forecasts of $10.55 billion.

Microsoft Corp. MSFT +3.29% shares rose a day after the software company said fiscal third-quarter earnings declined slightly from a year earlier, but revenue rose due to stronger sales of the company’s Windows and business division products. Microsoft earnings

And chip-maker Advanced Micro Devices Inc. AMD 0.00% topped Wall Street expectations with adjusted earnings of 12 cents a share late Thursday.

SanDisk Corp. SNDK -12.18% saw pressure in after-hours action Thursday after its earnings fell short of forecasts.

U.S. stocks lost ground for a second straight day Thursday as worries about Europe and lackluster U.S. economic data trumped a string of strong earnings.


Major emerging powers stood ready on Friday to pledge money to bolster the International Monetary Fund’s crisis-fighting war chest, though Brazil was holding out for promises that their voting power at the global lender would increase.

Russia said that G20 advanced and emerging countries were ready at a meeting on Friday to commit enough new funds to fulfill IMF chief Christine Lagarde’s request for at least $400 billion to draw a line under the euro-zone crisis. Russia itself, he said, would offer $10 billion.


Some of the same spoilers that interrupted the recovery in 2010 and 2011 have emerged again, raising fears that the winter’s economic strength might dissipate in the spring.

In recent weeks, European bond yields have started climbing. In the United States and elsewhere, high oil prices have sapped spending power. American employers remain skittish about hiring new workers, and new claims for unemployment insurance have risen. And stocks have declined.

There is a “light recovery blowing in a spring wind” with “dark clouds on the horizon,” Christine Lagarde, managing director of the International Monetary Fund, said Thursday, at the start of meetings here that will focus on Europe’s troubles and global growth. Ms. Lagarde implored world leaders not to become complacent.

Forecasters have said that the trends point to a moderation of economic growth in the United States, but they still expect the recovery to continue this year. The slowdown in part reflects an unusually warm winter, which pulled forward economic activity, making January and February seem artificially good and perhaps making recent weeks look worse than they truly were.

Still, the breadth of the recent weakening of activity shows that the economy remains fragile, as is typical in the years following a financial crisis.


Perhaps more importantly, trading volume jumped as volatility picked up. About 4.14 billion shares exchanged hands in NYSE composite trading volume, the largest amount since April 10, and about 14% above April’s average daily volume.

What was special about April 10? The Dow dropped 213 points that day.

Increasingly, volume — and thus conviction — is picking up during selloffs, while rallies occur on lackluster volume.

For example, the Dow’s 181-point spike last Thursday came on NYSE composite volume of just 3.52 billion shares, about 7% below the year-to-date average.

The popular thinking is that an uptick in trading volume tends to confirm a market’s recent trend. The big rally through the first three months of the year was accompanied by light volumes, which skeptics view as a sign of the rally’s fragility.

Conversely, yesterday’s pickup in volume during the selloff provides more fodder for the bears that the rally is petering out.

To be sure, these recent volume upticks have a low bar to clear as they are coming off extremely low levels. Overall trading volume in March was at its lowest levels since December 2007, according to Credit Suisse. Similar low levels have occurred this month, according to WSJ Market Data Group.

And its unlikely — barring any monumental events, like another U.S. credit downgrade or flash crash — that volume will pick up any time soon.