Stocks tread water; bulls rejoice

By Charley Blaine and Elizabeth Strott

Investors shrugged off bad reports on consumer confidence and home prices today and pushed the stock market generally higher.

At the close, the Standard & Poor's 500 Index was up 3 points to 1,353, and the Nasdaq Composite Index was up 14 points to 2,341.

The Dow Jones industrials were down about 16 points to 12,533, but the 30 stocks in the index were basically split between winners and losers. Meanwhile, gainers were ahead of decliners by 1.7-to-1 on the New York Stock Exchange and 1.5-to-1 on the Nasdaq.

The gains for the S&P 500 and Nasdaq were their third in three days and seventh in their last 10 sessions.

If you're a bull, today's finish was wonderful news. It meant the market was holding on to gains from Monday and Thursday, when the Dow jumped nearly 450 points, and it suggested the stock market had bottomed or was close to bottoming, at least in the short term.

But even bulls would concede that markets remain vulnerable to bad news from a weak economy, rising energy prices, a global credit crunch and rising inflation.

Right at the close, in fact, The Wall Street Journal reported that a $19 billion deal to take Clear Channel Communications (CCU, news, msgs), a big broadcasting and advertising company, is about to collapse. Clear Channel was off 5.5% to $32.56 in regular trading and down an additional 18% to $26.66 in after-hours trading.

Still, from intraday lows on March 17, the Dow is up 6.6%. The S&P 500 is up 7.6%, and the Nasdaq is up 8.6%. Barring an abrupt sell-off between now and Monday, it appears that the indexes will finish March with gains after four straight monthly losses.

The positive finish for the major averages today came primarily from gains in materials and energy stocks. Aluminum giant Alcoa (AA, news, msgs) led the 30 Dow stocks with a 2% gain to $35.74.

Financial stocks were generally higher. American Express (AXP, news, msgs) and Citigroup (C, news, msgs) were up 0.2% to $47.51 and 0.6% to $23.42, respectively. One big exception: Bank of America (BAC, news, msgs), down 3.5% to $40.97 after a downgrade by Merrill Lynch.

Wednesday brings government reports on factory orders and new home sales.

Plus, Oracle (ORCL, news, msgs), the big maker of database software, will report earnings after Wednesday's close. Investors are relatively bullish on the company; the stock has risen 12% this month and is up about 5% this week.

Energy prices -- New York close

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$101.22	$100.86	$0.36	-0.61%	5.46%
Heating oil (per gallon)	$2.9248	$2.9631	-$0.0383	3.00%	10.39%
Natural gas (per million BTU)	$9.4080	$9.3290	$0.0790	0.29%	25.72%
Unleaded gasoline (per gallon)	$2.6802	$2.6270	$0.0532	6.68%	7.60%

A split market

It was a mostly divided market, led by energy and materials stocks, which were rising thanks to higher commodity prices. Copper moved up 1.6% to $3.68 a pound in New York. Gold was up 1.8% to $935 an ounce.

The rally in both was caused by a falling dollar.

The U.S. dollar was off nearly 1.1% to 72.60 this afternoon. The index measures the dollar against a basket of currencies.

In addition to Alcoa, Freeport-McMoRan Copper & Gold (FCX, news, msgs) was up 4.1% to $92.41.

Monsanto (MON, news, msgs), one of the biggest makers of seeds and agricultural chemicals, was the leader among S&P 500 stocks with a 9.9% gain to $114.54 after boosting guidance substantially on 2008 earnings. Fertilizer maker Potash of Saskatchewan (POT, news, msgs) was up 4% to $156.80.

Crude oil, however, closed up slightly at $101.22 a barrel in New York after Texas energy investor T. Boone Pickens predicted crude would remain at current levels for the year. Energy stocks were mostly higher.

Natural gas producer Chesapeake Energy (CHK, news, msgs) jumped 3.1% to $46.40 after boosting its estimate on production in 2008 and 2009.

Meanwhile, it looks as if profit-taking hit JPMorgan Chase (JPM, news, msgs) today. The shares were down 1.1% to $46.06, but they had risen 29% from a low on March 14 through Monday.

Profit-taking and, possibly, a reality check hit shares of Bear Stearns (BSC, news, msgs), which were down 2.8% to $10.94. The stock had jumped 69% on Monday after JPMorgan raised its offer for the crippled investment bank to $10 a share from $2.

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The reality-check is a more sober assessment on whether the offer will be sweetened again.

Bad news I: Falling consumer confidence

The bad news today couldn't be sugar-coated. It began when the Conference Board's index on consumer confidence fell to 64.5 in March, down from a revised reading of 76.4 in February. It was the third consecutive drop and the lowest reading since March 2003.

Analysts had expected the index to fall to a reading of 73.5.

"Looking ahead, consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon," said Lynn Franco, the business research group's director of consumer research.

In fact, Franco told The Wall Street Journal, the report's expectations index is at its lowest levels since 1973 when the nation was gripped by inflation, Watergate and the first Arab oil embargo.

Bad news II: Weakening home prices

Meanwhile, the S&P/Case-Shiller home-price index fell nearly 10.7% in January from a year ago and 2.4% from December. The month-to-month decline was the 18th in a row. The year-to-year decline was larger than the 10.5% decline that analysts had expected.

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Nineteen of the 20 metro areas tracked by the study showed annual declines in January. The one exception: Charlotte, N.C., whose prices were up 1.8% year over year.

Las Vegas and Miami were the two metro areas with the biggest annual declines of 19.3% each.

A report from the Office of Federal Housing Enterprise Oversight also showed home prices falling.

Home prices fell 1.1% in January 2008 from December, according to OFHEO's new monthly House Price Index, which covers single-family homes in 363 metro areas. Prices fell 3% year-over-year.

Home-building stocks were generally lower on the news. The Philadelphia Housing Sector Index ($HGX.X) was off 0.3% to 149. Ryland (RYL, news, msgs) was down 3% to $33.39. Pulte (PHM, news, msgs) fell 2.8% to $15.05, but Lennar (LEN, news, msgs) added 0.5% to $18.87.

Home improvement retailers Home Depot (HD, news, msgs) and Lowe's (LOW, news, msgs), whose shares have moved up and down with housing prospects, were both lower.

Yahoo rises on hopes Microsoft boosts bid

Yahoo (YHOO, news, msgs) shares jumped 3% to $28.35 today after a Citigroup analyst said it is likely Microsoft (MSFT, news, msgs) will raise its $31-per-share offer for Yahoo. (Microsoft is the publisher of MSN Money.)

Analyst Mark Mahaney upgraded Yahoo shares to "buy" from "hold."

He also raised his price target on Yahoo to $34 from $31, saying he believed Microsoft remained committed to its offer and "is capable of and willing to" increase that bid to conclude the deal. Most analysts believe the deal will get done if Microsoft raises its bid to $32 to $34.

"While we continue to see no other competing bidders, we believe Yahoo is aggressively pursuing strategic alternatives," Mahaney said in a note to clients.

One possibility is a tie-up with Time Warner (TWX, news, msgs). The idea is that Time Warner would contribute its online content assets to Yahoo in exchange for a stake, the analyst said.

"We believe this could serve as a forcing function to a higher Microsoft bid."

Microsoft was off 0.2% to $29.11.

While Yahoo moved higher, shares of Google (GOOG, news, msgs) fell 1.9% to $452.03 after a UBS analyst lowered his price target and profit estimates for the company, saying consensus estimates don't sufficiently reflect slowing volume growth in its paid-clicks ad business.

In a note to clients, analyst Benjamin Schachter lowered his price target to $570 from $590.

Continued: Food prices rise; Valero cuts guidance

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