S&P Downgrades US Debt

Late Friday, S&P, one of the three major credit rating agencies, downgraded the US debt rating. The other two agencies have continued to assign the highest rating to US debt. S&P cited the deficit reduction in the debt ceiling agreement as too little. Since this is uncharted territory, it’s not clear what will happen when markets open on Monday. Interest rates may rise, but most analysts expect the impact to be small. A volatile session will be likely.

US stocks closed up

U.S. stocks closed up Friday as favorable economic reports balanced out disappointing earnings results, but it wasn’t enough give the Dow industrials its fourth consecutive weekly gain.

The Dow Jones Industrial Average rose 57 points, or 0.5%, to close at 12,342, with 20 of its 30 components rising. For the week, however, the Dow is off 0.3% to snap a three-week run of weekly gains.

Leading the Dow was Merck & Co., with shares up 1.9%, after the drug maker settled with Johnson & Johnson Inc. JNJ +0.90%  over a disputed arthritis medication. More on Merck.

The gains in stocks on Friday came as a measure of consumer sentiment rose in April, beating forecasts. Read more on consumer sentiment.

Core consumer prices climbing a modest 0.1% in March, according to the Labor Department, which provide the Federal Reserve with breathing space to continue its $600 billion bond buying program. Read more on the CPI.

Also released Friday was data showing that manufacturing in the New York region climbed to a one-year high in April on a surge of new orders. Read more on the manufacturing index.

Earlier, Chicago Federal Reserve President Charles Evans said as long as core inflation remained at 1.5% or lower he was “extremely doubtful” the Fed would adjust its monetary policy.

“The bottom line is that the good economy and cheap money will continue to bolster the stock market,” Cardillo said.

The biggest drag on the blue chips, Bank of America BAC -2.36% , saw its shares fall 2.4% after its first-quarter profit missed expectations and the bank said its chief risk officer would move up to become its chief financial officer. Read more on Bank of America.

The Standard & Poor’s 500 Index rose 5.2 points, or 0.4%, to close at 1,319.68, with technology the hardest hit and utilities the best performing among its 10 industry sectors. For the week, the index fell 0.6% for its second weekly loss in a row.

Both oil and gold settled higher on the day. Crude oil for May delivery CLK11 +1.44%  settled up $1.55, or 1.4%, at $109.66 a barrel, and gold for June delivery GCM11 +0.92%  rose $13.60, or 0.9%, to settle at $1,486.00 an ounce on the New York Mercantile Exchange.

US Stocks Tread Water

U.S. stock indexes have largely been treading water, as Wall Street preps for an onslaught of earnings that will have more than 100 S&P 500 companies reporting in the week ahead. Number wise for benchmark indexes we are right back to where we were two months ago.

The duo’s earnings and others that reported last week proved mixed, with Bank of America disappointing investors by reporting a sharper-than-anticipated drop in profit and naming a new chief financial officer.

On Friday, the major indexes tallied weekly declines, with the Dow Jones Industrial Average finishing its first down week in four.

Off 0.3% from the week-earlier close, the Dow ended at 12,341.83, up 56.68 points, or 0.5%, for the day.

The Standard & Poor’s 500 Index gained 5.16 points, or 0.4%, to finish at 1,319.68, off 0.6% for the week.

The Nasdaq Composite Index rose 4.43 points, or 0.2%, to 2,764.65, down 0.6% from the prior Friday’s close,with the technology-weighted index managing a daily rise even as internet-search giant Google Inc.  offered disappointing results.

Estimated share-weighted earnings for the S&P 500 for the first-quarter 2011 stood at $207.9 billion as of Friday, above the prior week’s $207.7 billion, according to Thomson Reuters analyst Christine Short.

The estimated revenue growth rate for the S&P 500 for the first quarter is 8%, according to Short and Freeman.

The 110 S&P 500 companies slated to release results in the coming week include the first major drug company to report first-quarter earnings, with Eli Lilly and Co. slated to release its results ahead of Monday’s open.

While earnings so far have proved a mixed bag, economic reports have largely bolstered the view of an economy picking up steam, albeit not at a rapid pace.

Investor issues, in the last week or so you’ve seen some strategists revising down GDP (gross domestic product) estimates for the year, and the IMF (International Monetary Fund) did the same thing for the entire world and the U.S., so the market is grappling with that.

And, with the Federal Reserve’s policy of quantitative easing liking coming to an end at the end of June, so long as core inflation is viewed as under control, investors are trying to gauge the impact.

“When the Fed takes a little capital away from the party, investors are wondering just how the economy is going to do on its own as some of the stimulus is taken away,” said Freeman.

Fuel costs have risen in recent weeks as violence in the Middle East and North Africa prompted worries of supply disruptions.

What to do with Gold

Gold has been in a volatile trading environment, to say the least, with prices repeatedly climbing to new heights since 2008, only to lose big chunks of those gains in a single day. Deciding what to do with gold and how to do it has been a challenge even for seasoned investors.

After all, gold investment choices come in many different forms: bars, coins, jewelry, futures and options contracts, exchange-traded funds and gold mining shares.

“The good news for gold and silver is the ‘mother’ of all bull markets has further to go,” said Peter Grandich, editor of The Grandich Letter. “The bad news is the opportunity to double or triple one’s money is behind us.

So what’s an investor to do?

For one thing, don’t rush to sell. If you’re thinking of cashing out, carefully consider your options and have a good reason before you do, say most experts.

“While gold and silver have been relatively volatile in recent weeks, they have remained solid long-term uptrends,” said Brien Lundin, editor of Gold Newsletter. “These uptrends are based on fundamental economic and monetary issues — primarily too much currency floating around the world, the continuance of accommodative monetary policies, and governmental debt concerns so large that they cannot be addressed without higher levels of inflation to eat away at their values.”

That all means the long-term picture looks bullish for both gold and silver, “although the wiggly lines that make up the bigger uptrend will provide better times to buy and sell the metals,” he said.
He wouldn’t recommend that investors sell their core holdings in the metals. He advises investors to “hold some gold and silver bullion as financial ‘insurance’ — a core holding that they shouldn’t trade.”

That seems to be great advice, given the mostly upbeat outlook for higher gold prices.

Gold has reached record levels, but it “remains a long way from its real inflation-adjusted high of $2,400 an ounce seen 31 years ago,” said Mark O’Byrne, executive director at international bullion dealer GoldCore. And “whether gold will fall or not, at some stage, is irrelevant if one is buying for portfolio diversification, safe haven and store of value reasons.”

So the best way to make the right decision to buy, sell or hold gold is to first fully understand investment goals.

Are you looking at gold as a short- or long-term investment and why?

If you aren’t sure, take some off the table,” he said. “Sometimes, it is a good idea to take your investment out (or reduce it) and ‘play’ with the house’s money,” and you can do that by selling part of your holdings outright, setting stops underneath the current market price or using options.

That gradual approach may be a good choice.

Stocks to watch: TI, Halliburton, Citi et al

Among the companies whose shares are expected to see active trade in Monday’s session are Texas Instruments Inc., Halliburton Co. and Citigroup Inc.

Texas Instruments Inc. TXN +0.81%  is expected to report first-quarter earnings of 58 cents a share, according to analysts surveyed by FactSet Research.

Halliburton Co. HAL +1.47%  is forecast to post earnings of 59 cents a share in the first quarter.

Citigroup Inc. C -0.23%  is estimated to report a profit of 9 cents a share in the first quarter.

Eli Lilly & Co. LLY +0.73%  is expected to report earnings of $1.17 a share in the first quarter.

Gannett Co. GCI +2.28%  is projected to post a first-quarter profit of 42 cents a share.

Keycorp KEY +0.80%  is estimated to report a profit of 14 cents a share in the first quarter.

TD Ameritrade Holding Corp. AMTD +2.03%  is forecast to post earnings of 28 cents a share in the fiscal second quarter.

Amylin Pharmaceuticals Inc. / AMLN +16.25%  is projected to post a first-quarter loss of 23 cents a share.

M&T Bank Corp. MTB +0.18%  is expected to report first-quarter earnings of $1.41 a share.

Which stocks should you own now?  Check out the latest Stocknod Hotsheet picks.

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