U.S. stock indices endured another bout of early-session weakness yesterday, but at least the big-cap area of the market recovered to erase those losses.

What caused the turnaround?  It appeared to be a much-better-than-expected confidence reading, released at 9:00 STL time, which seemed to be enough to offset a very weak durable goods report and another housing gauge that corroborated the new post-bubble low in prices.  That durable goods report was so ugly that it sent gasoline futures down eight cents on fears of further economic weakness, but apparently stocks were unfazed – at least not the large caps, mid and small-cap indices failed to participate in the rally.

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U.S. stocks struggled in early trading on Monday after the G-20 refused to increase IMF funding over the weekend – funding to help bail Europe out of its debt problems.  But the January results on pending home sales erased those losses as the market reversed course and went positive.  Most of the major indices managed to hold those gains to the close (we touch on that pending home sales report beyond the click).

The Dow Industrials was the only major index to close lower, but it was a slight loss and the measure is within 10% of its all-time high hit on October 9, 2007.  The S&P 500 is within 15% of its all-time high.  Those high water marks that were touched just two months before the U.S. began its worst recession in the postwar era.

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U.S. stocks closed higher on Friday, helping the broad market book a slight gain for the week, but flirted with negative territory on a couple of occasions.

The major indices began the session higher, but stumbled after the latest new-home sales data was released (it was spun as a good report, but one only needs to view the first chart beyond the click to see the real story) and energy price continued their rise.

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U.S. stocks bounced to recover the prior session’s losses on Thursday as another good jobless claims report coupled with improvement from the most-watched weekly gauge of consumer confidence gave traders the feeling that the good times are set to roll.

I’d suggest a bit of caution with regard to continuing benefits side of the jobless claims report (that is, we’re not showing a follow through via an amelioration in the long-term unemployment problem – it seems these people are simply seeing their benefits expire more than becoming employed), but the initial claims number are surely showing layoff rates have meaningfully declined.  I’ll explain some other things to contemplate about this report beyond the click.

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Should you buy Facebook?

Successful investing comes down to buying businesses at good prices.  Facebook may be a great company, but the price tag is very expensive and leaves very little room for upside.

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U.S. stocks fell but hung in well on Wednesday considering weak manufacturing reports from China and Europe persist, existing-home prices made a new post-bubble low in January and wholesale gasoline continues to advance.

Energy, utilities and health care led the gains.  Financials, telecoms and tech were the biggest losers.

Traders have yet to go running for the hills even as a number of troubling issues have come together.  So we’ve got the obvious fat-tail risk that is the European debt situation.  But combining with this is Asian economic weakness (Japan in deep recession and Chinese factory activity in contraction for four months), the latest round of home-price declines (likely to increase the delinquent, foreclosed upon and underwater mortgages – which currently stands at a combined 14 million) and gasoline that just keeps rising.

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U.S. stocks applauded word that the second Greek bailout had been agreed upon as the Dow Industrial Average proceeded to 13K (first time since May of ’08) and the S&P 500 finally made a new multi-year high (a level it’s been struggling to surpass since April 29).   But not so fast there Mr. Market, the gains evaporated as the afternoon session got underway as this Greek (really a total euro zone) thing is off the radar screen for just a spell and crude and gasoline are in the process of a serious upshot.

Leading the session were energy, telecoms and basic material shares.  The laggards were health care and consumer-related stocks.

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U.S. stocks shook off some early-session weakness on Friday to close higher as more central-bank actions out of Asia offset a CPI report that showed inflation rates remain sticky, continued troubles within the euro zone persist and increasing tensions from the Middle East. 

The equity market didn’t like that CPI report for January, which printed 2.3% year-over-year core inflation.  That reading, which the Fed watches closely (and has stated that 2.0% is their “comfort zone”), has accelerated from the 1.6% rate as of June.  But traders quickly remembered that the Fed’s comments on keeping inflation within their comfort zone is all talk and additional easing from the Bank of China helped to remind everyone that aggressive central banks actions aren’t about to end any time soon – oh, and the Bank of Japan has just increased their bond purchases too (although, such QE-type actions should teach us that it’s hardly an economic elixir since they’ve been at it for 20 years now, yet their economy has made zero progress.)

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When a fund manager comes on CNBC and says “We like dividend paying stocks” he’s making an investment decision based on a fundamental characteristic of a company. In reality businesses who make money can decide to either expand their business by funding new business ventures with the profits, or they can choose to return capital to shareholders through dividends.

If a company has enough opportunities to expand, they may decide to retain all earnings and not pay any dividend at all. On the other hand, a company in a more mature industry, with fewer prospects for new investment may distribute a higher percentage of their profits to shareholders.

If you ask a person to pick between a stock that pays dividends and one that doesn’t - based only on that criteria - I bet most people would pick the dividend payer. But if you framed the question differently and asked them to pick between a company with more opportunities for expansion or one with fewer prospects for growth, I bet the same people would end up picking the company with more growth opportunities - who are less likely to pay dividends. My point is there are a lot of factors involved, and any one factor in isolation doesn’t separate good companies from bad.

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U.S. stocks snapped its two day slide on better than expected economic data and optimism about the progress on a second bailout for Greece.

The two days prior to yesterday’s rally led many to question the sustainability of the recent string of positive data.  Few would be surprised by a short-term pullback at this point, especially given the back and forth in Europe over Greece’s bailout and the fact that as corporate profits ex-Apple have been rather unimpressive.

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