Six-Week Winning Streak Runs Out of Steam
Banks Rally but Indexes Fall Short of Seventh Week of Gains
PETER A. MCKAY ROB CURRAN
Banks shares rose as the government pulled back the curtain on its stress-test methodology, lifting the broader market Friday, though blue chips were unable to stretch their recent winning streak to seven weeks.
The Dow Jones Industrial Average rose 119.23 points, or 1.5%, to 8076.29. Microsoft and American Express jumped by 11% and 21%, respectively, after posting better-than-expected results on Thursday. DuPont and Bank of America eached gained more than 3%.
On the week, the Dow declined 0.7%, halting a six-week string of gains. But the benchmark closed at its highest level in a week, is up 6.1% this month and more than 23% above the 12-year closing low it hit on March 9.
![[Markets Data]](http://s.wsj.net/public/resources/images/MDGpromo_D01222009151210.jpg)
Friday afternoon, the Fed laid out its framework for evaluating the nation's 19 largest banks, saying regulators have aggressively sought detailed information from individual firms.
Traders lamented that the framework failed to provide specific loss estimates being used in the stress tests. Banks received an estimate from the government on how much capital they will need to raise but executives and U.S. officials are expected to negotiate on a final figure over the next week.
Peter Kenny, managing director in institutional sales at Knight Equity Markets, said, "It's very anticlimactic … but that's by design. The design is to take the drama and fear out of the market and to the extent that's one of the objectives, it's succeeded."
Bank stocks climbed. The KBW Banks Index rose 2.6%. J.P. Morgan Chase climbed 0.5%, U.S. Bancorp rose 3% and Wells Fargo advanced 6.5%. Some of the sector's gains faded in the final 15 minutes of the trading day.
Traders said the initial bounce may fade as investors digest the implications of the test for weaker banks. The test requires banks to project their credit losses and revenue for 2009 and 2010 and reserves needed to cover expected losses in 2011. Banks exposed to real-estate and commercial markets in the Midwest and the Southeast may not be adequately capitalized to cover those losses, some analysts fear.
"The worry comes out of today's report is the midlevel banks that you don't see in the news every day," said Joe Kinahan, chief derivatives strategist at thinkorswim. He attributed the bounce after the test hit the tape to "short squeeze" as bears betting against the banks were forced to buy back the shares they had borrowed.
The S&P 500 rose 14.31 points, or 1.7%, to 866.23 as investors rotated out of defensive sectors like utilities and health care. The benchmark was down 0.4% for the week, also ending a six-week run of gains. Ford Motor climbed 11% after it said it burned through less cash in the first quarter as it continued to restructure without government aid.
Online retailer Amazon.com rose 4.8% after it posted a better-than-expected 24% rise in first-quarter profit.
The Nasdaq Composite Index rose 42.08 points, or 2.6%, to 1694.29. The relative strength of the generally smaller technology and consumer stocks on the Nasdaq represents a growing bet on an economic recovery, traders said. The benchmark was up 1.7% on the week and has risen for seven weeks in a row. It is up 34% from the six-and-a-half year closing low it hit on March 9.
"This is a breakout and it looks like it has more legs to it," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. For the broader market, "you want technology leadership," Mr. Detrick said. "When you have a true -- I don't want to say bull market yet -- but a strong trending market, technology is one thing you want to perform."
Oil futures rose $1.93, or 3.9%, to $51.55, pushing them back above the $50 a barrel level. Though new inventory data this week showed U.S. stockpiles of crude at historic highs, traders and analysts say the market is beginning to reflect early bets on summer driving season.
Fadel Gheit, energy analyst at Oppenheimer & Co. in New York, said gasoline demand has held up fairly well this year despite a deep global recession, though other refined fuels, like diesel, have lagged due to weakness in the industrial sector.
"You have to remember that gasoline prices are about half what they were a year ago," said Mr. Gheit. "For the consumer, that helps to offset the effects of job losses," which tend to weigh on fuel demand.
In another development closely watched by oil traders on Thursday, OPEC Secretary General Abdalla Salem El-Badri said he doesn't expect the oil cartel to cut production when the group meets next month.
