Genzyme (NASDAQ: GENZ), higher on news of a buyout by Sanofi-Aventis.

Dell (NASDAQ: DELL), up 7% after posting strong earnings

Borders Group down 25% after it declared bankruptcy.

Comcast (NASDAQ: CMCSA), up 3% on strong earnings.

American Capital (NASDAQ: ACAS) , up 6%, on better than expected numbers.

Photronics (NASDAQ: PLAB) pushing higher 9% on good earnings.

Fred’s (NASDAQ: FRED), higher by 7% on buyout rumors

Dollar Tree (NASDAQ: DLTR) on a buyout offer from Nelson Peltz

Douglas A. McIntyre

It has risen 77% since then to the current level of 11,444. It would need to rise another 23% to move back above 14,000.

The 14,000 level is attainable in the next year or two if a small number of things happened. A longer recession would clearly bring the DJIA down. So might a prolonged period of unemployment near 10% or another drop in the home market.

However, instead of everything going wrong as in 2008 and 2009, most things in the financial markets may be going right.

There are relatively few changes to the current economy that would have to occur for the DJIA to move higher than it is now. Several of these would have to happen in tandem, but when the financial world improves, it is often because a number of things occur simultaneously.

1. Earnings per share are relatively cheap now.

That is only accurate if the revenue of large public companies rise or costs can be bought down more. Both may happen. Worker productivity improved 1.9% in the third quarter of this year. It has moved up most quarters for the last two years. American businesses seem to be able to squeeze more work out of each employee. There is clearly a limit to this, but it may not have been reached yet. Company margins, particularly work force ratios, could still get better, and so could sales. The forecasts that many companies put out for the current quarter and next year projected fairly robust growth. This is not only true for firms like Google and Apple.   For example, Ford expects sales to get better. So do companies as diverse as GE, Pfizer, AT&T, Alcoa and Boston Scientific. The final aspect of the EPS formula is that the nation’s largest companies have hundreds of billions of dollars on their books. Some, such as McDonald’s, are aggressively buying back stock—making their numbers of shares outstanding shrink.

2. QE2 could work.

The Fed’s purchase of $600 billion or more in long-term US Treasuries should bring other interest rates down. It is also likely to weaken the dollar and improve US export levels, which a number of America’s trade partners find objectionable. The newest round of quantitative easing should push down interest rates and the amount of capital banks have to lend at lower interest rates. Interest rates  are already at historic lows and the economy has not been helped much, but they eventually will be low enough to encourage borrowing – a key element to economic growth.

Oracle (NASDAQ: ORCL) is up 4% after posting good quarterly numbers.

Crucell (NASDAQ: CRXL) is up over 55% on news of a takeover offer from Johnson & Johnson (NYSE: JNJ)

Arena Pharma (NASDAQ: ARNA) is off 44% on new that the FDA rejected on of it most important trials.

Douglas A. McIntyre

Nymex WTI crude is around $81.75 per barrel; Gold is flat around $1,194.50 per ounce.

Treasury bond prices were soft with the yield on the 10-Year at 2.91% is and the yield on the 30-Year was 4.05%.

Friday morning’s major media snapshot from Reuters, WSJ, NYTimes, FT, Bloomberg, and more is available here.

These are today’s top economic data:
8:30 AM EST JULY Unemployment and non-Farm Payrolls
3:30 AM EST Consumer Credit

CBO said that the Federal Budget Deficit reaches $1.2 trillion through July

Major earnings today are as follows: AES, AIG, BPT, BAM, DYN, XIDE, LUK, LMIA, MIR, NM, NAT, PLUG, PGN, SHO, VIRL.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

A new Gallup poll shows that many Americans have regained their faith in the market. The research shows that “The 22% of Americans who now say stocks or mutual funds constitute the best long-term investment is up from 15% a year ago.” That number is still relatively low. Oddly enough many people still think that real estate is a better long-term investment than stocks. That would seem counterintuitive based on the sharp drop in real estate and the low likelihood that it will recover any times soon.

The renewed faith in the markets is actually relatively isolated to the more wealthy. That is not terribly surprising because most equities are helped by people with high incomes. They have seen their investment slide and then recover. Many people with incomes below $30,000 never held stocks at all, so their suspicions of the markets may be based more on what they read and have heard rather than their own investments.

The divide in stock market perceptions is also based, in large part, on levels of education. Those with a positive attitude toward equities tend to be college graduates.

Institutions have already returned to the markets. For the last year, it has given them good return especially investments in magacap tech and bank stocks and funds that simply play the indexes.

The well-to-do investors have decided to follow the “smart money” back into the market. That may be happening just before the market tops, as it often does.

Douglas A. McIntyre

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The last long rally the market had ran from March of 2003, when the DJIA was 7,740 to almost 14,100 in October 2007. An investor in an index fund doubled his money and did even better if dividends were factored in. No one calls the long leg up in the market a sucker rally, but it was for those who did not sell their stocks until early this month when the Dow dropped below 6,600.

What defines a sucker rally is simply a matter of perspective, and, more importantly, when investors buy and sell. Someone with the fortitude or foresight to buy Citigroup (C) earlier this month at $1 would have had a return of two-and-a-half times in a matter of days. It is pointless to figure out what that would be on an annualized basis. Citi is not going to $5,000 in the next year, so doing the math doesn’t matter.

A well timed investment in GE (GE) could be worth a 71% return, also in less than a month. Sirius (SIRI) is up 7x from its low of $.05 which was set only a month ago. Even Apple (AAPL) has moved up 27% in a very short period of time.
There really is not any such thing as a sucker rally. There are only suckers. In the long bull market that stretched over nearly four years, many investors who made five or six times their initial investment did not cash out in 2007. Some did not take even a small part of their gains and put them into CDs or yen futures. They just let the money ride which means that they assumed that the market was due to double again.

The last two weeks of explosive movement in the market will not continue. The market may have made a turn, and it may trade much higher in a year than it does now. But, a 10% return every two weeks is less probable than the Republic of Madagascar putting a man on the moon during the next decade.

People who give investment advice make their living getting other people to gamble their money away.  These advisers want people to listen to predictions which could cause them to lose their life’s savings.
Owning a stock that is up by a factor of three or four times in less than a month is a blessing, perhaps not a celestial one, but it is a sign, at least, that fate has been kind. Even the most fabulously gifted investor in the world could not have predicted that Citigroup shares would rebound so far, so fast.

Someone will sell Citigroup tomorrow, and someone else will hold it while it goes to $5 or back to $1.

As W.C. Fields said, “Never wise up a chump.”

Douglas A. McIntyre

GM (GM) is off 11% today to $11.43. Anyone who watches the car industry much must have known that car sales would be bad this year. Gas is too high and consumer income is too low. The stock traded above $21 a month ago.

GE (GE), one of the most admired companies in the world, is down 2% to $27.49, near its 52-week low. There is nothing new from the conglomerate. The most management has said is that it thinks it will hit its numbers. Hardly a reason to racket the share price down again.

RIM (RIMM) and Oracle (ORCL) are both down, RIM by 11% and Oracle by 3%. Each had guidance below Wall St. estimates, but the guidance was still for significant growth. The news should be a relief.

Bank of America (BAC) took out a new low today. Goldman said Citigroup (C) would have $8.8 billion in new write-offs in the current quarter. That helped drop BAC. So did its acquisition of much-troubled mortgage company Countrywide (CFC) Bank of America is one of the few stocks that should be taking a beating.

Even the darling of the investment community, Apple (AAPL) is off nearly 3% to $172.42. With everything so right at the company, why should its share fall?

Some of the selling has become too bloody to watch. It is time to avert the eyes or find a new hobby that does not involve investing in the stock market.

Douglas A. McIntyre

Europe markets have also been off over 5% most of the day with the German DAXX and French CAC 40 leading the way. Huge multinational Siemens (SI) has fallen as much as 7.3%. French financial services giant AXA (AXA) has been off almost 8%.

A 6% drop on the Dow tomorrow would be almost 750 points. If concerns over a US recession and the lack of real solutions in the Bush economic stimulation plan rattle the markets more Dow components like Citigroup (C), JP Morgan (JPM), and American Express (AXP) could be hit especially hard.

Bank of America (BAC) and Apple (AAPL) report tomorrow. If the market thinks those companies might report below consensus the shares could be pushed down early.

For the Dow to drop 1,000 points it would have to sell of 8%. On October 19, 1987 the index sold off over 22% and it lost 7% of its value in one trading day on both September 21, 2001 and April 14, 2000.

With the deep concerns with the market, it could happen again.

Douglas A. McIntyre

Douglas A. McIntyre