Transcripts

Which Way Will Stocks Head Next?

SUSIE GHARIB: Wall Street is on a roll. The major averages finished higher for the sixth straight week. Investors focused today on another better than expected earnings report from a leading financial firm -- this time, Citigroup. Citi posted a loss that was much smaller than analysts predicted. Also beating forecasts, General Electric, which reported a profit $0.05 above expectations. So now the big question is, will stocks continue their steady rise? Erika Miller takes a look.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Investors are no doubt delighting in the stock market's recovery the past few weeks. The S&P 500 has rocketed 27 percent since early March, the biggest gain since the market downturn started in October 2007. However, many Wall Street strategists, including Mike Ryan, are not sure the recovery will stick.

MIKE RYAN, CHIEF INVESTMENT STRATEGIST, UBS WEALTH MANAGEMENT: I really think it's too early to christen this the beginning of a bull market. I think we're still in a discovery phase. You know, we have really, these incredible headwinds that we're still dealing with from a cyclical side. Think about it -- the unemployment rate continues to rise. We still have stress in the financial system. And then we're seeing a broad-based economic slowdown globally.

MILLER: That said, Ryan and others do think things are moving in a positive direction. They believe the earnings outlook is improving. Today, Citigroup joined rivals Goldman Sachs, Wells Fargo and JPMorgan in reporting better than expected earnings. Citi finished the first quarter with a loss of $0.18 a share, a big improvement from last year. Jeff Arricale, manager of the T. Rowe Price financial services fund, is optimistic about the industry.

JEFFREY ARRICALE, PORTFOLIO MANAGER, T.ROWE PRICE FINANCIAL SERVICES FUND: In relation to the banking system, it's pretty clear the system has found its footing. Companies are able to issue commercial paper. Financial institutions are able to issue FDIC-backed debt and have very good access to liquidity. So, I think the sector is on decent footing.

MILLER: General Electric also beat expectations, reporting a profit of $0.26 a share in the first quarter, although that was down from $0.44 last year. The next two weeks could be a big test for the stock market's recovery as earnings season ramps up. Even the pros are braced for more volatility.

RYAN: I still think what we're going to see is periods where the equity markets will pull back. We'll see some retrenchment. But I don't think we'll see the type of wholesale selling or capitulation that we saw in the latter part of 2008.

MILLER: For now, investors can be cheered by another bullish sign - the stock market closed higher for the sixth straight week. That's the longest winning streak since May 2007. Erika Miller, NIGHTLY BUSINESS REPORT, New York.