Stock Market update

The stock market closed the first quarter on a winning note, but alas, today's gains weren't enough to avoid yet another month of declines. The end result is that the S&P 500 extended its losing streak to five consecutive months - the longest such losing streak since 1990.

Monday's outing was accented by a handful of developments, the most prominent of which was a proposal put forth by Treasury Secretary Paulson to enact a sweeping overhaul of the U.S. financial regulation system.

Paulson's plan, among other things, calls for a much larger oversight role for the Federal Reserve, the merging of the Securities Exchange Commission with the Commodity Futures Trading Commission, a federal charter for insurance companies and the closure of the Office of Thrift Supervision.

The main thrust of Paulson's proposal is to streamline bureaucracy in the regulatory system. The plan, which had its roots last spring, wasn't intended to be a response to the current crisis in the financial markets. The plan itself provided some provocative talking points, yet the realization that it wasn't going to be implemented any time soon - if at all - diminished its impact on today's market.

The latter point notwithstanding, the attempt to modernize the regulatory process and make the U.S. financial system more competitive in the global marketplace did not go unappreciated.

The financial sector, rebounding from last week's losses, played a supportive role that enabled the broader market to overcome substantive declines in S&P components Merck (MRK 37.95, -6.56) and Schering-Plough (SGP 14.41, -5.06). Those stocks declined 15% and 26%, respectively, after the efficacy of cholesterol-lowering drugs Vytorin and Zetia was questioned by a panel of cardiologists who recommended prescribing the drugs only as a last resort.

Other supportive influences in Monday's trade included a decline in oil prices and a better than expected regional manufacturing report. Specifically, oil prices, which touched $106.78 early in the day, fell 3.7% to $101.74, while the Chicago Purchasing Manager's Index checked in at 48.2 versus the market's expectation for a reading of 46.0. A number below 50 still connotes contraction, so bullish enthusiasm was held in check.

On Tuesday the market will be provided some insight on national manufacturing activity in the form of the March ISM Index. Economists expect the survey to reveal an overall reading of 47.5 versus 48.3 in February; Briefing.com looks for a slightly higher reading of 48.0.

Until then investors will be left to contemplate overnight the worst quarterly performance for the market, in which the S&P 500 declined 9.9%, since 2002. Separately, the Dow Jones Industrial Average dropped 7.6%, the Nasdaq Composite declined 14.1%, the S&P 400 Midcap Index slipped 9.2% and the Russell 2000 fell 10.2%.DJ30 +46.49 NASDAQ +17.92 SP500 +7.48 NASDAQ Dec/Adv/Vol 1178/1736/1.74 bln NYSE Dec/Adv/Vol 1218/1918/1.46 bln

3:30 pm : After some choppy trading, the stock market is largely unchanged from 30 minutes ago. If the S&P 500 is unable to make a decent run in the last half-hour, it will finish the month in the red. This will mark the fifth consecutive monthly loss, which has not occurred since 1990.

First Quarter 2008 Performance Review: All ten economic sectors are set to post a loss. Technology is the worst performing sector with a 15.4% decline, with financials close behind with a 14.8% slide. Consumer staples and industrials are relative outperformers with losses of 2.7% and 4.5%, respectively.DJ30 +40.95 NASDAQ +14.54 SP500 +6.65 NASDAQ Dec/Adv/Vol 1139/1743/1.32 bln NYSE Dec/Adv/Vol 1208/1898/1.03 bln

3:05 pm : The major indices extend their decline, but remain in the green. On CNBC, the CEO of Wells Fargo (WFC 29.19, -0.16) said it is possible to have another Bear Stearns (BSC 10.39, -0.39) incident, and that the markets are very volatile.

First Quarter 2008 Performance Review: The weakness in the dollar has captured the market's attention, some arguing it is bad, and some arguing it is good. The DXY Index--a basket of major currencies compared against the dollar--is down 6.5%, which is its largest quarterly decline since 2004. Of the ten major currencies, the Swiss Franc has posted the largest gain of 14.3%. The only major currency to post a loss against the dollar is the Canadian dollar (-3.3%). In emerging currencies, the largest gainer is the Chilean Peso (+14.3%) and the largest decliner is the Iceland Krona (-16.9%). DJ30 +46.33 NASDAQ +15.06 SP500 +6.41 NASDAQ Dec/Adv/Vol 1184/1667/1.19 bln NYSE Dec/Adv/Vol 1257/1839/930 mln

2:30 pm : The major indices slip a bit, but continue to hold onto solid gains. It has been a slow news day. Within the S&P 500, 370 stocks are trending higher. General Electric (GE 37.15, +0.54) is providing leadership, while Merck (MRK 37.96, -6.55) is the worst performing name.

First Quarter 2008 Performance Review: The S&P 400 Mid Cap Index is down 9.4%. Its best performing stock is homebuilder Hovnanian (HOV), up 48.0%. PMI Group (PMI) is down 56.1%, making it the worst performing stock.DJ30 +70.42 NASDAQ +21.79 SP500 +9.08 NASDAQ Dec/Adv/Vol 1105/1729/1.08 bln NYSE Dec/Adv/Vol 1186/1889/845 mln

2:00 pm : Buying interest fades, but selling interest has not picked up much either as the major indices trade modestly below their best levels. This session's gains have sent the Dow and Nasdaq into positive territory for the month, although the S&P 500 is still posting a slight loss.

First Quarter 2008 Performance Review: Seven of the 30 Dow components have posted a gain. Wal-Mart (WMT) is up 11.6%, making it the best performing component. Merck (MRK) is the worst performing component with a 35.0% decline.DJ30 +85.59 NASDAQ +24.80 SP500 +10.66 NASDAQ Dec/Adv/Vol 1089/1741/977 mln NYSE Dec/Adv/Vol 1127/1943/762 mln

1:35 pm : The stock market climbs higher. Market breadth is positive with advancers outpacing decliners by 9-to-5, and by more than 3-to-2 on the Nasdaq. Meanwhile, crude continues to tumble on no apparent news. It is now down 4.2% to $101.22 per barrel.

First Quarter 2008 Performance Review: The small-cap Russell 2000 Index (-9.6%) is performing on par with its large-cap counterparts. Encysive Pharmaceuticals (ENCY) is its best performing stock, with a 175.3% advance. Keryx Biopharmaceuticals (KERX) saw the steepest drop of 92.9%.DJ30 +103.23 NASDAQ +27.96 SP500 +12.91 NASDAQ Dec/Adv/Vol 1063/1749/898 mln NYSE Dec/Adv/Vol 1052/1985/698 mln

1:00 pm : The major indices are trading at their best levels of the session. Telecom (+2.5%) is posting the largest gain, although financials (+2.2%) are having the most influence due to their heavy weighting. Investment banks & brokerages (+3.3%) is the best performing financial group, although it is still down 8.6% over the last five sessions.

First Quarter 2008 Performance Review: The Nasdaq 100 is down 14.7%. Its best performing component is biopharm company Celgene (CELG), with a 31.9% gain. The worst performing stock is GPS maker Garmin (GRMN) with a 44.3% drop.DJ30 +73.22 NASDAQ +20.17 SP500 +10.27 NASDAQ Dec/Adv/Vol 1120/1666/801 mln NYSE Dec/Adv/Vol 1106/1918/932 mln

12:30 pm : The major indices are off their best levels, but are holding onto decent gains. The CRB Commodity Index (-1.6%) has taken a turn south in conjunction with crude oil (-3.4% to $101.99). Gold is now down 0.9%.

The reversal in crude prices has taken a toll on the energy stocks. The energy sector is now up only 0.2% after being up as much as 1.7% in earlier trade.

First Quarter 2008 Performance Review: The CRB Commodity Index is posting a gain of 8.2%, which is its largest in 2.5 years. However, the index is well off its best levels of the quarter when it was up 17.7%. Natural gas has seen the largest gain of 31.9%, while cattle are posting the largest loss of 15.7%. Crude oil is up 7.7%, but was up as much as 16.5% when it hit its all-time high of $111.80 per barrel.DJ30 +66.44 NASDAQ +14.71 SP500 +8.52 NASDAQ Dec/Adv/Vol 1193/1564/736 mln NYSE Dec/Adv/Vol 1188/1828/577 mln

12:05 pm : The final day of trade in first quarter 2008 has been a positive one, although news has been relatively slow. At midday, the stock market is posting a healthy gain of 0.7%, near its best levels of the session. Topping headlines is a plan to overhaul financial regulation, and news that two popular cholesterol fighting drugs may not be effective.

Treasury Secretary Henry Paulson outlined his proposal to revamp financial regulation by streamlining current bureaucracy. The Federal Reserve would have increased power, and several regulatory agencies would be combined. Paulson noted the plan is not in response to the current market turmoil, and will not be completed this year.

Shares of Merck (MRK 38.04, -6.47) are posting their largest one-day percent decline since 2002, and shares of Schering-Plough (SGP 14.40, -5.07) are down the most ever on news that their popular cholesterol fighting drugs may not be effective. According to reports, a panel of cardiologists said the two drugs—Vytorin and Zetia—should only be used as a last resort. The combined sales of the drugs were roughly $5 billion in 2007.

Eight of the ten sectors are trending higher, led by a 1.9% gain in financials. Healthcare (-1.0%) is the main laggard.

In economic news, the Chicago PMI—a regional manufacturing survey—rose to 48.2, from 44.5. This was better than the expected reading of 46.0. However, the reading is still below 50, which indicates deteriorating manufacturing condition in the Chicago region.

Crude oil prices are down 3.0% to $102.40 per barrel, after being up as much as 1.1% in earlier trade. Currently, there is no apparent news item for the quick reversal and it may be a technical based move.

First Quarter 2008 Performance Review: The U.S. stock market’s weakness has garnered a lot of negative press, although it is actually outperforming most of the major world stock markets. The S&P 500’s 9.8% drop is better than returns on France’s CAC (-16.2%), Germany’s DAX (-19.0%), London’s FTSE (-11.7%), Japan’s Nikkei (-18.2%), China's CSI 300 (-29.0%) and Hong Kong’s Hang Seng (-17.8%).
DJ30 +67.66 NASDAQ +15.98 SP500 +9.02 NASDAQ Dec/Adv/Vol 1145/1574/636 mln NYSE Dec/Adv/Vol 1148/1822/495 mln

11:35 am : The stock market hits its best level of the session, although its overall advance is modest. Only healthcare (-1.0%) remains in the red, due to weakness in Merck (MRK 38.03, -6.48) and Schering-Plough (SGP 14.48, -4.99). Merck is posting its largest one day percent decline since 2004, and Schering is posting is largest loss ever on news that the effectiveness of their popular cholesterol drugs has been questioned.

First Quarter 2008 Performance Review: Of the 90 primary world stock market indices, 21 have posted a gain. Ghana is leading the way with a 15.4% advance. The Vietnam Stock Index is the worst performing with a 44.2% drop.DJ30 +50.80 NASDAQ +12.23 SP500 +7.78 NASDAQ Dec/Adv/Vol 1201/1478/552 mln NYSE Dec/Adv/Vol 1187/1738/426 mln

11:00 am : The major indices are trading with a slight gain. The financial sector (+1.4%) is now the best performing sector, as it trades at its best level of the session. Paulson has finished his speech on his proposal to overhaul regulation on U.S. financial markets.

First Quarter 2008 Performance Review: The best performing S&P 500 industry group has been trucking (+29%)--its only component is Ryder System (R).DJ30 +12.13 NASDAQ +6.64 SP500 +4.58 NASDAQ Dec/Adv/Vol 1235/1401/454 mln NYSE Dec/Adv/Vol 1263/1628/346 mln

10:35 am : After some choppy action, the Dow falls into the red, and the Nasdaq and S&P fall to the unchanged mark. Treasury Secretary Paulson is outlining his plan to overhaul financial regulation. He noted that this task will take a long time, and will not be completed this year.

Five sectors remain in the green. The energy sector (+1.5%) has taken the top leadership spot as crude oil is up 1.0% to $106.60 per barrel.

First Quarter 2008 Performance Review: Of the S&P 500's 130 industry groups, 109 have posted a loss. The worst performing group is education services (-41%), which got clipped after traders were displeased with results from for-profit education provider Apollo (APOL).DJ30 -17.01 NASDAQ +3.01 SP500 +2.12 NASDAQ Dec/Adv/Vol 1302/1238/338 mln NYSE Dec/Adv/Vol 1331/1480/259 mln

10:10 am : All three major indices are now in the green. Eight of the ten sectors are posting a gain. Telecom (+1.2%) and energy (+1.2%) are showing the most strength. Healthcare (-1.3%) is the main laggard.

The Chicago PMI, a regional manufacturing survey, came in at 48.2. This was higher than the expected reading of 46.0, and higher than the prior reading of 44.5.

First Quarter 2008 Performance Review: The S&P 500 is down 10.2%. The worst performing stock is Bear Stearns (BSC) with a 88% decline. Rumors of liquidity problems caused a run on the bank, causing it to sell itself to JPMorgan for $2 per share to avoid bankruptcy. The offer was later raised to $10 per share.DJ30 +4.89 NASDAQ +10.35 SP500 +3.30 NASDAQ Dec/Adv/Vol 1015/1436/222 mln NYSE Dec/Adv/Vol 1112/1634/176 mln

09:40 am : The major indices open in mixed fashion on a slow news day. Topping headlines is news that Treasury Secretary Henry Paulson is going to outline a proposal that will give the Federal Reserve more power. This has made a nice talking point, but since there is nothing concrete it has had limited effect on stock prices.

Shares of Merck (MRK) and Schering-Plough (SGP) are under pressure on news that a panel of cardiologists questioned the effectiveness of cholesterol-lowering drugs Vytorin and Zetia.

Today marks the last day of first quarter 2008. Unless stocks make some incredible gains this session, this quarter will mark the largest percent decline for the S&P 500 since 2002.

First Quarter 2008 Performance Review: Only 110 S&P 500 stocks are in the green. The best performing S&P 500 stock has been Big Lots (BIG) with a 40.2% gain.DJ30 -10.58 NASDAQ +6.16 SP500 +0.47

09:18 am : S&P futures vs fair value: -1.0. Nasdaq futures vs fair value: +4.0.

09:02 am : S&P futures vs fair value: -1.5. Nasdaq futures vs fair value: +3.8. Futures slip a bit. The S&P 500 is poised for a slightly lower open, while the Nasdaq is set for a slightly higher open. Merck (MRK) is down 11% in pre-market trading and Schering-Plough (SGP) is down 22% on news that a panel of cardiologists questioned the effectiveness of cholesterol-lowering drugs Vytorin and Zetia.

08:31 am : S&P futures vs fair value: +0.8. Nasdaq futures vs fair value: +7.8. Futures indicate a positive open. Asian markets had steep declines, with the Hang Seng falling 1.9% and the Nikkei shedding 2.3%. European market's were trading lower, but are now trading in mixed fashion.

08:00 am : S&P futures vs fair value: +1.8. Nasdaq futures vs fair value: +9.2. Futures suggest a modestly higher opening on the last trading day of the first quarter. According to reports, Treasury Secretary Hank Paulson will outline a plan today that will increase the Federal Reserve’s power. On the economic front, the March Chicago PMI is set for release at 9:45 ET.

06:19 am : S&P futures vs fair value: -2.4. Nasdaq futures vs fair value: -2.0.

06:18 am : FTSE...5659.20...-33.70...-0.6%. DAX...6469.36...-90.54...-1.4%.

06:18 am : Nikkei...12525.54...-294.93...-2.3%. Hang Seng...22849.20...-436.75...-1.

Fed interest-rate cuts

In a gloomy market, where the headlines have been dominated by crisis and interest-rate cuts, a lot of consumers have figured that they would at least get some payback when the rate cuts hit home.

For that to happen, however, consumers are going to have to work for it and make some moves that they might not have been expecting.

But what the rate situation is making plain is that for any consumer carrying debt and nervous about the stock market and inflation the best way to increase net worth is likely to come from refinancing and paying off debt.

That said, it won't be mortgages that lead the way in refinancing. Mortgage rates tend to be tied more to Treasury yields than to the short-term rates that the Federal Reserve is cutting, so while consumers may expect a Fed cut to help them out at home, there's no guarantee.

In general, long-term rates like mortgages move in sync with short-term rates because the cuts are being made in order to help a slowing economy; what makes today's situation different is that the cuts are being made to stem a financial crisis that occurred without a recession. Lacking that downward stimulus, longer-term rates have not followed the short-term made-to-bail-out-the-market-now trend.

The only plus for consumers is that rates on adjustable-rate mortgages have dropped, so that the mortgage resets that were expected to crush consumers -- as debts they took on a few years back were repriced to much higher levels -- have actually not been such a big burden. In some cases, the reset rate has actually been better than the introductory rate.

"This has helped people who got into trouble with ARMs," says Greg McBride, senior financial analyst for BankRate.com, "but for almost every other consumer, this news hasn't been so good."

The one sure outcome of a Fed rate cut is that savings rates are going down. For savers, that has dropped rates on certificates of deposit and money-market accounts back towards the record lows they didn't expect to see for awhile. The average one-year CD is now paying 2.89%, down from just over 3% a week ago and likely to fall further before stabilizing.

"Savers are watching two things happen right before their eyes," McBride says. "First, they are seeing savings rates go back to levels where they have to wonder if it's worth it, and they are watching each rate cut fuel inflation, which makes it harder for their savings to keep pace with inflation."

In fact, most savings vehicles currently lag inflation, meaning that the nervous investor who wants to find a safe haven to avoid principle risk in the stock market is, in fact, embracing purchasing-power risk -- the chance that their money will lag inflation -- if they move money into savings vehicles.

Stocks closed lower Friday

Stocks closed lower Friday after a profit warning from J.C. Penney renewed fears about slower consumer spending. Financials and techs caved in after earlier attempts to rally.

Major U.S. Indexes

A third straight day of declines was enough to erase gains from the rally at the start of the week triggered by JPMorgan's upgrade to $10 a share for Bear Stearns. The Dow Jones Industrial Average and S&P 500 finished down more than 1 percent for the week.

The Nasdaq finished flat for the week but today's losses were enough to push the tech-heavy index back into bear-market territory, down 21 percent from its October high.

Still, all three indexes are up more than 2 percent in the past two weeks since news of the Bear Stearns bailout and extraordinary measures by the Federal Reserve were announced.

The resilience we've seen in March has been an encouraging sign after weakness in January and February. The consensus is that the market has found a bottom and that better times are ahead in the second quarter.

Tech Rally Fizzles

Tech stocks, which are down about 15 percent so far for the quarter, held on longer than most sectors today, but eventually caved in to the selling pressure.

mong the remaining holdouts were BlackBerry maker Research In Motion

Research In Motion Ltd RIMM 115.34 3.19 +2.84% NASDAQ

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[RIMM 115.34 3.19 (+2.84%) ], which gained 2.8 percent after RBC Capital raised its price target on the stock, and Apple

Apple Inc AAPL 143.01 2.76 +1.97% NASDAQ

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[AAPL 143.01 2.76 (+1.97%) ], which rose 2 percent after Bank of America said the company is getting ready to roll out iPhones using 3G technology, which uses higher bandwidth and allows for global roaming.

In economic news, consumer confidence fell to a 16-year low at the end of March, according to a report from the University of Michigan.

Analysts pointed out that consumer confidence is clearly in recession mode, though spending isn't. Consumer spending ticked up 0.1 percent in February, a weak reading but still better than the 0.1 percent decline expected.

J.C. Penney

JC Penney Co Inc JCP 37.48 -3.04 -7.5% NYSE

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[JCP 37.48 -3.04 (-7.5%) ] shares fell 7.5 percent after the mid-tier department store lowered its first-quarter earnings forecast, saying sales through the Easter holiday were "well below expectations."

Competition from lower-priced retailers like Wal-Mart

Wal-Mart Stores Inc WMT 52.12 -0.25 -0.48% NYSE

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[WMT 52.12 -0.25 (-0.48%) ] spurred JPMorgan to cut its rating on Bed, Bath & Beyond to "underweight" from "neutral."

There's also concern that spending on the high end is slowing. Merrill Lynch cut its rating on Tiffany

Tiffany & Co TIF 41.15 -2.00 -4.63% NYSE

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[TIF 41.15 -2.00 (-4.63%) ] to "neutral" from "sell," and downgraded online jeweler Blue Nile

Blue Nile Inc NILE 52.99 -2.60 -4.68% NASDAQ

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[NILE 52.99 -2.60 (-4.68%) ] to "sell" from "neutral."

On the inflation front, the government's report on consumer income and spending showed that the core PCE price index, an inflation gauge closely watched by the Fed, rose 2 percent year over year, the top of the Fed's comfort zone. In the Michigan survey, the 12-month inflation forecast climbed to 4.3 percent from 3.6 percent in February, while the projection for inflation in five years dropped to 2.9 percent from 3 percent last month.

Bear Holds Above $10; a Boost for Lehman

In the financial sector, the big buzz was that Bear Stearns CEO Jimmy Cayne is selling his stock in the company. He's getting about $60 million for a stake once valued at closer to $1 billion. Bear Stearns shares

Bear Stearns Cos Inc BSC 10.78 -0.45 -4.01% NYSE

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[BSC 10.78 -0.45 (-4.01%) ] fell 4 percent to $10.78.

Lehman Brothers

Lehman Brothers Holdings Inc LEH 37.87 -0.84 -2.17% NYSE

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[LEH 37.87 -0.84 (-2.17%) ] shares declined 2.2 percent even after Citigroup advised clients to start buying shares of the stock, which has been battered by shorts convinced the brokerage is going to be the next to collapse.

"It's tough to have a liquidity-driven meltdown when you're being backed by government entities that have the ability to print money," Citigroup said.

Overall, financials were rattled after Oppenheimer analyst Meredith Whitney said banks such as Citigroup

Citigroup Inc C 20.83 -0.96 -4.41% NYSE

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[C 20.83 -0.96 (-4.41%) ] and Wachovia

Wachovia Corp WB 25.99 -1.08 -3.99% NYSE

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[WB 25.99 -1.08 (-3.99%) ] are likely to announce dividend cuts in April as earnings won't support the current level of dividends.

Citigroup, the largest U.S. bank, is also said to be working on hiring an outsider to take over its flagging U.S. consumer business, according to a report in the Wall Street Journal.

Boston Fed President Eric Rosengren called for more detailed reports from banks on how they respond to problems amid concerns that troubles of U.S. banks could grow as the economy slows down.

U.S. money manager Legg Mason

Legg Mason Inc LM 54.12 -1.80 -3.22% NYSE

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[LM 54.12 -1.80 (-3.22%) ] said Friday that it is mulling options for providing liquidity to holders of auction-rate preferred securities issued by seven closed-end funds of its affiliates.

On the home front, KB Home

KB Home KBH 24.54 -1.25 -4.85% NYSE

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[KBH 24.54 -1.25 (-4.85%) ] shares dropped nearly 5 percent after the homebuilder reported it swung to a loss amid impairment and abandonment charges and said it didn't expect conditions to improve in the near term.

A day earlier, Lennar

Lennar Corp LEN 17.94 0.04 +0.22% NYSE

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[LEN 17.94 0.04 (+0.22%) ] posted a quarterly loss but beat estimates. That coupled with a lower-than-expected decline in new-home sales and a slight decline in inventories had offered some hope that a turnaround may be brewing for the housing sector. But both homebuilders stressed that, until prices and consumer confidence rebound, inventory levels are going to remain out of whack with demand.

Responding to a question about a proposal from Democratic presidential contender Hillary Clinton, a housing official said the the idea of freezing mortgage rates for any length of time would be a mistake.

"You'd really cause market dislocations," said James Lockhart, the director of the Office of Federal Housing Enterprise Oversight Director. "I think we're going to let the market work and interest rates have come down dramatically and people are going to be able to refinance," Lockhart said.

Google Paid Clicks

New data confirming slowing growth in Google Inc.'s paid clicks renewed debate Thursday on Wall Street over whether the Internet search company's revenue can quickly adjust to changes it made in how it generates clicks.

Citing data that comScore Inc. released after the market closed on Wednesday, analysts said growth in Google's click-through rate has nearly ground to a halt.

Google's stock closed down $14.11, or 3.1 percent, to $444.08 in afternoon trading.

The click-through rate grew 3 percent in February compared to a year earlier, and January saw no increase compared to January 2007. Several months earlier, the rate was growing 25 percent to 40 percent compared to a year earlier. The new data is in line with click-through declines Google reported last quarter.

Google, which gets paid when users click on a sponsored ad that comes up as the result of a Google search, has reported steadily rising per-click revenue.

The Mountain View-based company said in January that the drop in click-through rates is a result of its efforts to boost the usefulness of each click to its advertisers' sales performance. For instance, the company decreased the space around a word that would result in a click, so more clicks would be intentional.

Analysts disagree on how long it will take Google's per-click revenue to adjust to any increased value per click it has created.

Rob Sanderson, an analyst with American Technology Research, said per-click revenue will rise immediately if advertisers see more value in each click, because they'll pay more for them at auction.

"It's not clicks that advertisers are really buying, it's what those clicks get them, which is sales conversions," said Sanderson.

Colin Gillis, an Internet analyst at Canaccord Adams, also was optimistic.

"It's very difficult to spin this as positive data point, but it also doesn't mean the world is ending," Gillis said.

The click-through rate is only one piece of the equation for Google, he said.

"The counter point is that Google is out there saying, 'We are trying to make our clicks more worthwhile.' They want to actually deliver relevant hot leads to their customers because that's what their customers want," Gillis said.

Other analysts disagreed.

Piper Jaffray analyst Gene Munster predicted Google will fall short of Wall Street expectations in the current quarter because of the click-through rate.

Lehman Brothers analyst Doug Anmuth cut his 2008 profit estimate for Google and reduced his price target to $580 per share from $644, citing the click-through rates.

He also said advertisers may be trimming their budgets -- and not responding to the changes Google has made.

Google, which reports first quarter earnings April 17, declined to comment on the comScore data.

Numbers from comScore are closely watched by some industry analysts, even though the firm uses online recruitment techniques dismissed by many traditional pollsters.

Sanderson said comScore's numbers have a wide margin of error and can't be used to predict quarterly results.

"ComScore data has a really wide range of plus or minus in terms of being accurate. They don't know what the real number is, it's just a sample," he said.