SHARES are heading to record levels tomorrow led by the mining and energy giants, market watchers say.
A jump in the prices for gold and oil in New York on Friday night and generally higher base metal prices should see the ASX200 open up to 30 points higher, edging over the 5700-point level, they say.
With private equity-fuelled takeover rumours continuing to circle some of Australia's biggest companies ”” the latest talk is that sugar giant CSR could fall to the stampeding horde ”” the broader market will also receive support, says MFS chief investment officer Guy Hutchings.
But tomorrow's expected 20- to 30-point gain locally will be despite a flat lead from Wall Street on Friday night, when disappointing profit news from computer giant IBM offset gains for stocks in the US resource and energy sectors.
AMP Capital Investors chief investment officer Shane Oliver said IBM dragged down the Dow on Friday night ”” the Dow closed 2.4 points lower at 12,565.5 ”” when the broader-based S&P500 index rose 0.4 per cent after a positive reading on US consumer sentiment.
"But the US commodity and oil stocks were all up about 2 per cent, so I think we'll have a pretty good day on Monday," Mr Oliver said.
Symbol Last Change
Dow 12,477.16 -88.37 (0.70%)
Nasdaq 2,431.07 -20.24 (0.83%)
S&P 500 1,422.95 -7.55 (0.53%)
10-Yr Bond 4.7590% -0.0140
NYSE Volume 2,526,689,000
Nasdaq Volume 1,958,527,000
Stocks Fall on Tech Worries
AP - Wall Street stumbled lower Monday as growing concerns over technology companies led jittery investors to pull money out of the market ahead of this week's earnings reports.
4:20 pm NY US time : Stocks stumbled out of the gate Monday and never recovered as ongoing concerns that companies will not live up to the market's lofty earnings expectations kicked off a new week on a negative note.
Worries about disappointing guidance kept Technology in focus again. Microsoft (MSFT 30.72 -0.39), which hit a multi-year high last week, gave back some of those gains as investors grew concerned about its Q2 report this Thursday.
As a reminder, the Tech sector tumbled 3.4% last week, contributing heavily to the Nasdaq's worst weekly performance (-2.1%) since last July, after reports from Apple (AAPL 86.79 -1.71) and Intel (INTC 20.79 -0.03) failed to impress investors. With most of the bad news already priced into shares of Texas Instruments (TXN 28.67 +0.28), which warned in early December, the stock was one of the sector's few bright spots today heading into its Q4 report after the close.
Industrials was the day's biggest disappointment among the 10 sectors that closed lower. An analyst downgrade on Boeing (BA 85.57 -3.06), the Dow's leading laggard (-3.5%), left Aerospace & Defense (-1.7%) as one of today's worst performing S&P industry groups. Construction & Farming (-2.1%) fared even worse as Caterpillar (CAT 58.21 -1.16) dropped 2.0% to a new 52-week low.
Fellow Dow component Pfizer (PFE 26.98 -0.24), which was up 10% after bottoming out in early December, topped Wall Street expectations in its fourth quarter. However, not even plans to cut costs by $2 bln annually (i.e. slashing 10% of workforce, closing plants) were enough to offset a Q4 report that showed Lipitor sales missed 2006 targets while Zoloft sales plunged 79%. Pfizer's nearly 1.0% decline was a big reason why investors
NY time 4:20 pm : Buyers returned Tuesday following Monday's broad-based decline amid some renewed optimism about the overall earnings picture for Q4. However, market gains were modest as a late-day surge in oil prices took some steam out of intraday recovery efforts, especially on the tech-heavy Nasdaq.
With earnings season in full swing and this week marking the biggest batch of reports thus far, Tuesday was no exception. Of the three Dow components reporting today, United Technologies (UTX 66.14 +2.05) was the best performer on the blue-chip index (+3.2%) after it posted a 38% jump in Q4 profits.
The Industrials sector got an additional boost from Railroads (+3.7%), even in the face of the 4.7% surge in oil. Burlington Northern Santa Fe (BNI 80.15 +3.02) and CSX Corp (CSX 36.70 +1.60) soared 3.9% and 4.6%, respectively, after posting solid quarterly results and providing optimistic outlooks.
With regard to oil prices, crude for March delivery closed just above $55/bbl, recording its largest one-day increase since September 2005 following reports that President Bush will propose doubling the size of the Strategic Petroleum Reserve. While oil's surge helped Energy more than halve its year-to-date 4.6% decline, the sector's 2.4% advance was also attributed to the commodity's potential to crimp spending exacerbating the continued rotation out of Technology.
Of the other five sectors closing in positive territory, Materials was also up more than 1.0% as weakness in the greenback made dollar-denominated commodity stocks more attractive.
However, even though only three sectors closed lower, the losing trio of Financials, Health Care and Technology are also the most influential of the 10 economic sectors. Since they collectively account
The NYSE closed UP +87 points on Wednesday January 24 at:
Symbol Last Change
Dow 12,621.77 +87.97 (0.70%)
Nasdaq 2,466.28 +34.87 (1.43%)
S&P 500 1,440.13 +12.14 (0.85%)
10-Yr Bond 4.8100% +0.0060
NYSE Volume 2,783,184,000
Nasdaq Volume 2,297,470,000
Market Update http://finance.yahoo.com/marketupdate/overview
NY time 4:20 pm :
Stocks rallied Wednesday as renewed optimism on the earnings front, especially from some notable tech names, sparked a wave of buying interest that closed all three major averages sharply higher. The Dow finished in record territory, the S&P 500 hit a fresh six-year high and the Nasdaq closed up 1.4%, extending its year-to-date leading advance to more than 2%.
With nothing of note on the economic calendar, earnings were again at the forefront of investors' minds Wednesday. More notable than the majority of the reports either meeting or exceeding Wall Street expectations, though, was a batch of upbeat guidance that suggested growth prospects might not be that bad after all.
Bargain hunters hungry for even the slightest bit of clarity to suggest recent market weakness may be overdone came primarily from Technology, which is also where the cloud of uncertainty has been most prevalent. As evidenced by the Nasdaq outpacing its blue-chip counterparts to the upside, Yahoo! (YHOO 28.94 +1.98) and Sun Microsystems (SUNW 6.15 +0.49) were among the biggest standouts from a news standpoint. Even though neither is the tech bellwether they used to be, both companies followed up better than expected earnings reports with some additional upbeat developments.
Yahoo closed up 7.3% as investors applauded news that an earlier than anticipated roll-out of its Panama ad search technology implies growth acceleration beginning in Q2. Sun soared nearly 9% after announcing a $700 mln private placement transaction with KKR Private Equity Investors. Other tech stocks topping estimates and lending some reassurance about a sector plagued of late by a slew of reports taht failed to impress investors were Corning (GLW 20.92 +2.08), Citrix Systems
The NYSE DOW closed DOWN -119 points on Thursday January 25 at:
Symbol Last ----Change
Dow 12,502.56 -119.21 (0.94%)
Nasdaq 2,434.24 -32.04 (1.30%)
S&P 500 1,423.90 -16.23 (1.13%)
10-Yr Bond 4.87% +0.06
NYSE Volume 3,044,544,000
Nasdaq Volume 2,279,145,000
Market Update http://finance.yahoo.com/marketupdate/overview
NY time 4:20 pm :
Evidently, the absence of potentially troubling economic data a day earlier did help investors place more of an emphasis on the "good" news embedded in earnings reports because today's mixed earnings news and economic data dashing hopes of a Fed rate cut anytime soon took a toll on sentiment.
The major averages opened mixed as investors weighed the sustainability of yesterday's impressive rally against another round of better than expected results. Dow component AT&T (T 36.84 0.21) was the day's biggest name, opening at a multi-year high (+2.6%) after beating expectations and guiding for double-digit EPS growth this year and next. Nonetheless, blue-chip buyers began showing some reserve early on, especially after the Dow hit record levels and the S&P 500 hit six-year highs Wednesday.
The Nasdaq wasn't faring much better early on as it was clinging to a small gain following unexpectedly strong results from tech companies like eBay (EBAY 33.65 +3.65) and Qualcomm (QCOM 38.16 -0.46). eBay, a recommended holding in the Briefing.com Active Portfolio, was up as much as 18% last night following its encouraging Q4 report and still closed up 8%. Be that as it may, a two-day hiatus from any economic reports also left investors anxiously waiting to see if the housing market was still showing signs of stabilization.
Then, at 10:00 ET, existing home sales for December checked in shy of economists' forecasts and, for all of 2006, fell 8.4% -- the largest annual decline in 17 years. While that was responsible for a knee-jerk reaction in stocks that exacerbated the temptation to take some of yesterday's gains off the table, the worst was yet to come.
Fed funds futures, which were pricing in a nearly 50% rate cut before June
The NYSE DOW closed DOWN -15 points on Friday January 26 at:
Symbol Last Change
Dow 12,487.02 -15.54 (0.12%)
Nasdaq 2,435.49 +1.25 (0.05%)
S&P 500 1,422.18 -1.72 (0.12%)
10-Yr Bond 4.8790% +0.0120
NYSE Volume 2,628,664,000
Nasdaq Volume 2,083,880,000
NY time 4:20 pm : The indices finished in split fashion and were relatively flat Friday as investors juggled mixed corporate news, surging oil prices and the growing likelihood the Fed might not cut rates at all this year.
Before the market opened, the belief that Thursday's sell-off may have been an overreaction, especially on the heels of Microsoft's (MSFT 30.60 +0.15) solid quarter and fellow Dow component Caterpillar (CAT 61.04 +1.41) issuing upside 2007 sales guidance, helped to improve the underlying tone.
Microsoft's solid quarter helped renew confidence in Technology's growth prospects, as bargain hunters jumped back into beaten-down chip stocks. Nonetheless, tech only recovering a fraction of the 1.0% it endured a day earlier was only enough to help the Nasdaq limp into the close with a paltry gain.
Aside from the inability to take a more convincing tech recovery into the weekend, growing uncertainty as to which way (and when) policy makers will fine-tune monetary policy also weighed on investors' minds.
NY time At 8:30 ET
, the market digested a report that showed underlying business investment trends are picking up after a few soft months. Durable goods orders jumped 3.1% in December, ex-transportation orders posted their first increase since September and non-defense orders (ex-trans) rebounded after a few months of decline.
Just a day removed from getting more evidence of stabilization in the economy's weakest sector - housing - the Commerce Dept. showed that new home sales rose a healthy 4.8% in December to a 1.12 mln annual rate, the highest level since April. The report also showed a decline in monthly inventories, a drop in median home prices and an upward revision to November's numbers. However, such
The NYSE DOW closed UP 4 points on Monday January 29 at:
Symbol Last Change
Dow 12,490.78 +3.76 (0.03%)
Nasdaq 2,441.09 +5.60 (0.23%)
S&P 500 1,420.62 -1.56 (0.11%)
10-Yr Bond 4.8920% +0.0130
NYSE Volume 2,695,797,000
Nasdaq Volume 1,978,769,000
NY time 4:20 pm : Stocks finished in similar fashion to the way they opened, relatively flat, as investors weighed positive developments like plunging oil prices and M&A activity against mixed earnings news and uncertainty heading into a two-day FOMC meeting. On Wednesday, policy makers are likely to keep rates unchanged again but underlying nervousness suggests the policy directive may exhibit a more hawkish stance than previously thought.
With another 25% of the S&P 500 reporting results this week, earnings were a focal point Monday. However, Dow component Verizon (VZ 38.04 +0.21) merely beating estimates by a penny also served as a reminder that there have been very few blowout numbers.
A batch of M&A news was also noteworthy; but the lack of any blockbuster deals left the market redirecting some of its focus to a slew of economic data out later in the week, especially the upcoming Fed policy statement. Laureate Education (LAUR 60.80 +6.39) going private was the biggest deal today. However, its proposed $3.8 bln management-led takeover was overshadowed by Merrill Lynch's (MER 92.44 -2.09) smaller $1.8 bln deal for First Republic (FRC 53.69 +15.39), but a 46% premium that drew criticism from MER shareholders. Ensuing weakness throughout the brokerage group removed some notable leadership from the most influential of all S&P sectors -- Financials.
Posting a similar 0.5% decline was Energy. Albeit holding up rather well early on, even as oil prices were down about 1.5%, the commodity slipping to as low as $53.75/bbl (-3.0%) in afternoon trade eventually took a toll on the sector. Crude for March delivery plunged 2.6% and closed below $54/bbl after a Saudi Official said current oil prices are adequate for consumers and producers
The NYSE DOW closed UP 32 points on Tuesday January 30 at:
Symbol Last Change
Dow 12,523.31 +32.53 (0.26%)
Nasdaq 2,448.64 +7.55 (0.31%)
S&P 500 1,428.82 +8.20 (0.58%)
10-Yr Bond 4.8750% -0.0170
NYSE Volume 2,706,247,000
Nasdaq Volume 1,857,258,000
NY time 4:20 pm : Considering the breadth of disappointments on the earnings front and soaring prices across the energy complex ahead of a plethora of economic data that also includes an update on monetary policy, stocks actually held up rather well Tuesday.
As evidenced by the S&P 500 turning in a better performance than the Dow and Nasdaq, it's not surprising to see just how big of an impact renewed enthusiasm for beaten-down oil stocks had on the day's action. All of the Energy sector's 33 components closed sharply higher, led by a 1.6% gain in shares of the broader market's most heavily-weighted name -- Exxon Mobil (XOM 74.36 +1.16). Explorers, among the biggest beneficiaries of soaring natural gas prices (+11%), was the day's best performing S&P industry group (+3.4%).
Crude for March delivery surged 5.4%, the biggest one-day move since Hurricane Katrina, to close near $57/bbl. The rally was sparked by reports of below-normal temperatures and news that Saudi Arabia will reduce daily production by another 158,000 barrels beginning Thursday.
It is also worth noting that even as policy makers said at their last meeting (Dec. 12) that "inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices," the front-month crude contract closed that day near $61/bbl. Since that is still 7% higher than where it closed today, it didn't appear investors were too concerned about the Fed tweaking that portion of tomorrow's closely-watched policy directive.
While the market was pricing in the likelihood of a Fed easing in early 2007, there's also an argument that such a rate cut may jeopardize the Fed's credibility and subsequently renew recession worries. Thus, since the Fed needs to talk tough on
The NYSE DOW closed UP 98 points on Wednesday January 31:
Symbol Last Change
Dow 12,621.69 +98.38 (0.79%)
Nasdaq 2,463.93 +15.29 (0.62%)
S&P 500 1,438.24 +9.42 (0.66%)
10-Yr Bond 4.8260% -0.0490
NYSE Volume 2,895,446,000
Nasdaq Volume 2,292,049,000
Market Update http://finance.yahoo.com/marketupdate/overview
NY time 4:20 pm : Stocks rallied Wednesday as investors embraced further evidence that the Fed is doing a remarkably good job of managing a soft landing for the economy... so far. The Dow finished within a point of record levels, the S&P 500 closed out its eighth straight month of gains while the Russell 2000 and S&P 400 MidCap closed at historic highs.
Per usual, all eyes were fixed on today's FOMC meeting. As expected, policy makers left rates unchanged at 5.25% for a fifth straight time; but the policy statement carried some added risk. The market has been pricing in an increasingly hawkish stance for a few weeks ago now, and a stronger than expected advance read on Q4 GDP did little to change things.
While a rebound to 3.5% growth from 2.0% in Q3 dispels the worst of recession fears, suggesting the economy is back on trend, the GDP report further diminished the chance of the Fed easing anytime soon. Today's Fed statement further echoed such improbability, as the directive reflected a continued leaning toward a rate hike rather than lowering rates.
Oil prices tacking a 2.1% gain onto yesterday's 5.5% surge, marking the biggest two-day gain since December 2004, as well as the Energy sector's inability to take full advantage with a paltry 0.2% advance, also lent less conviction behind today's reaction to the Fed.
Be that as it may, a market hungry for some upbeat news since earnings season so far has been uninspiring, market participants rallied around proof that the economy is firming, not slowing. The removal of "substantial" to describe the slowdown in housing and addition of "stabilization" was also greeted with enthusiasm, as was the phrase, "Readings on core inflation have improved modestly in
The NYSE DOW closed UP 52 points on Thursday February 1:
Looking very good for today on ASX!
Symbol Last Change Dow 12,673.68 +51.99 (0.41%)
Nasdaq 2,468.38 +4.45 (0.18%)
S&P 500 1,445.94 +7.70 (0.54%)
10-Yr Bond 4.8370% +0.0110
NYSE Volume 2,914,890,000
Nasdaq Volume 2,234,755,000
NY time 4:20 pm :
The Stock Trader's Almanac states that, "as the S&P goes in January, so goes the year." Well, with the S&P 500 briefly slipping into negative territory for 2007 last Friday but rallying into the end of the month to finish up 1.4%, that momentum carried over into Thursday's session, jumpstarting what is historically a flat month for equities.
Strong leadership from several key sectors, especially Industrials, contributed to the bullish disposition that left the Dow at a new record high. Raytheon (RTN 52.55 +0.65) becoming the second defense contractor in as many days to post strong Q4 results prompted follow-through buying in Boeing (BA 91.05 +1.49). The Dow component surged 1.7% to a new all-time high.
More notable was the economically-sensitive sector's ability to look past a discouraging update about manufacturing conditions. The January ISM index unexpectedly fell to 49.3%, indicating contraction, which ran counter to a Fed directive that showed firming economic growth a day earlier. The disappointment initially left investors questioning the validity of Wednesday's rally that we still believe was overdone considering the Fed's continued talk about tightening.
Be that as it may, investors eventually rallied around an earlier report that reinforced the Fed's view of moderating inflation pressures. Before the bell, the Commerce Dept. reported only a 0.1% rise in the core PCE deflator -- the Fed's favored inflation measure. While the January data left the year/year increase steady at 2.2%, still probably above where the Fed would like to see it, the rate of increase slowing over the last three months offered some added relief on the market's current focus -- inflation.
The Industrials sector's best performer, though, was American Standard (ASD 53.14 +3.75), which soared more than 7% to a record high after posting a 77% rise in Q4 earnings and saying it will split into three different businesses. The Dow Jones Transportation Average eclipsing the 5,000 mark for the first time since May, getting a boost from falling oil prices, provided additional support Industrials.
With regard to crude, the Energy sector's resilience in the face of a 1.4% pullback in oil was also noteworthy. After surging nearly 8% over the last two days, crude for March delivery closed lower at $57.30/bbl in sympathy with a decline in natural gas futures following bearish supply data. Exxon Mobil (XOM 75.08 +0.98) said that it earned $39.5 bln in 2006, the largest profit ever for a U.S. company. Valero Energy (VLO 56.03 +1.75), which also handily topped Wall Street expectations, got an additional lift as it weighed the possible sale of an Ohio refinery.
The Financials sector also showed its buoyancy, as an increase in borrowing costs was overshadowed by Lehman Brothers' (LEH 85.04 +2.80) plan to buy back nearly 20% of its stock.
Of the two sectors trading lower, the absence of leadership from Technology was the only reason the indices didn't turn in an even better performance. Google (GOOG 481.75 -19.75) failed to impress shareholders with a report that still showed Q4 profits nearly tripled. A change in sentiment as to what Michael Dell's return as CEO to the company that bears his name -- Dell (DELL 23.80 -0.42) -- also weighed on the influential sector. BTK +1.3% DJ30 +51.99 DJTA +1.7% DJUA 0.8% DOT +0.6% NASDAQ +4.45 NQ100 -0.1% R2K +0.9% SOX +0.8% SP400 +0.9% SP500 +7.70 XOI +1.3% NASDAQ Dec/Adv/Vol 1086/1952/2.15 bln NYSE Dec/Adv/Vol 881/2405/1.66 bln
The NYSE DOW closed DOWN 52 points on Friday February 2: and Nasdaq was UP +7.50 (0.30%)
Symbol Last Change Dow 12,653.49 -20.19 (0.16%) Nasdaq 2,475.88 +7.50 (0.30%)
S&P 500 1,448.39 +2.45 (0.17%) 10-Yr Bond 4.8270% -0.0100
NYSE Volume 2,569,447,000
Nasdaq Volume 1,940,376,000
NY time 4:20 pm :
The major averages finished in split fashion Friday, indicative of the divide among investors as to what today's encouraging employment data mean for Fed policy.
Before the bell, the Labor Dept. showed that only 111,000 nonfarm payrolls were added in January. Since that was weaker than the consensus estimate and below the average gain of 153,000 per month for all of 2006, some investors viewed the news as bearish.
Throw in the Dow closing at record levels for a fifth time this year a day earlier and the S&P 500 on pace for its best weekly performance since August and a sense that blue chips may be overbought at current levels offered sellers an excuse to take some money off the table. The Dow snapped a three-day winning streak.
Be that as it may, looking beyond the headline read of lower payrolls did in fact show that the Fed is doing a surprisingly good job of managing a soft landing for the economy. Upon further analysis, an upward revision to previous data left the December figure at a strong 206,000, which equates to an additional 39,000 jobs. Add that to a January figure that is also likely to be revised higher, and the net two-month gain was exactly what the economists' January forecast of 150,000 assumed.
With investors now more preoccupied with inflation than the pace of economic growth, the report's hourly earnings component garnered even closer attention. To the market's surprise, average hourly earnings rose just 0.2%, following a downward revision to the previous month, and lowered the year/year gain to 4.0%. That was good news since it does not reflect the inflationary wage pressures that the Fed remains concerned about, as evidenced by their continued focus on "the high level of resource utilization."
Nonetheless, more evidence that the economy remains on a good growth path also did little to renew optimism about the Fed cutting rates anytime soon. Thus, with policy makers still exhibiting a tightening bias -- a fundamental shift from the point of view that helped stocks rally in the second half of 2006, it was not surprising to see a lack of conviction on the part of both buyers and sellers.
The market's resilience of late to rising energy prices was noteworthy. A late-day rally closed the March crude contract up 3.1% and at its highest levels for the year ($59.10/bbl); but since policy makers now believe that the "impetus from energy prices" has been reduced so much that there was no mention of it whatsoever in the Fed's recent FOMC statement, oil's inflationary potential was somewhat muted. The Energy sector's failure to take full advantage of oil's extended upturn, however, posed a problem from a leadership standpoint as Energy's modest 0.4% gain was only outdone by Telecom and Utilities -- two of the least influential sectors on the S&P 500.
As evidenced by the Nasdaq turning in the day's best performance among the majors, Technology attracted modest buying interest, but not even enough to offset Thursday's pullback. In fact, had it not been for a 2.0% surge in shares of Cisco Systems (CSCO 27.14 +0.55) following upbeat analyst commentary, the tech-heavy Composite might have also succumbed to some modest consolidation heading into the weekend. BTK +0.1% DJ30 -20.19 DJTA +0.2% DJUA +0.8% DOT +0.9% NASDAQ +7.50 NQ100 +0.4% R2K +0.2% SOX +0.9% SP400 +0.3% SP500 +2.45 XOI -0.3% NASDAQ Dec/Adv/Vol 1356/1648/1.92 bln NYSE Dec/Adv/Vol 1386/1869/1.41 bln
The NYSE DOW closed UP 8 points on Monday February 5
Symbol Last Change Dow 12,661.74 +8.25 (0.07%) Nasdaq 2,470.60 -5.28 (0.21%)
S&P 500 1,446.99 -1.40 (0.10%)
10-Yr Bond 4.8080% -0.0190
NYSE Volume 2,475,916,000
Nasdaq Volume 1,972,032,000
NY time 4:20 pm :
The S&P 500 snapped a four-day winning streak Monday as M&A activity, a reversal in oil, and reassurance about the pace of economic growth weren't enough to completely sideline sellers questioning the sustainability of the market's recent gains. Last week, the Dow, S&P 500 and Nasdaq surged 1.6% on average.
With the broader market turning in its best weekly performance (+1.8%) since last August, it wasn't surprising to see investors exhibiting some sense of trepidation today. Several Fed officials slated to give speeches this week, with Fed Chairman Bernanke talking tomorrow afternoon, also played into the lack of conviction on the part of both buyers and sellers, especially with earnings season winding down and no big reports today to drive the market.
The Dow clung to a small gain, but that was due in large part to a nearly 2.0% surge in shares of Hewlett-Packard (HPQ 42.81 +0.74). Investors applauded H-P's decision to strengthen its competitive position with the acquisition of Bristol Technologies. Wal-Mart (WMT 48.52 +0.44) estimating that January same-store sales will be up 2.2%, above the high end of its 1-2% guidance, also helped to offset a 1.9% decline in Microsoft (MSFT 29.61 -0.58), the day's worst performing Dow component. Microsoft fell after Barron's said future Vista sales may not justify the stock price at current levels.
Nine out of 10 sectors closed lower, but the biggest disappointments coming from two of the least influential economic sectors also underscored why the S&P 500 and Nasdaq weren't down more. The day's best performing sector was Utilities; but its 1.0% gain merely spoke to the market's defensive stance since it too is among the lowest weighted sectors in the S&P 500.
On a positive note, some M&A activity making headlines played into our Overweight rating on Financials and our belief that stock valuations remain reasonable. Triad Hospitals (TRI 49.70 +6.43) agreed to a $6.4 bln private equity buyout, State Street (STT 67.30 -4.45) is buying Investors Financial (IFIN 59.80 +12.85) for $4.5 bln, and billionaire financier Carl Icahn made a $2.4 bln bid for Lear Corp (LEA 38.70 +4.03). Since none of today's deals were blockbusters by any means, investors continued to err on the side of caution.
Also, crude for March delivery came within a nickel of hitting $60/bbl early in the session but closed well off its highs (+1.6%) and below $59/bbl. Oil eclipsing such a psychological barrier will become a bearish factor for stocks and bring its inflationary potential back into focus among policy makers. Nonetheless, subsequent deterioration throughout the Energy sector acted as an offset as investors settled into a holding pattern until presented with more notable catalysts to set a definitive tone to a market that looked ripe for a pullback.
Separately, investors got some comforting news about the pace of economic growth from the services sector, especially after the weak 49.3 read on manufacturing conditions reported last week. The January ISM survey of national services companies came in with a reading of 59.0, the highest level since May. Nonetheless, since the services sector is so steady, the report did little to ease underlying concerns about the Fed cutting rates anytime soon. DJ30 +8.25 NASDAQ -5.28 SP500 -1.40 NASDAQ Dec/Adv/Vol 1739/1302/1.95 bln NYSE Dec/Adv/Vol 1808/1459/1.40 bln
The NYSE DOW closed UP 4 points on Tuesday February 6:
Symbol Last Change
Dow 12,666.31 +4.57 (0.04%)
Nasdaq 2,471.49 +0.89 (0.04%)
S&P 500 1,448.00 +1.01 (0.07%) 10-Yr Bond 4.7650% -0.0430
NYSE Volume 2,575,722,000
Nasdaq Volume 2,198,942,000
NY Time 4:20 pm :
For a second straight day, stocks looked lethargic as the lack of catalysts this week continues to leave investors indecisive about the sustainability of last week's impressive rally.
While the absence of potentially troubling economic data cleared way for the bulls to build on recent market gains right out of the gate, renewed concerns about Tech's growth prospects, oil prices making another run at $60/bbl intraday, and some apprehension ahead of several speeches from Fed officials underpinned a sense of caution throughout the session.
Even with Fed Chairman Bernanke's testimony out of the way around 1:30 ET, which made no mention of interest rates or the economy, investors struggled to find much incentive to get back into a market ripe for a pullback on the heels of the S&P 500's best weekly performance since August.
Of the five sectors closing higher, Utilities turned in the best performance as falling bond yields made dividend-paying stocks more attractive. The Dow Jones Utilities Index was up for the seventh straight day and closed at an all-time high.
The yield on the 10-year note fell four basis points to 4.76% after this week's first refunding auction garnered surprisingly strong demand from foreign central banks. The $16 bln 3-year note auction drew a solid 2.97 bid-to-cover with indirect bidder participation checking in at 32.3%, the biggest share since May 2005.
The rate-sensitive and much more influential Financials sector, though, provided the bulk of market support that merely helped the S&P 500 claw back after falling for the first time in five days. REITs were among the day's best performers after Blackstone raised its all-cash offer for Equity Office Properties (EOP 55.95 +0.49) to $39 bln. Investors also applauded MGIC Investment's (MTG 70.00 +7.07) decision to acquire Radian Group (RDN 66.54 +5.70) for $4.9 bln in stock while an analyst upgrade on State Street (STT 68.21 +1.13) gave Asset Managers a boost.
Providing additional sector support was Principal Financial Group (PFG 63.03 +0.79), which closed at an all-time higher after posting a 15% rise in Q4 profits. However, another strong profit report within the sector also served as a reminder that, without an estimated 8% contribution in aggregate earnings growth from Financials, Q4 profit growth for the S&P 500 stands at an unimpressive 3%.
Among the five sectors losing ground, Technology was the day's most influential laggard. A Q3 revenue warning from National Semiconductor (NSM 22.71 -0.61) Monday night gave investors another reason to rotate out of semiconductor stocks. A change of heart regarding tonight's Q2 report from Cisco Systems (CSCO 27.28 -0.23), which was up 1.0% earlier in anticipation of a solid report from the tech bellwether, also took away what little momentum stocks were exhibiting early on.
Energy was another disappointment as the sector failed to benefit from a late-day rebound in crude. Even with oil prices near their highest levels of the year, Anadarko Petroleum's (APC 42.40 -0.55) Q4 shortfall offset a 3.5% surge in Grant-Prideco (GRP 40.88 +1.37). The latter is a suggested holding in Briefing.com's Active Portfolio and it handily topped Wall Street forecasts and issued upside FY07 EPS guidance. BTK -0.2% DJ30 +4.57 DJUA +0.8% NASDAQ +0.89 NQ100 -0.1% R2K +0.4% SOX -0.5% SP400 0.5% SP500 +1.01 XOI -0.5% NASDAQ Dec/Adv/Vol 1323/1673/2.14 bln NYSE Dec/Adv/Vol 1197/2087/1.42 bln