US Stocks Close Up Slightly




The Dow Jones Industrial Average vaulted over 12000 for the first time in almost three years but couldn't hold its ground, closing just short of the milestone as investors digested President Obama's State of the Union address and the unanimous decision by the Federal Reserve to stay the course on supporting the economy.

The Dow finished up 8.25 points, or 0.07%, at 11985.44, restrained by disappointing earnings from Boeing. Leading on the upside was DuPont, up 2.6%.

The Nasdaq Composite Index rose 20.25 points, or 0.74%, to 2739.50, while the Standard & Poor's 500-stock index rose 5.45 points, or 0.42%, to 1296.63. The S&P 500 fell just short of the 1300 barrier, which it last held in August 2008, trading as high as 1299.74 in afternoon trading.

The traversing of 12000, while fleeting, was the latest reminder of the durability of the stock market's bull run on a day dominated by headline news from the government and the Federal Reserve, whose massive interventions helped propel markets to the current levels.

The Dow made its first pass at 12000 in 2006, as credit expansion fueled a home-buying binge that eventually ended in the 2007-2008 housing bust. From a peak of 14198.10 in October 2007, the market tumbled to a March 2009 low of 6469.95, wiping out more than half of the blue-chip index's market capitalization.

However, a combination of fiscal and in particular monetary stimulus helped fuel optimism in the market. Since the Federal Reserve made clear its plans to embark on a second massive wave of asset buying last August, the market has climbed nearly 20%.

On Wednesday, the latest statement from the Federal Open Market Committee showed the central bank's commitment to stimulating the economy, with the committee arriving at a consensus decision after a shuffling of the voting membership.

Still, the bull market's reliance on the Fed has had some investors questioning the durability of the rally.

"Corporate earnings have been so dramatically better over the last two years that, even though it hasn't equated in a better economy, people see these earnings and want to get involved," said Peter Costa, a New York Stock Exchange floor trader with Empire Executions. "After the housing bubble that burst in 2007-08, I think we'll probably never see those levels again....9% to 10% of our people are just trying to make ends meet, and I'm not sure you can get that sort of a run-up when so many people are just trying to get basic needs met."

In the State of the Union speech Tuesday night, President Obama challenged lawmakers in both parties to rise above partisan divisions to tackle problems that will enable the U.S. to compete in the global economy. Among his proposals were calls for Congress to lower the corporate tax rate by closing industry-specific loopholes and find spending cuts across the government. The president also called for a five-year freeze on nondefense discretionary spending.

"A lot of what he said could have been said by a Republican," said Doug Roberts, chief investment strategist at Channel Capital Research. Mr. Roberts said much of the expectations of President Obama's move to the center had already been factored in by the market, but Tuesday's speech were still important for reaffirming market expectations of a more centrist government.

Wednesday morning, data on new-home sales came in much stronger than expected, pushing the market higher. Sales increased 17.5% from the prior month, rising to a seasonally adjusted annual pace of 329,000 homes. The increase was driven by a nearly 72% jump in the western U.S. Economists expected an increase to an annual rate of 299,000. The median sales price for a new home sold in December was up 8.5% from a year earlier.

"The positive home numbers correlate well with the consumer confidence numbers that came out earlier," said Chip Cobb, senior vice president at Bryn Mawr Trust Asset Management. Still, Mr. Cobb remained concerned about unemployment, saying he expects the jobless rate to stay above 9% this year.

Leading the way were materials and energy stocks. AK Steel Holding rose 5.2%, Cliffs Natural Resources climbed 7.3% and U.S. Steel added 3.8%. Halliburton surged 8% and Baker Hughes advanced 5.9%.

Among the day's slew of earnings announcements, aerospace giant Boeing posted an 8.2% decline in fourth-quarter profit as revenue and margins slid. Boeing offered a 2011 profit forecast well below consensus expectations, pushing shares down 3.1% to make it the steepest decliner among the Dow's 30 components.

United Technologies slipped 0.4% after the maker of Otis elevators and Pratt & Whitney plane engines reported a 12% rise in profit as sales climbed 6.3%, topping analysts' estimates. Revenue increased at five of the company's six segments.

Airline stocks were bolstered by hopes that carriers will be able to continue increasing airfares amid rising passenger demand. US Airways Group soared 6.6% after swinging to a fourth-quarter profit, despite significantly higher fuel prices amid a rebound in demand and cost controls.

United Continental Holdings jumped 7.1% as revenue increased more than expected on rising traffic and capacity. Even so, the company reported a wider loss. (It was listing combined results for the first time since October's merger between UAL Corp.'s United Airlines and Continental Airlines.)

American Airlines parent AMR rose 2.5%. Delta Air Lines added 3%.

Xerox tumbled 7.7% after fourth-quarter earnings declined 5%, hurt by restructuring costs and a modest first-quarter earnings outlook.

SAP advanced 2.4% in New York after Europe's largest software maker showed operational strength, despite taking a fourth-quarter hit to cover the costs of its lawsuit with rival Oracle. The German company said it would raise its dividend for 2010 by 20%, and it expects sales and profit growth in 2011.

Yahoo fell 2.8% after the Internet search company late Tuesday gave a current-quarter revenue forecast that fell short of Wall Street's expectations.

Toyota Motor shed 1.9% in New York after the auto maker said it was recalling more than 1.7 million vehicles world-wide to fix problems, including fuel-system defects.

The euro held steady at $1.3689, from $1.3685 late Tuesday. Oil rose 1.3% to break a six-day losing streak, while gold edged down. Treasurys slumped broadly, pushing the yield on the benchmark 10-year note to 3.43%.