US Stocks Turn Mixed On Disappointing Boeing Earnings
-The Dow Jones Industrial Average pulled back modestly Wednesday after briefly rising above the 12000 mark for the first time in nearly three years as investors digested resurgent home sales and President Barack Obama's State of the Union address.
The Dow was up 5.5 points to 11983 in mid-day trading, dragged down by disappointing earnings from Boeing. Leading on the upside was Dupont, up 2.7%. A finish above 12000 would reclaim a level that the blue-chip index last surrendered in June 2008.
The Nasdaq Composite gained 16 points to 2735, while the Standard & Poor's 500-stock index was up five points at 1296, putting it on the cusp of 1300, a level it last held in August 2008.
The traversing of the 12000 barrier, while temporary, was the latest reminder of the durability of the stock market bull run on a trading day dominated by headline news from the government and the Federal Reserve, whose massive interventions helped propel markets to its 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 gained nearly 20%.
The bull market's reliance on the Fed, however, 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.... Nine to ten percent 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."
Wednesday's moves came after Obama's State of the Union speech Tuesday night challenged lawmakers in both major parties to rise above partisan divisions to tackle problems that will allow the U.S. to compete in the global economy. Among his proposals, the president called on 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.
New-home sales data also came in much stronger than expected, pushing the market higher. Sales increased 17.5% compared with the prior month, rising to a seasonally adjusted annual sales pace of 329,000. The increase was driven by a nearly 72% jump in the West. Economists had 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 the same month a year ago.
Investors are still awaiting the latest statement from the Federal Open Market Committee at 2:15 p.m. EST. The market will be watching for confirmation that the central bank still sees the economy as improving, but still in need of its stimulus. Investors are also curious to see how many dissenters there will be to the continuation of the quantitative-easing program, given that there will be a different mix of Fed presidents voting. Just one or two of the Fed presidents are expected to dissent, so no policy changes are likely.
Leading the way on Wednesday were materials and energy stocks. AK Steel Holding rose 4.1%, Cliffs Natural Resources gained 3.1% and U.S. Steel added 2.5%. Halliburton surged 5.5% and Baker Huges advanced 4%.
Among Wednesday's slew of earnings announcements, aerospace giant Boeing posted an 8.2% decline in fourth-quarter profit, despite a tax-related gain adding to the bottom line, as revenue and margins slid. Boeing offered a 2011 profit forecast of $3.80 to $4 a share, below FactSet Research consensus estimates of $4.59 a share. Shares fell 3.6%, the deepest decliner among the Dow's 30 components.
United Technologies fell 1.1% after strong gains on Tuesday. The maker of Otis elevators and Pratt & Whitney plane engines reported a 12% rise in profit to $1.2 billion as sales grew 6.3%, topping analysts' estimates. Revenue increased at five of the company's six segments.
Airline stocks were also bolstered by hopes that carriers will be able to continue increasing airfares amid rising passenger demand. US Airways Group soared 12% after swinging to a fourth-quarter profit, despite significantly higher fuel prices amid a rebound in demand and cost controls.
United Continental Holdings jumped 8.6% as revenues grew better than expected growth amid rising traffic and capacity. Even so, the company--reporting combined results for the first time since October's merger between UAL Corp.'s United Airlines and Continental Airlines--reported a widening loss.
American Airlines parent AMR Corp. gained 4.7% while Delta Air Lines added 2.1%.
Xerox tumbled 7.3% after fourth-quarter earnings declined 5%, hurt by restructuring costs and a modest first-quarter earnings outlook.
SAP AG gained 1.7% in New York after Europe's largest software maker showed operational strength, despite taking a fourth-quarter hit on charges of almost one billion euros 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 shares lost 1.9% in New York after the auto maker said it was recalling more than 1.7 million vehicles worldwide to fix problems, including fuel-system defects.
The euro slipped to $1.3675, from $1.3685 late Tuesday, while oil edged up and gold fell. Treasurys slumped broadly, pushing the yield on the benchmark 10-year note to 3.395%.
Tuesday, January 25, 2011
WORLD FOREX: Euro Rises Vs Dollar
The euro gained against the dollar in Asia Tuesday as firm share prices in most Asian markets buoyed risk sentiment, while expectations grew that the European Central Bank may raise interest rates ahead of the U.S. and Japan, benefiting the common currency.
Asian shares gained broadly after a strong performance on Wall Street, with the Australian market bolstered by news of lower-than-expected inflation. Japan's Nikkei Stock Average was up 1.1% while Australia's S&P/ASX 200 was 0.5% higher. Markets in South Korea and Hong Kong also gained.
Also helping the euro are growing expectations the euro-zone may raise key interest rates to combat rising inflation in the coming months, while the U.S. and Japan likely continue on the easing path, dealers said.
"Speculation is growing that the euro-zone will be the first to raise interest rates among major economies, Japan, the U.S. and the euro-zone," said Tomohiro Nishida, senior dealer at Chuo Mitsui Trust and Banking.
"Although Europe has a long way to go to get its fiscal mess in order, recent economic data show the economy is expanding. And with bond yields much higher than their U.S. counterparts, the euro is getting plenty of support," said Croy David, senior interest rate strategist at ANZ Bank in Wellington.
The Bank of Japan's policy board decided Tuesday to keep its easy monetary policy unchanged, as stable financial markets and growing optimism toward the economic outlook give it room to gauge the effects of "comprehensive monetary easing" announced in October.
Dealers said no immediate reaction was seen in the foreign exchange market to the Japanese central bank decision.
In Europe, attention will likely focus on the first sale of up to EUR5 billion of bonds by the European Financial Stability Facility, dealers said.
"The sentiment (for the euro) will get another boost if the bond sales attract a great deal of demand," Kenichiro Ikezawa, fund manager at Daiwa SB Investments.
Ikezawa said the euro may rise to 1.3740 later in the global day.
The euro was at $1.3656 as of 0450 GMT from $1.3638 late Monday in New York, according to EBS. The dollar was at Y82.44 from Y82.53, while the euro was at Y112.59 from Y112.55.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 77.933 from 78.038.
Elsewhere, the Australian dollar fell against the dollar on weaker-than-expected Australian consumer price index data for the fourth quarter. The Australian dollar was at $0.9956 from $0.9987.
The Australian consumer price index rose 0.4% in the fourth quarter of 2010 from the third quarter, and 2.7% from a year earlier, the Australian Bureau of Statistics said Tuesday. Economists on average had expected the CPI to post a gain of 0.7% in the quarter.
Economists said the Reserve Bank of Australia, which targets inflation at 2%-3%, now looks likely to be sidelined until the second half of 2011
The euro gained against the dollar in Asia Tuesday as firm share prices in most Asian markets buoyed risk sentiment, while expectations grew that the European Central Bank may raise interest rates ahead of the U.S. and Japan, benefiting the common currency.
Asian shares gained broadly after a strong performance on Wall Street, with the Australian market bolstered by news of lower-than-expected inflation. Japan's Nikkei Stock Average was up 1.1% while Australia's S&P/ASX 200 was 0.5% higher. Markets in South Korea and Hong Kong also gained.
Also helping the euro are growing expectations the euro-zone may raise key interest rates to combat rising inflation in the coming months, while the U.S. and Japan likely continue on the easing path, dealers said.
"Speculation is growing that the euro-zone will be the first to raise interest rates among major economies, Japan, the U.S. and the euro-zone," said Tomohiro Nishida, senior dealer at Chuo Mitsui Trust and Banking.
"Although Europe has a long way to go to get its fiscal mess in order, recent economic data show the economy is expanding. And with bond yields much higher than their U.S. counterparts, the euro is getting plenty of support," said Croy David, senior interest rate strategist at ANZ Bank in Wellington.
The Bank of Japan's policy board decided Tuesday to keep its easy monetary policy unchanged, as stable financial markets and growing optimism toward the economic outlook give it room to gauge the effects of "comprehensive monetary easing" announced in October.
Dealers said no immediate reaction was seen in the foreign exchange market to the Japanese central bank decision.
In Europe, attention will likely focus on the first sale of up to EUR5 billion of bonds by the European Financial Stability Facility, dealers said.
"The sentiment (for the euro) will get another boost if the bond sales attract a great deal of demand," Kenichiro Ikezawa, fund manager at Daiwa SB Investments.
Ikezawa said the euro may rise to 1.3740 later in the global day.
The euro was at $1.3656 as of 0450 GMT from $1.3638 late Monday in New York, according to EBS. The dollar was at Y82.44 from Y82.53, while the euro was at Y112.59 from Y112.55.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 77.933 from 78.038.
Elsewhere, the Australian dollar fell against the dollar on weaker-than-expected Australian consumer price index data for the fourth quarter. The Australian dollar was at $0.9956 from $0.9987.
The Australian consumer price index rose 0.4% in the fourth quarter of 2010 from the third quarter, and 2.7% from a year earlier, the Australian Bureau of Statistics said Tuesday. Economists on average had expected the CPI to post a gain of 0.7% in the quarter.
Economists said the Reserve Bank of Australia, which targets inflation at 2%-3%, now looks likely to be sidelined until the second half of 2011
U.S. stock index futures down
* U.S. stock index futures pointed to a weaker open on Wall Street on Tuesday, with futures for the S&P 500 SPc1, for the Dow Jones DJc1 and for the Nasdaq 100 NDc1 down 0.1-0.2 percent.
* The U.S. Federal Open Market Committee begins its two-day meeting on interest-rate policy. The Fed, in a statement due around 1915 GMT on Wednesday, was widely expected to acknowledge improving economic conditions marked by signs of life among consumers and factories. [ID:nFEDAHEAD]
* At 1245 GMT ICSC/Goldman Sachs will release chain store sales for the week ended Jan. 22, versus the prior week. In the previous week, sales fell 0.1 percent.
* BlackRock Inc (BLK.N), the world's largest asset manager, is expected to report healthy gains in fourth quarter profit and revenue on Tuesday, aided in no small measure by the global stock market rally. [ID:nN24204446]
* Other major companies to report results on Tuesday include Yahoo (YHOO.O), Johnson & Johnson (JNJ.N), DuPont (DD.N), 3M Company (MMM.N) and Harley-Davidson (HOG.N).
* At 1355 GMT, Redbook releases its Retail Sales Index of department and chain store sales for January versus December. In the prior period, sales were down 0.6 percent.
* Britain is to give News Corp (NWSA.O) a final chance to avoid a prolonged and costly investigation into its proposed $12 billion buyout of BSkyB (BSY.L), in a move that is likely to draw criticism from rivals. [ID:nLDE7040N6]
* At 1400 GMT Standard & Poor's is set to release its S&P Case/Shiller Home Price Index for November. Economists expect a drop of 0.8 percent versus a 1.0 percent fall in the previous month.
* A package of U.S. tax cuts should give a lift to a global economic recovery that had already begun to gain speed late last year, the IMF said as it revised its world growth forecast higher. [ID:nJAT007100]
* At 1500 GMT, the Federal Housing Finance Agency issues Home Price Index for November. In October, the index rose 0.7 percent.
* Also at 1500 GMT the Conference Board releases January consumer confidence. Economists in a Reuters survey expect a reading of 54.3 compared with 52.5 in December.
* Resource-related stock will be in focus, with U.S. oil CLc1 falling for a second straight session as an expected rise in U.S. stocks and a weak technical outlook weighed on prices.
* The FTSEurofirst 300 .FTEU3 index of top European shares was flat in morning trade after gaining earlier in the session, while Japan's Nikkei average .N225 ended 1.2 percent firmer.
* On Monday the Dow Jones industrial average .DJI ended up 108.68 points, or 0.92 percent, at 11,980.52. The Standard & Poor's 500 Index .SPX was up 7.49 points, or 0.58 percent, at 1,290.84. The Nasdaq Composite Index .IXIC was up 28.01 points, or 1.04 percent, at 2,717.55.
* U.S. stock index futures pointed to a weaker open on Wall Street on Tuesday, with futures for the S&P 500 SPc1, for the Dow Jones DJc1 and for the Nasdaq 100 NDc1 down 0.1-0.2 percent.
* The U.S. Federal Open Market Committee begins its two-day meeting on interest-rate policy. The Fed, in a statement due around 1915 GMT on Wednesday, was widely expected to acknowledge improving economic conditions marked by signs of life among consumers and factories. [ID:nFEDAHEAD]
* At 1245 GMT ICSC/Goldman Sachs will release chain store sales for the week ended Jan. 22, versus the prior week. In the previous week, sales fell 0.1 percent.
* BlackRock Inc (BLK.N), the world's largest asset manager, is expected to report healthy gains in fourth quarter profit and revenue on Tuesday, aided in no small measure by the global stock market rally. [ID:nN24204446]
* Other major companies to report results on Tuesday include Yahoo (YHOO.O), Johnson & Johnson (JNJ.N), DuPont (DD.N), 3M Company (MMM.N) and Harley-Davidson (HOG.N).
* At 1355 GMT, Redbook releases its Retail Sales Index of department and chain store sales for January versus December. In the prior period, sales were down 0.6 percent.
* Britain is to give News Corp (NWSA.O) a final chance to avoid a prolonged and costly investigation into its proposed $12 billion buyout of BSkyB (BSY.L), in a move that is likely to draw criticism from rivals. [ID:nLDE7040N6]
* At 1400 GMT Standard & Poor's is set to release its S&P Case/Shiller Home Price Index for November. Economists expect a drop of 0.8 percent versus a 1.0 percent fall in the previous month.
* A package of U.S. tax cuts should give a lift to a global economic recovery that had already begun to gain speed late last year, the IMF said as it revised its world growth forecast higher. [ID:nJAT007100]
* At 1500 GMT, the Federal Housing Finance Agency issues Home Price Index for November. In October, the index rose 0.7 percent.
* Also at 1500 GMT the Conference Board releases January consumer confidence. Economists in a Reuters survey expect a reading of 54.3 compared with 52.5 in December.
* Resource-related stock will be in focus, with U.S. oil CLc1 falling for a second straight session as an expected rise in U.S. stocks and a weak technical outlook weighed on prices.
* The FTSEurofirst 300 .FTEU3 index of top European shares was flat in morning trade after gaining earlier in the session, while Japan's Nikkei average .N225 ended 1.2 percent firmer.
* On Monday the Dow Jones industrial average .DJI ended up 108.68 points, or 0.92 percent, at 11,980.52. The Standard & Poor's 500 Index .SPX was up 7.49 points, or 0.58 percent, at 1,290.84. The Nasdaq Composite Index .IXIC was up 28.01 points, or 1.04 percent, at 2,717.55.
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