Wall Street successfully navigated through numerous dark clouds onTuesday as the Dow ended in the green for the fourth day of the last five despite a bleak economic picture depicted by the Federal Reserve and countless economic reports.
Today's Markets
The Dow Jones Industrial Average jumped 62.21 points, or 0.69%, to 9015.10, the S&P 500 added 7.25 points, or 0.78%, to 934.70 and the Nasdaq Composite picked up 24.35 points, or 1.50%, to 1652.38. The consumer-friendly FOX 50 gained 3.94 points, or 0.56%, to 708.71.
“The general tone for the last couple of weeks has been to look past the negativity. There are expectations that the new administration is going to be extremely helpful to the economy,” said Michael James, senior equity trader at Wedbush Morgan Securities. “People are for the most part figuring they need to have more exposure to equities for the economic recovery later this year."
The markets ended near the midpoint of their trading range of the day, giving back some of an early triple-digit rally on the Dow but also managing to stay out of negative territory despite significant headwinds.
More than half of the 30 components of the Dow ended higher, led byHewlett-Packard (HPQ) and GeneralMotors (GM). Also,Citigroup (C) and AmericanExpress (AXP) saw heavy buying. On the other hand, the declining stocks were led by defensive names like Pfizer(PFE) and McDonald's (MCD).
Tuesday's gains helped cancel out a modestly negative start to the week as the Dow lost 82 points a day ago, ending a streak of three consecutive triple-digit rallies. The benchmark index has climbed more than 1500 points from its 5 1/2-year low hit on November 20.
The bulls on Wall Street can take solace in the fact that Wall Street has managed to hold onto last week's huge rally, which came without heavy market participation due to the holidays.
“There are some positive signs out there even though there are some negative economic numbers," said Anthony Conroy, head trader at BNYConvergEx. Conroy pointed to Monday's news that President-elect Barack Obama's economic stimulus package may include $300 billion in tax cuts as well as less demand for Treasuries, which could indicate new money returning to equities.
Markets Withstand Gloomy Data,FOMCMinutes
Wall Street managed to stay in positive territory even after the Federal Open Market Committee's latest minutes revealed the central bank sees the "distinct possibility of a prolonged contraction" as unemployment rises "significantly" into 2010.
The FOMC minutes, which detailed the Dec. 16 meeting where the Fed slashed interest rates to zero for the first time ever, also showed the central bank sees a growing threat of deflation, a steep drop in prices.
Meanwhile, an industry group revealed that pending U.S. home sales plummeted to the lowest level since records began in 2001 during November. The National Association of Realtors said sales of previously owned homes slid 4% in November, compared to the 1% decline analysts expected. The housing sector shrugged off the report as shares of home builders like Lennar(LEN) and Hovnanian (HOV) ended sharply higher.
Also, the government said factory orders plunged by 4.6% in November, compared to expectations for a 2.2% decline. The results represent a fourth consecutive monthly decline, a record for factory orders.
On the upside, the Institute for Supply Management said the U.S. service sector unexpectedly rebounded in December. The private research group's IMS non-manufacturing index improved to a 40.6 reading last month, up from 37.3 in November and well above the 36.8 reading that had been expected.Still, a sub-50 reading indicates contraction.
Crude's Hot Streak Ends
Despite the conflict in the Middle East and Gazprom's reported gas supply cutoffs, crude oil futures failed to extend a three-day win streak that had added 25% to the commodity. The price of a barrel of crude sank 23 cents, or 0.47%, to $48.58. Oil prices soared to as high as $50.47 per barrel, sparking an earlier rally in energy stocks like ExxonMobil (XOM).
Oil futures bucked the trend as commodities rose broadyly on Tuesday, led by a 8.6% jump for copper, which ended at one-month highs. Commodity-based companies such as multinational mining giant Rio Tinto (RTP) and aluminum titan Alcoa (AA) saw heavy buying on Tuesday.
"Oil is hovering around $50 and that's a good sign," NYSE trader Frank Chester of Christopher J.Forbes told FOXBusiness. "The market is stabilizing.I think in three or four months we should have a good trading market."
Corporate Movers
Dow Chemical (DOW) announced plans to purse legal and other options against Kuwait, which scrapped a $17.4 billion joint venture with Dow last month. The chemicals company also said it has accelerated discussions around new partnerships and will continue to pay its quarterly dividend.
Bank of America (BAC) CEO Ken Lewis expects the banking giant’s final results to miss expectations, according to an internal document obtained by The Wall Street Journal. Lewis is recommending he and his top lieutenants receive no bonus for 2008, the newspaper reported.
Wells Fargo (WFC) had its debt ratings lowered by Moody’s, which said the bank’s capital position is “significantly weakened” by its acquisition of Wachovia.
Apple (AAPL) saw its shares sink after the tech heavyweight's annual MacWorld presentation ended without any significant new products or an appearance by co-founder Steve Jobs. The presentation came just a day after the Jobs said he will stay on as CEO while he recovers from a hormone imbalance.
Prudential (PRU) closed sharply higher after the insurer was chosen as a top pick by Fox-Pitt, which said it was “pointed to have a solid 2009.” S&P Equity Research also raised its price target on Prudential by $10 to $40.
Toyota (TM), which disclosed a 37% plunge in U.S. sales for last month, plans to halt production at its Japanese plants for 11 days in February and March. The auto maker already announced plans to halt production for three days this month.
Logitech (LOGI), the world’s largest computer mouse maker, abandoned its growth targets for fiscal 2009 sales and operating company. Citing the expectation for the global economy to weaken further, Logitech said it plans to slash 15% of its global salaried workforce.
Bank of America (BAC) may face new questions about its ability to merge with brokerage giant Merrill Lynch as the Journal reported Robert McCann, Merrill’s brokerage chief, has unexpectedly left the newly combined company.
CBS (CBS) avoided a dispute with Time Warner Cable (TWC) by inking a deal allowing for the retransmission of content from CBS-owned and operated TV stations and Showtime through 2013.
Foreign Markets
European markets continued their hot start to 2009 as the Dow Jones Euro Stoxx 50 Index, which gauges the 50 largest companies in Europe, jumped 1.5% to end higher for the fifth consecutive day. In the individual European markets, London's FTSE 100 was higher by 1.3% while Germany's DAX jumped by 0.85% and France's CAC 40 rose 1.1%.
In Asia, Tokyo's Nikkei 225 gained 37.72 points, or 0.42%, to 9080.84. Hong Kong's Hang Seng fell slightly by 53.80 points, or 0.35%, to 15509.51. The materials-heavy Australian ASX 200 index gained 1.5% in overnight trading.
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