Wednesday, October 18, 2006

Dow Tops 12,000, Then Pulls Back

News Article
October 18, 2006

BusinessWeek Logo

Dow Tops 12,000, Then Pulls Back

Major indexes finished mixed after IBM posted sharply higher earnings. September housing starts unexpectedly rebounded, while the CPI rose 0.2%

Another day, another Wall Street milestone. Stocks finished mixed Wednesday, giving up initial gains after the Dow topped the 12,000 level for its first time ever. Solid earnings reports and a surprising uptick in housing starts countered a report indicating stubborn inflation.

On Wednesday, the Dow Jones industrial average rose 42.66 points, or 0.36%, to 11,992.68, a new all-time closing record. The blue-chip benchmark also touched an all-time intraday high of 12,049.51. The broader Standard & Poor's 500 index nudged added 1.91 points, or 0.14%, to 1,365.96. The tech-heavy Nasdaq composite fell 7.8 points, or 0.33%, to 2,337.15.

Options expiration, technical overbought readings, and the psychological effect of the 12,000 mark all helped limit gains, according to Chris Johnson, managing quantitative analyst at Schaeffer's Investment Research. "It's opportunity selling," Johnson says.

Investors were assessing another round of inflation data Wednesday. The consumer price index (CPI) fell 0.5% in September, while the core CPI, which excludes food and energy, rose 0.2%. The report echoes the pattern of Tuesday's producer price index, with declining gas prices but persistent price gains elsewhere, says Action Economics.

In other economic numbers, housing starts climbed 5.9% to an unexpectedly strong pace of 1.772 million in September, after an upwardly revised 1.674 million rate in August.

The economic docket Thursday holds leading indicators and the Philadelphia Federal Reserve's index of regional manufacturing activity. Weekly jobless claims figures are also on tap.

Strong quarterly results shared the spotlight Wednesday. IBM (IBM) was higher after the computer maker reported a nearly 50% jump in third-quarter profit, trumping analyst expectations.

Fellow Dow component Intel (INTC) was also higher after the chipmaker posted a 35% decline in third-quarter profit, but beat Wall Street forecasts for the first time in three quarters.

Shares of Yahoo! (YHOO) dipped after the Internet media company posted a 38% drop in third-quarter profit, despite hopes of a turnaround next year.

Data-storage provider EMC (EMC) was lower as the company posted a decline in third-quarter profit and said it would slash 1,250 jobs.

In other earnings news, J.P. Morgan (JPM) was lower after the financial institution said third-quarter profit increased 30%.

Companies set to post quarterly results after the closing bell include tech bellwether Apple (AAPL) and online auctioneer eBay (EBAY).

Among companies reporting earnings Thursday are Bank of America (BAC), Coca-Cola (KO), Honeywell (HON), SanDisk (SNDK), and Wyeth (WYE).

Elsewhere, General Motors (GM) has reportedly hired two advisers to ready itself for a possible proxy fight or other hostile action by minority shareholder Kirk Kerkorian.

Meanwhile, cable operator Time Warner Cable announced plans to sell $100 million in Class A shares in an initial public offering. All of the shares are reportedly being sold by part-owner Adelphia Communications. Media conglomerate Time Warner (TWX) controls 84% of the shares of Time Warner Cable, which would list its shares under the ticker "TWC."

In the energy markets, November West Texas Intermediate crude futures fell $1.28 to $57.65 a barrel, after a weekly inventory report showed an unexpectedly large rise in crude supplies.

European markets finished higher. In London, the FTSE-100 index rose 41.8 points, or 0.68%, to 6,150.4. Germany's DAX index climbed 67.68 points, or 1.11%, to 6,182.78. In Paris, the CAC 40 index added 58.3 points, or 1.1%, to 5,361.29.

Asian markets ended higher. In Japan, the Nikkei 225 index gained 41.41 points, or 0.25%, to 16,653. In Hong Kong, the Hang Seng index nudged higher 33.25 points, or 0.18%, to 18,048.09. Korea's Kospi index advanced 2.96 points, or 0.22%, to 1,354.26.

Treasury Market
Treasury yields ticked lower, hovering around the unchanged mark for most of the session after the upbeat housing starts data and nagging CPI gains. The 10-year note edged up in price to 100-28/32 for a yield of 4.76%, while the 30-year bond nudged higher to 93-30/32 for a yield of 4.89%.

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