Wednesday, November 22, 2006

Stocks Drift Higher Ahead of Holiday

News Article
November 22, 2006

BusinessWeek Logo

Stocks Drift Higher Ahead of Holiday

Dell's third-quarter profit topped forecasts, but reports on consumer sentiment and jobless claims missed expectations. Also in focus: GM, Alcoa

Major stock indexes finished modestly higher in slow trading Wednesday, as investors digested solid Dell (DELL) earnings and a pair of weaker-than-expected economic reports. The market will be closed Thursday for Thanksgiving and will have a shortened trading session on Friday.

On Wednesday, the Dow Jones industrial average nudged higher 5.36 points, or 0.04%, to 12,326.95, after hitting a new all-time intraday high of 12,361.00. The broader Standard & Poor's 500 index rose 3.28 points, or 0.23%, to 1,406.09. The tech-heavy Nasdaq composite rose 11.14 points, or 0.45%, to 2,465.98.

Solid earnings news was in focus Wednesday. Dell was sharply higher after the computer maker late Tuesday issued a delayed third-quarter earnings report that beat analyst expectations. Bear Stearns upgraded the stock from peer perform to outperform.

On the economic docket, University of Michigan's consumer sentiment index fell to 92.1 in its final November reading, weaker than expected, from 93.6 in October.

Separately, initial jobless claims rose 12,000 to 321,000, more than anticipated, in the week ended Nov. 18. That follows an upwardly revised 309,000 increase the week before.

After a few quiet days, the economic calendar picks up again next week. Key data releases are set to include October existing and new home sales, the Institute for Supply Management's manufacturing index, personal income, durable goods orders, and auto sales. A revised reading on third-quarter economic growth, the Federal Reserve's Beige Book, and Chicago PMI will also be on tap.

General Motors (GM) weighed on the Dow on Wednesday as billionaire investor Kirk Kerkorian's Tracinda Corp. reported cutting its stake in the automaker from 9.9% to 7.4%.

MGM Mirage (MGM) was sharply higher amid news Tracinda plans to raise its stake in the casino owner. Tracinda reportedly intends to offer $55 a share in cash for up to 15 million shares of the company.

Alcoa (AA) was higher after the aluminum producer announced it will cut 6,700 jobs as part of a restructuring effort.

Fellow Dow component Merck (MRK) was modestly higher following a federal judge's ruling that lawsuits claiming the drugmaker's Vioxx painkiller killed or injured people by causing heart attacks could not go forward as a class-action suit.

Supercomputer maker Cray (CRAY) was up sharply after winning a $250 million contract from the U.S. Defense Advanced Research Projects Agency.

Shares of Brocade Communications Systems (BRCD) climbed as the networking equipment maker posted a jump in fourth-quarter profit on improved sales and gross margins. Needham analysts upgraded the stock from hold to buy.

Hormel Foods (HRL) was higher after the Spam maker reported a 9% rise in fourth-quarter earnings, topping Street estimates.

Internet media company Yahoo! (YHOO) was higher as Bank of America analysts issued positive comments, maintaining a buy rating on the stock. Rival Google (GOOG) was down modestly.

M&A news continued to percolate. Comcast (CMCSA) bought Disney's (DIS) 39.5% stake in E! Entertainment Television for $1.23 billion and inked a deal allowing the cable provider to distribute Disney content through video-on-demand.

Meanwhile, IAC/InterActiveCorp (IACI), DirecTV (DTV), and Questar (STR) were higher after Standard & Poor's picked the companies to be part of the S&P 500 index.

In the energy markets, January West Texas Intermediate crude futures fell 93 cents to $59.24 barrel after a weekly inventory reported showed an unexpectedly large increase in crude supplies.

European markets finished mixed. In London, the FTSE-100 index fell 42.3 points, or 0.68%, to 6,160.3. Germany's DAX index rose 15.74 points, or 0.24%, to 6,476.13. In Paris, the CAC 40 index slipped 6.86 points, or 0.13%, to 5,452.49.

Asian markets ended sharply higher. In Japan, the Nikkei 225 index gained 180.09 points, or 1.14%, to 15,914.23. In Hong Kong, the Hang Seng index climbed 242.49 points, or 1.28%, to 19,250.79. Korea's Kospi index advanced 16.64 points, or 1.18%, to 1,422.54.

Treasury Market
Treasuries prices drifted higher after the weaker-than-expected data on consumer sentiment and jobless claims. The 10-year note edged up in price to 100-16/32 for a yield of 4.57%, while the 30-year bond rose modestly to 97-22/32 for a yield of 4.65%.

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