January 4, 2007
Falling Oil Lifts Stocks
Crude futures slid below $56 after a bearish inventory report. But retailers' December sales results disappointed the StreetMajor stock indexes finished higher Thursday, bouncing back from early lows as 2007 continued to get off to a roller coaster start. Crude oil prices tumbled for a second straight day, offsetting lackluster retail sales and a round of economic data that was slightly weaker than expected.
On Thursday, the Dow Jones Industrial average nudged higher 6.17 points, or 0.05%, to 12,480.69. The broader Standard & Poor's 500 index rose 1.74 points, or 0.12%, to 1,418.34. The tech-heavy Nasdaq composite climbed 30.27 points, or 1.25%, to 2,453.43, boosted by Intel (INTC) and Qualcomm (QCOM).
NYSE breadth was flat, with as many stocks advancing as declining. Nasdaq breadth was 17-13 positive.
Oil prices extended their recent descent, weighing on corresponding shares but apparently cheering traders. In the energy markets, February West Texas Intermediate crude oil futures fell $2.73 to $55.59 a barrel, after a weekly inventory report showed an unexpectedly large decline in crude supplies alongside larger-than-expected supply increases for gasoline and distillates.
In economic news, the Institute for Supply Management's non-manufacturing index fell to 57.1 in December, from 58 in November. Separately, U.S. factory orders rose 0.9% in November, slightly below expectations, after October's positively revised 4.5% decline.
Investors were also considering disappointing data on the housing market. The National Association of Realtors' pending home sales index inched lower to 107.0, from 107.2 in October.
U.S. jobless claims rose 10,000 to 329,000 in the week ended Dec. 30, from an upwardly revised 319,000 a week earlier. The increase was larger than expected but small compared to typical holiday-week volatility, says Action Economics.
Looking ahead, Friday's report on nonfarm payrolls may give indications of where the economy and the Federal Reserve are headed, says Standard & Poor's Equity Research. Fed Chairman Ben Bernanke is set to speak at a conference in Chicago.
Among stocks in the news, retailers reported tepid sales gains for December. Companies posting disappointing results included Gap (GPS), Limited Brands (LTD), Pacific Sunwear (PSUN), Pier 1 Imports (PIR), and Zale (ZLC).
On the upside, Wal-Mart (WMT), Target (TGT), and Costco (COST) were among retailers reporting December same-store sales that topped Wall Street forecasts.
In earnings news, Monsanto (MON) was lower after the agricultural products maker reported a 53% rise in fiscal first-quarter profit but issued full-year guidance below analyst expectations.
On the M&A front, Cisco (CSCO) agreed to buy closely held network-security company IronPort Systems for $830 million in cash and stock.
Beer maker Redhook Ale Brewery (HOOK) said it has entered into preliminary talks with peer Widmer Brothers Brewing over a possible combination of the two companies.
Elsewhere, Eli Lilly (LLY) agreed to settle additional liability lawsuits over its anti-psychotic drug Zyprexa for less than $500 million.
European markets finished lower. The FTSE-100 index in London fell 34.9 points, or 0.55%, to 6,284.1. Germany's DAX index dropped 16.92 points, or 0.25%, to 6,674.4. In Paris, the CAC 40 index was down 36.36 points, or 0.65%, to 5,574.56.
Asian markets ended mixed. In Japan, the Nikkei 225 index gained 127.84 points, or 0.74%, to 17,353.67. In Hong Kong, the Hang Seng index tumbled 387.81 points, or 1.9%, to 20,025.58. Korea's Kospi index slid 12.06 points, or 0.86%, to 1,397.29.
Treasury yields ticked lower following the weaker batch of economic data. The 10-year note rose in price to 100-03/32 for a yield of 4.62%, while the 30-year bond climbed to 96-16/32 for a yield of 4.73%. The latest economic reports did not look strong enough to make the Fed shift its policy stance, and some traders were apparently betting that Friday's payrolls report will show a modest increase, says S&P.