BusinessWeek.com
January 26, 2007
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Stocks End Mixed as Investors Weigh Data
New home sales and durable goods orders rose in December, beating expectations. Microsoft and Caterpillar issued upbeat 2007 earnings guidance
Stocks finished mixed Friday, helped by late short-covering, as investors digested a pair of solid economic reports and another batch of earnings releases. Recent stronger-than-expected economic data fanned fears the Federal Reserve won't cut rates anytime soon, and may even have to hike, says Standard & Poor's Equity Research.On Friday, the Dow Jones industrial average slipped 15.54 points, or 0.12%, to 12,487.02. The broader Standard & Poor's 500 index shed 1.71 points, or 0.12%, to 1,420.55. The tech-heavy Nasdaq composite edged up 1.25 points, or 0.05%, to 2,435.49.
NYSE breadth was positive, with 19 issues advancing for every 14 declining. Nasdaq breadth was 18-12 positive.
In economic news Friday, U.S. new home sales climbed 4.8% to a 1.120 million rate in December, from an upwardly revised November rate of 1.069 million. The report was much stronger than expected, says Action Economics.
U.S. durable goods orders rose 3.1% in December, stronger than expected, after an upwardly revised 2.2% increase in November.
Next week's calendar holds the Fed's policy meeting, with an announcement due Wednesday. Central bankers are expected to keep interest rates unchanged, but sentiment is growing that the Fed will raise its federal funds rate target sometime in the coming months, says S&P.
Other economic releases due next week include data on January employment, fouth-quarter economic growth, and December consumer spending.
Among stocks in the news, Microsoft (MSFT) was higher as the software giant raised its 2007 profit forecast and reported fiscal second-quarter earnings that topped analyst estimates.
Fellow Dow component Caterpillar (CAT) was higher on a strong 2007 profit outlook and a 4% rise in fourth-quarter earnings.
Semiconductor stocks helped support the Nasdaq. Shares of MEMC Electronic Materials (WFR) hit a 52-week high after the silicon wafer maker said its fourth-quarter earnings more than doubled on 39% higher sales.
On the downside, Amgen (AMGN) was lower after the biotech company reported fourth-quarter earnings that missed analyst estimates.
Shares of Honeywell (HON) slipped after the high-tech manufacturer logged a 14% rise in quarterly earnings but issued a 2007 forecast that suggested full-year profits could miss analyst expectations.
Halliburton (HAL) was lower after the oil industry services provider posted a 40% drop in fourth-quarter profit.
General Motors (GM) was lower after the automaker postponed reporting its 2006 financial results, citing accounting errors.
Next week brings another torrent of earnings reports. Companies set to announce quarterly results include 3M (MMM), Merck (MRK), Exxon Mobil (XOM), and Chevron (CVX).
In analyst calls, Citigroup cut its recommendation on Cisco (CSCO) from buy to hold, but shares of the networking equipment maker gained. Citigroup also upgraded Juniper Networks (JNPR) from hold to buy, and shares of the company rose.
Elsewhere, KB Homes (KBH) was lower after the homebuilder said the SEC has begun a formal investigation into its stock-options practices.
In the energy markets, March West Texas Intermediate crude oil futures rose $1.19 to $55.42 a barrel amid cold weather forecasts.
European markets finished lower. The FTSE-100 index in London fell 41.3 points, or 0.66%, to 6,228. Germany's DAX index dropped 29.24 points, or 0.44%, to 6,690.34. In Paris, the CAC 40 index was down 26.9 points, or 0.48%, to 5,582.3.
Asian markets ended lower. In Japan, the Nikkei 225 index lost 36.37 points, or 0.21%, to 17,421.93. In Hong Kong, the Hang Seng index slid 388.7 points, or 1.88%, to 20,281.13. Korea's Kospi index shed 11.03 points, or 0.8%, to 1,371.33.
Treasury Market
Treasury yields ticked higher after the strong durables and housing reports added to other data this week pointing to unexpectedly strong economic growth. The 10-year note was little changed at 98-01/32 for a yield of 4.88%, while the 30-year bond fell to 92-22/32 for a yield of 4.98%.
