The stock market opened higher Monday following a better-than-expected rise in the sale of existing homes and a major acquisition in the pharmaceutical sector.
Analysts expected December’s existing home sales to be lower again but, instead, were told that sales increased 6.5% to an annualized rate of 4.74 million. And prior to that report, Pfizer (PFE) said that it was acquiring Wyeth (WYE) for a stock and cash deal worth $68 billion.
So, stocks opened modestly higher but then spent the remainder of the day taking back the gains.
Stockholders were subject to a variety of negative stories, including more than 500,000 job cuts, making it the third-straight month in which the economy has seen cuts of more than 500,000 and the fifth-straight month of more than 400,000 job eliminations.
Even the big pharma deal had its dark side when Pfizer said it would have to cut the dividend.
One of the most closely watched stocks, Caterpillar (CAT), fell $2.99 to $32.67 following a disappointing earnings report. And Dow Chemical (DOW) said that it would not be closing the long-awaited merger with Rohm & Haas (ROH) before today. Home Depot (HD), up 4.7%, said that it would let 7,000 workers go.
At the close, the Dow was down 38 points to 8,116. The S&P 500 (SPX) gained five points to 837 and the Nasdaq (NASD) rose 12 points, closing at 1,489.
Volume on the New York Stock Exchange barely missed making 1.3 billion shares but advancers were ahead by almost 2-to-1. The Nasdaq traded 747 million shares and advancers were ahead of decliners by 8-to-5.
Crude oil (February contract) ended down 74 cents to $45.73 a barrel. The Amex Energy SPDR (XLE) ended the day at $47.93, up 87 cents. Gold (February contract) ended higher by $13, ending at $908.80, and the PHLX Gold/Silver Index (XAU) fell $1.38 to $124.60.
What the Markets Are Saying
Despite the overwhelming tide of bad news from Q4 earnings reports, stocks not only held above the support line at Dow (DJI) 8,000 and S&P 500 (SPX) 800 Monday, but the stochastic indicator on both the NYSE Composite Index (NYA) and the Nasdaq (NASD) issued buy signals.
Our other internal indicators are still oversold, and the CBOE Volatility Index (VIX) fell to 45.69 and appears to be headed lower — which is generally a bullish sign.
The key, however, to moving the markets higher could be the financial stocks.
This week, a number of closely-watched banks, such as Dow members American Express (AXP) and Wells Fargo (WFC), will report earnings. The expectation for all of these former finance powerhouses is low, so upside surprises could have a positive impact on the Dow.
And other Dow members, such as Exxon Mobil (XOM), Boeing (BA), Chevron (CVX) and others, will undoubtedly impact the important technical support zones just under yesterday’s intraday lows.
Today’s Trading Landscape
Earnings of note to be reported include: AK Steel Holding Corp, Alliance Financial, Altera Corp, Amylin Pharmaceuticals, Ashland, Avery Dennison Corp, BJ Services Co, Black Box Network Services and Bristol-Myers Squibb.
C.H. Robinson Worldwide, Canadian Pacific Railway, Capital Southwest, Carpenter Technology, CGI Group, Check Point Software Technologies, Colonial Bank, Convergys Corp, Cooper Industries Ltd, CSG Systems, Delta Air Lines, , DeVry and DuPont.
East West Bancorp, EMC Corp, Emulex, Energizer, First Cash, FirstMerit, FPL Group, Gilead Sciences, Jacobs Engineering Group, Keynote Systems, Kinetic Concepts, LAN Airlines, Lexmark Int’l, Marten Transport, Mercury Computer Systems and Molex.
New York Community Bancorp, NewAlliance Bancshares, Norfolk Southern Corp, Nucor, Peabody Energy Corp, Phoenix Technologies, Preferred Bank, Prosperity Bancshares, Provident Bankshares Corp, Rayonier, RF Micro Devices, RLI Corp and Rock-Tenn Company.
Seacoast Banking FL, Siemens AG, St. Jude Medical, StanCorp Financial Group, Steris, Sterling Bancorp, ST Microelectronics, Stryker, Sun Microsystems, Tellabs, The Hershey Co, The McGraw Hill Companies, The Travelers Companies and Trustmark Corp.
United States Steel Corp, Valero Energy Corp, Verizon, VistaPrint, Waddell & Reed Financial, Waters Corp, Websense, Wilshire Bancorp and Yahoo.
Several economic reports are due today including: International Council of Shopping Centers (ICSC) Chain Store Sales Index for Jan. 24, Redbook Retail Sales Index for Jan. 24, November S&P/Case Shiller Home Price Index, January Richmond Fed Manufacturing Survey, January Conference Board Consumer Confidence, API Oil Industry Report, and ABC/Washington Post Consumer Confidence for Jan. 24.
DuPont (DD) beat Q4 estimates, reporting 70 cents versus an expected 60 cents a share.
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