Yesterday, Abu Dhabi provided financing for Dubai, while Exxon Mobil (XOM) acquired XTO Energy (XTO). Together the pair of financings drove the Dow Jones Industrial Average (DJI) to another 14-month closing high.
XTO jumped 15% on the Exxon buyout, which helped the broad market, but XOM fell 4.3% taking 24 points from the Dow’s advance.
After stocks initially jumped on the financial deals, trading slowed in the afternoon to its now normal holiday pace.
This was partially due to Standard & Poor’s lowering their foreign sovereign credit rating and local currency rating on Mexico, which had a dampening effect on the markets.
Financial stocks finished with a slight gain following early selling in Citigroup (C). The endangered bank announced that it would repay its $20 billion TARP loan and terminate its loss-sharing agreement with the government with an issue of $17 billion of common stock with other contingencies. Citigroup stock fell 6.3% because of the dilution to shareholders.
The Citigroup announcement gave rise to talk that Wells Fargo (WFC) and PNC Financial (PNC) may soon follow with repayments of their own.
The U.S. dollar fell with the Dollar Index off 0.3%, which gave support to stocks, especially materials stocks.
At the close, the Dow had gained 30 points to 10,501, the S&P 500 (SPX) was up 8 points to 1,114, and the Nasdaq (NASD) rose 22 points to 2,212.
Volume on the NYSE totaled just under 1.1 billion shares, while the Nasdaq crossed 526 million shares. Advancers were ahead of decliners on both exchanges by about 11-to-4.
Despite a falling dollar, crude oil for January delivery fell 36 cents to $69.51 a barrel, and the Energy Select Sector SPDR (XLE) rose 57 cents to $56.10.
February gold rose $3.90 to settle at $1,123.80 an ounce. The PHLX Gold/Silver Sector Index (XAU) closed at $174.38, up $1.94.
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What the Markets Are Saying
The three major indices all punched to new 14-month closing highs yesterday, as a round of buying hit the market. But it was another case of more small buyers than small sellers, with the public still on the sidelines. Without their participation, the broad market can’t seem to get a big-volume breakout through the stubborn resistance of the last three weeks.
Even though new closing highs were set, the intraday highs of several weeks ago still mark the resistance that must be crushed if the broad market is to get a sustained rally going.
Of the major indices, only the NYSE Composite failed to set a new closing high, and that confirms that the depth of the buying is very shallow. Even so, breadth is solid at just under 3-to-1 on the buy side, and though a big blast-off seems unlikely, new highs in small increments could be sustained until the public begins to take part or the big institutions decide to jump in with large block purchases.
What I hope to see before the end of 2009 is a final buying spree signifying a capitulation on the part of those on the sidelines. If it occurs, we could be in for a wild Q1 as investors concede the bearish side and drive stocks to the target of S&P 1,245. This also means that there should be some very quick, even spectacular gains to be made in technology and mid-cap stocks.
With that in mind, now may be the right time to jump on those techs and look forward to a sleigh full of goodies from a late Santa rally.
Today’s Trading Landscape
Earnings to be reported: Best Buy (BBY), FactSet Research Systems Inc. (FDS), GigaMedia (GIGM), AAR Corp. (AIR), Adobe Systems (ADBE) and Take-Two (TTWO).
Economic reports due: ICSC-Goldman Sachs chain store sales, producer price index (the consensus expects 1% and 0.2% ex-food and energy), Empire State manufacturing survey (the consensus expects 25), Redbook, industrial production (the consensus expects 0.6% and a 71.2% capacity utilization rate), and housing market index.
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