Stock Market Today: January 17, 2012

4:20 PM ET - Wall Street got back to work today following Monday’s holiday, and it was the bulls who had the upper hand. Generally positive economic developments in Europe, Asia, and the United States set the table for strong rally early, although share prices came off their best levels in afternoon trading. In Europe, a report showing that inflation had moderated signaled there could be room for central bankers to lower interest rates. A business sentiment gauge in Germany also suggested activity in the euro zone’s largest nation was stabilizing, rather than deteriorating. And Spain’s borrowing costs fell following a successful bond auction. These factors combined to push up the euro, which lately has acted as a barometer of the region’s health.

Moreover, a report showing that China’s economy was slowing, but less decisively than feared, elicited hope for lower interest rates in that country, particularly in light of the Asian giant’s weakening housing sector. Back home, traders were greeted with stronger-than-expected manufacturing data in the New York State region.

Oil and gold prices moved up on the day, on a weaker U.S. dollar and as economic prospects showed some firmness. Curiously, however, Treasury bond prices barely budged, underscoring the risk-aversion still prevalent among many investors.  

At the closing bell, the Dow Jones Industrial Average and the NASDAQ had registered gains of 60 points and 17 points, respectively, and many more stocks hit 52-week highs than lows on the major exchanges.

As for individual sectors, disparate earnings reports from a couple of the big banks made for a mixed performance among financial stocks. But technology shares were buoyed by optimism for positive earnings news from several leading companies reporting later this week. Better-than-expected profits from Check Point Software (CHKP) shored up sentiment toward the group. In energy, shares of Canada’s Provident Energy (PVX) soared on word that it was being taken over by neighboring Pembina Pipeline (PPL.TO). Pembina’s shares also rose on the announcement. The move is a further sign of consolidation in the pipeline industry.   
  
Tomorrow brings fresh economic data that includes December readings for the Producer Price Index, Industrial Production, and Capacity Utilization. This latest batch of information is expected to provide further evidence that inflation is tame and progress is being made on the manufacturing front. The agenda also includes more earnings news, notably from the financial sector, where another mixed showing is likely. But, on the whole, investors have liked what they’ve seen so far this year, and have pushed the market higher. - Robert Mitkowski Jr.

  
At the time this article was written, the author did not have positions in any of the companies mentioned.

12:30 PM ET - The U.S. stock market is advancing today, following a three-day holiday weekend. At just past noon in New York, the Dow Jones Industrial Average is up 129 points (1.0%); the broader S&P 500 Index is ahead 12 points (0.9%); and the NASDAQ, which is leading the market higher, is up 30 points (1.2%). Today’s move is fairly broad based, with advancing stocks outnumbering decliners by over 2-to-1 on the NYSE.  Most of the market sectors are participating in the rally. Leadership can be seen in the basic materials sector, which is getting a lift from the steel and aluminum stocks.  The conglomerates are also strong.  Meanwhile, the energy sector is making an upward push, thanks to strength in the integrated oil and gas names. There is some weakness in the transportation group, as the airline stocks are lower. Notably, the Dow Jones Transportation Average (DJT) is weak. This setback may reflect higher oil prices.

Technically, today’s move puts the S&P 500 Index at the 1,300 mark, which may be of psychological importance.  From here, the Index may encounter some resistance, if its attempts to break into new 52-week high ground at 1,370. Notably, the S&P 500 had some difficulty near that level numerous times early last year.

Today’s tone likely reflects a better outlook overseas. Specifically, China reported a better-than- anticipated fourth-quarter GDP figure. This likely explains the big move in the Asian Markets overnight. The Shanghai Composite was up better than 4%, with equally impressive gains on the Hang Seng. Meanwhile, further west, the news was not so bad on the Continent. It seems the recent flurry of sovereign debt downgrades has largely been ignored, or was widely expected. Continued efforts by the region’s leaders, along with decent bond auction results, may be offering some relief. France’s CAC-40 and Germany’s DAX both logged better than 1% gains, with a more modest showing on Britain’s FTSE 100. The euro now at $1.27 is strengthening, which is also a good sign.

The economic news at home was light today, but encouraging .The Empire State Manufacturing Index improved to 13.5 in January, which was better than anticipated. In corporate news, the earnings reports are starting to come in, led by the banks. Shares of Citigroup (C) are sinking, after the financial services giant released its report. Wells Fargo (WFC) stock is higher after that company reported results that pleased Wall Street. In other areas, Forest Labs (FRX) stock is up, after that company posted decent guidance. Meanwhile, Carnival Cruises (CCL) is seeing its stock drop, after a tragic ship accident in Italy. More reports will follow after the closing bell. Specifically, we will hear from tech companies Cree (CREE) and Linear Technology (LLTC).   - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

Before The Bell - The U.S. stock market will re-open for trading in less than an hour from now following the long holiday weekend. However, the markets have already opened overseas and the results are impressive, if you are a bull, notwithstanding the fairly widespread ratings downgrades announced late last week. That is because a confluence of positive factors have come together this morning to send the markets up around the globe, and lift our own equity futures noticeably. In fact, we would expect our markets to open with very strong gains this morning, as the Dow futures are up by around 100 points; the S&P 500 Index futures are ahead by 11 points; and the NASDAQ futures are better by 21 points.

Helping sentiment around the world today are several developments. First, euro-zone inflation has eased, according to the latest reports. That should prompt officials in the European Central Bank (ECB) to reduce interest rates further in the weeks to come. This is a well-timed drop in pricing, as the Continent appears headed for a recession in the months ahead. In all, inflation in the 17-nation confederation was 2.7% in December on an annual basis. That was less than the earlier estimate of 2.8%. If we strip out food and energy, meanwhile, to get the so-called core rate of price change, we find that inflation was just 1.6%. Also, in November, the ECB had reduced rates in two 25-basis-point steps. No changes were then effected in December. But this news could now pave the way for another 25-point cut.

Also helping sentiment overseas, and driving the bourses 1%-2% higher was the news that China's growth had slowed again, but just modestly. The rate of improvement, on an annual basis, in the fourth quarter was 8.9%. That was a tad better than the forecast of 8.7%, but it also was the lowest such rate of gain in two and a half years. A further deceleration in growth to just over 8% is now likely in the first quarter of 2012. The good news, apparently, is that this slower growth, but seeming soft landing over there, should prompt an interest rate cut, thereby helping to stoke growth later on this year. 

Finally, there is optimism over here about earnings season, which really kicks into gear today and the rest of the week, with many of the Dow companies and other large-cap industrial, financial, and consumer companies posting their December-period results. Expectations are that Corporate America will meet lowered expectations. We caution, though, that indications are results will not blow out estimates as had been the case throughout the long, but uneven, business up cycle to date.

Overall, things look rather bright going forward in the current quarter--at least along our shores. In addition to earnings, there is the U.S. economy, which unlike Europe, does not now look as though it is headed for another recession. The next few days will be telling, however, as we will get key reports on producer and consumer prices, housing starts and sales of existing homes, industrial production, factory use, and initial jobless claims. On balance, we expect the results to be reasonably good. And they probably better be, as Wall Street seems, by its recent positive action, to be factoring in favorable economic metrics as well as upbeat earnings data.     - Harvey S. Katz, CFA
 

At the time of this report's posting, the author did not have positions in any of the companies mentioned.

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