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After The Close - Weaker-than-expected economic data pulled the plug on an early rally on Wall Street today. The Dow Jones Industrial Average had been up about 85 points this morning after a report on Durable-goods orders came in better than expected. But disappointing readings on new home sales and the nation’s leading economic indicators drained the investor enthusiasm that had arisen from yesterday’s Federal Reserve decision to keep interest rate low for three more years.

At the close, the Dow and the NASDAQ were down 22 points and 13 points, respectively. Stocks may be running into some technical resistance following their surge since the beginning of the year. The Dow is within striking distance of its 52-week high of 12,928, but needs additional firepower to break through that level, we sense.

Traders are also still mulling over what the Fed’s easy money policy will mean in the long run. The dollar weakened against the euro and the Japanese yen today on the lack of support from interest-rate prospects, for instance. That, in turn, boosted gold prices to a seven-week high, above $1,700 an ounce, and pushed up oil prices.

Elsewhere, the financial sector did not take the news about the Fed’s extreme interest-rate measures staying in place indefinitely especially well. Banks need healthy interest-rate spreads to generate profits, particularly smaller institutions without a lot of fee income, and asset yields are now falling, with little offset on the cost of funds side. On the other hand, utility stocks held up better, bolstered by their hefty dividend yields.

Earnings-wise, there was an assortment of news, mostly good, but not completely. The Dow’s winners included Caterpillar (CATFree Caterpillar Stock Report) and 3M (MMMFree 3M Stock Report), which put up good numbers. AT&T (TFree AT&T Stock Report) stock lagged on weaker-than-anticipated profits, though. Other notable names reporting included Netflix (NFLX). Its shares jumped on surprising subscriber growth, and Colgate-Palmolive (CL). The latter stock rose when the company indicated that it would be raising product prices in North America for the first time in two-and-a-half years.

Tomorrow brings a fresh round of information on corporate profits and the economy. Quarterly earnings are due from Chevron (CVXFree Chevron Stock Report), Procter & Gamble (PGFree P&G Stock Report), and Honeywell (HON), among others. As for the economy, the University of Michigan’s consumer index is forecast to show some firming in January from its initial reading. Meantime, preliminary data due to be released before the opening bell are expected to show that the nation’s GDP advanced at a 3.0% rate in the fourth quarter of 2011. This is an important number, and one that may set the tone for trading on Friday.- Robert Mitkowksi

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 opened higher this morning, but has turned mixed. At just past noon, the Dow Jones Industrial Average is still up five points; but the broader S&P 500 Index is down five points (-0.4%); and the NASDAQ is shedding nine points (-0.3%). The mixed tone can be seen in the market’s breadth, as advancing stocks are just slightly ahead of decliners on the NYSE.

There is some leadership in the basic materials group, thanks to renewed buying of the metals stocks. Specifically, the mining stocks are higher on stronger gold prices. The transports are also doing well again, as the airline stocks are moving higher. Notably, the Dow Jones Transports (DJT) are up about 0.6% today. Weakness can be seen in the healthcare and technology issues.

Technically, the S&P 500 Index has had a big run in January. In fact, there have been only a handful of days when the S&P actually closed lower since the start of the year. Lately, we have seen the index struggling to move higher, and many are wondering if profit taking will set in. The market has been getting an added lift from some positive earnings reports, as well as yesterday’s supportive remarks from the Fed. It will be interesting to see if the markets’ recent strength can continue past earnings season.

A number of Dow components posted their figures today. Caterpillar (CAT - Free Caterpillar Stock Report) reported results that were better than expected. That stock is trading higher, on the news. Telecom giant AT&T (T - Free AT&T Stock Report) is seeing its stock move lower, on a weaker report. We also heard from 3M (MMM - Free 3M Stock Report). That issue is higher.

The economic news was mixed today. New home sales for the month of December slipped 2.2% to 307,000 units, annualized. This showing fell a bit short of expectations. Notably, the Home Builders Index (XHB) is off about 1.2% in response to the news. On the employment front, initial jobless claims for the week ended January 21st, rose to 377,000, which was slightly higher than many had anticipated. However, it should be noted that claims are still well below the 400,000 mark. Not all the news was negative. Durable goods orders rose 3% in December, a bit better than expected. Moreover, there was some strength in orders for non-defense goods, which suggests that demand is broad and the economy is picking up.

In Europe, the markets are closing out a strong day. All the major indexes are up better than 1% for the session. Traders may seem a bit more optimistic about a partial resolution to Greece’s debt situation. - 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 stock market was meandering about yesterday morning, with little notable direction. In fact, whatever movement there had been generally was to the downside. Then, just after the noon hour along the East Coast, the Federal Reserve, near the conclusion of its two-day Federal Open Market Committee meeting, announced that it would be keeping interest rates near their current historic lows until at least late 2014. That was a full year longer than had been the expected duration of such levels. The pledge to not disturb the low-interest-rate environment for another three years, or more, broke the latest logjam on Wall Street and stocks turned around abruptly.

The gains came quickly and without much redirection subsequently, so that by the close, the Dow Jones Industrial Average, in the red all morning, ended up with a notable 81-point gain. The NASDAQ, meanwhile, a winner all day long thanks to an outsized profit performance and stellar subsequent share price gains by computer stalwart Apple Inc. (AAPL), added to its earlier strength, rising 32 points, or 1.1% on the day. The other averages also pressed higher on the rate optimism. Low interest rates, whether justified or not, seem to have a major positive effect on the equity markets.

The Fed's stated rationale is that unemployment is still too high and the housing market is still too weak--especially in an era of low inflation--for the lead bank to revise its accommodative monetary ways at this time. The Fed statement was near unanimous, with just one of its governors, Jeffrey M. Lackey, dissenting. His opposition was not to the low rates, per se, but rather to indicating just how long they would stay that way. The tacking on of those extra months took the world by surprise and the overseas markets are following our lead by marching higher today. Our own futures, meantime, are also in rally mode, with the S&P 500 futures ahead by seven points, and the NASDAQ futures jumping by 10 points. We should thus move nicely to the plus side when trading commences in less than an hour from now.

Are the continuing low interest rates justified? Perhaps they are for now, as housing and employment remain in the doldrums, and the threat of a deepening economic slide in Europe is very real. Indeed, should that region's presumptive recession prove deeper than we now envision, we could yet follow the euro zone into recession. However, our own economic metrics are clearly improving, and that improvement extends to the employment sector and even to the housing arena, albeit irregularly so. And while we do not have an inflation problem at present, the massive deficits that our nation has racked up in recent years do have the potential to eventually bring about serious pricing pressures. Hence. the Fed could well be putting itself and the nation into something of a longer-term bind.

Meanwhile, the economic beat rolls on, although for the first three days of this week, the news has been rather sparse, save for some mixed housing metrics yesterday. Now, though, the business reports pick up, with the release, just moments ago, of data showing that orders for durable goods jumped by 3.0% in December. That was notably above consensus. Later on this morning, we will get a look at December new home sales, where a gain is the forecast, as that sector continues to bottom out and show glimpses of a rebound of sorts. Also, weekly jobless claims, fresh off of last week's near four-year low, rose in the latest seven-day stretch, increasing from an upwardly revised 356,000 claims last week to 377,000 claims this week. This trio of releases will be followed up tomorrow morning by reports on fourth-quarter GDP, where a 3.0% increase is the consensus forecast, and by data on personal income and spending.

Then, there is earnings season, which to date has been acceptable, but not eyecatching. Thus far today, we have seen a solid report from 3M Company (MMMFree 3M Stock Report), with that diverse industrial giant and Dow-30 component beating forecasts. The stock is indicated higher, by more than a point, in response. Also, drugmaking mainstay Bristol-Myers Squibb (BMY) has reported better-than-expected net, but that stock may have discounted this solid showing, as the equity is indicated to open modestly lower.

Finally, there is Europe, which continues to struggle, with the latest episode of this long-running soap opera being all about debt-encumbered Greece, and that struggling nation's efforts to fashion a new debt deal. Thus far, an agreement has proven elusive. - Harvey S. Katz

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