Stocks moved higher on Tuesday after the release of Federal Reserve minutes from its Nov. 1 policy meeting sparked speculation that it might soon pause from its tightening cycle. The minutes said policy would become increasingly sensitive to economic data and that some members worried that the Fed could go too far in tightening at some point.
The Dow Jones industrial average rose 51.15 points to 10,871.43. The broader Standard & Poor's 500 index was up 6.38 points to 1,261.23. The tech-heavy Nasdaq composite index gained 11.89 points to 2,253.56.
Crude oil futures jumped $1.14 to $58.84 a barrel as colder temperature forecasts for the Northeast prompted short covering into the long U.S. Thanksgiving weekend, says Action Economics. The NYMEX exchange will be closed Thursday and Friday.
A few economic reports will be out Wednesday. The final November reading for Michigan sentiment is expected at 80.7 -- little changed from the 79.9 preliminary reading, and up from the 74.2 October reading. The continued drop in gasoline prices over the last couple of weeks should provide upside in the final reading relative to the preliminary readings.
Weekly jobless claims will also be out.
Tuesday's key release was the FOMC's minutes from the Nov. 1 policy meeting, which revealed a mixed picture of the Fed's outlook on policy, says Action Economics. The markets focused primarily on the expectation that a "language change" may be in the pipeline that would imply neutrality (i.e. away from "accommodative and measured"), though that may be premature as the Fed is still clearly concerned about inflation, says Action Economics. The minutes also noted a likely slowdown in the housing sector and potential corresponding rebound in savings.
The National Retail Federation raised its forecasts for the holiday shopping season for the first time ever once the season was already underway, according to The Wall Street Journal. The group cited the improving economy, lower gasoline prices, and strong October sales for its 1% boost in forecast to a 6% increase (See BW Online, 11/22/05, "A Bit of Cheer for Holiday Sales?").
Microsoft (MSFT) launched its Xbox 360 video game package today, just in time for the holidays (See BW Online, 11/22/05, "Xbox: How It's Designed to Thrill").
Deere & Co. (DE) posted better-than-expected fourth-quarter earnings per share of 96 cents, vs. $1.41 a year ago, on 1% lower worlwide net sales.
Cooper Companies (COO) shares fell after the company cut 96-99 cents fourth-quarter EPS guidance to 83-86 cents on $219-$222 million in revenue. It cited foreign exchange rates, softness in U.S. sales of spherical soft contact lenses, and operating issues due to weather conditions. It also cut fiscal year 2006 and 2007 guidance.
In deal news, PepsiCo (PEP) agreed to buy Sara Lee's (SLE) European nuts business in Netherlands, Belgium, and France for ??130 million.
Medicis Pharmaceutical (MRX) gave notice to Inamed's (IMDC) board of directors requesting it recommend to its shareholders that they reject Allergan's (AGN) exchange offer. AGN has offered to buy IMDC for either $84 in cash per share or 0.8498 of AGN stock.
European stock markets finished mixed on Tuesday. London's FTSE-100 index and France's CAC-40 index rose, while Germany's DAX index fell slightly. In Asia, the Nikkei 225 index rose 27.89 points to 14,708.32, while the Hang Seng index was flat at 14,885.65.
Treasury yields slid after the FOMC minutes were released. "Led by the front-end, yields collapsed as it appeared more likely that the keys will be handed over to Bernanke next year with the policy gear close to neutral," says Action Economics. The 10-year note yield fell to 4.43%.