U.S. stocks closed higher for a third straight session Tuesday as positive earnings reports from American Express (AXP), U.S. Steel (X), and certain other companies offset negative economic data, including steep drops in January consumer confidence and the November S&P/Case-Shiller 20-city home price index. A 9% jump in AmEx shares helped lift the Dow industrials and the broader financial sector.
Also, Congressional committees took up the Obama administration's $825 billion economic stimulus package Tuesday. Meanwhile, the Federal Reserve kicked off its two-day policy meeting.
On Tuesday, the 30-stock Dow Jones industrial average finished higher by 58.70 points, or 0.72%, at 8,174.73. The broader S&P 500 index rose 9.13 points, or 1.09%, to 845.70. The tech-heavy Nasdaq composite index added 15.44 points, or 1.04%, to 1,504.90.
On the New York Stock Exchange, 21 stocks were higher in price for every 10 that were lower. Nasdaq breadth was 17-10 positive.
Treasuries surged following a strong auction of two-year notes, with the 10-year yield lower at 2.53%. There was also some focus on the Davos economic forum.
The U.S. dollar index was flat in volatile trading. Gold and crude oil futures were lower.
Traders will be looking ahead to Wednesday's conclusion of the Fed's two-day policy meeting. "Of course policy officials will debate the current stance of policy and the success or failure of its actions to date, as well as strategies on further actions such as Treasury purchases," says Action Economics. Officials will also be revising their outlook on the economy and inflation.
In economic news Tuesday, U.S. consumer confidence dropped to 37.7 in January, a new record low, surpassing the prior low-point of 38.6 in December (revised from 38.0). The index was at 87.3 a year ago. The present situations component fell to 29.9 versus 30.2 in December (revised from 29.4). The expectations index slipped to 43.0 after falling to 44.2 in December (revised from 43.8). The labor index (jobs plentiful minus jobs hard to get) improved to -33.9 from -35.0 (revised from -35.8). The average inflation index declined further to 5.6% versus 5.8% in December. It was 7.7% in June.
The U.S. S&P/Case-Shiller home price index dropped 2.23% to 154.6 in November for the 20-city composite, from a revised 158.1 in October (was 158.2). This is the 28th straight monthly decline. The index is down a record 18.2% in the 12 months through November, vs. -18.1% previously from October. The 10-city composite index fell 2.2% on the month to 166.1, and is down 19.1% from a year earlier. For the second month in a row, the price index declined in all of the 20 major metro areas surveyed, paced by a 3.43% drop in Phoenix, followed by Las Vegas (-3.29%) and Detroit (-3.11%).
"The data are in line with expectations and the November data shouldn't have any significant impact on the markets," says Action Economics.
President Obama will visit Capitol Hill Tuesday to try to build momentum for an $825 billion package he says is urgently needed to keep the U.S. economy from sinking into an even deeper recession. Obama's meeting with lawmakers comes after the president achieved one victory on the economic front: the confirmation of Treasury Secretary Timothy Geithner. With his economic team in place, Obama hopes he can win passage of the stimulus plan by mid-February.
Geithner, in his first full day on the job, announced new rules to limit special-interest influence on the government's $700 billion financial rescue program, the AP reported. The new rules are designed to crack down on lobbyist influence over the rescue program.
A report of the nonpartisan Congressional Budget Office report casts doubt on a commitment by the Obama administration that three-quarters of a proposed $825 billion stimulus plan would be pumped into the economy by the start of 2011. The CBO said $526 billion would be rippling through the economy by that time. That is about 64% of the government spending and tax cuts that make up the plan. The CBO finding suggests the package of measures may take longer to boost the economy than called for by many of its advocates. The report said the tax cut provisions would have the quickest impact on the economy, with about $208 billion reaching taxpayers by the end of next year.
The Fed is expected to name William Dudley as head of the New York Federal Reserve Bank sometime today as a replacement for Geithner. Former Goldman Sachs chief economist Dudley is presently the head of the key markets desk at the New York Fed and Reuters sources confirmed overnight that he has been given the nod.
The New York Times reports automakers said they were working toward Obama's goal of reducing fuel consumption, but rapid imposition of stricter emissions standards could force them to drastically cut production of larger, more profitable vehicles, adding to their financial duress. Obama ordered the government on Monday to reconsider whether California and other states could regulate vehicle emissions to help control greenhouse gas emissions, a reversal of a position taken by the Bush administration.
Texas Instruments posted 8 cents vs. 54 cents fourth quarter EPS on a 30% revenue drop. The company noted that current-quarter results included 13 cents in restructuring charges. The company plans to cut employment 12% through 1,800 layoffs and 1,600 voluntary retirements and departures. It sees first-quarter revenue of $1.62 billion-$2.12 billion, and per share results ranging from an 11 cent loss to earnings of 3 cents. T-I sees 2009 R&D expense of $1.5 billion and capital spending of $300 million.
American Express reported fourth-quarter EPS from continuing operations of 21 cents, vs. 73 cents one year earlier, on an 11% revenue drop. The company noted that consolidated provisions totaled $1.4 billion vs. $1.5 billion a year earlier, which included a significant credit related charge. AmEx noted that it exceeded all of its funding requirements, in part by raising $6.2B through a new retail certificate of deposit program.
DuPont (DD) reported a fourth-quarter loss of 70 cents per share, vs. 60 cents EPS one year earlier, on a 16% revenue decline. The company expects that global macroeconomic conditions for the 2009 first quarter will be similar to the 2008 fourth quarter, with very weak demand in most of its key markets, excluding agriculture. It sees first-quarter EPS of 50 cents-70 cents. With weak industrial economic conditions expected to continue in 2009, the company cut its $2.25-$2.75 EPS forecast to $2.00-$2.50.
Amgen (AMGN) posted fourth-quarter GAAP EPS of 91 cents, vs. 76 cents one year earlier, on flat revenues. Amgen sees 2009 revenue of $14.8 billion-$15.2 billion, and 2009 adjusted EPS of $4.55-$4.75, excluding stock option expense, certain expenses related to acquisitions, restructuring charges and certain other items.
Verizon Communications (VZ) posted fourth-quarter EPS of 43 cents, vs. 37 cents one year earlier, on a 3.4% operating revenue rise. Verizon posted 61 cents non-GAAP EPS, which was in line with Wall Street estimates. Verizon said it added 303,000 net new FiOS TV customers, compared with 226,000 in the year-earlier quarter.
Siemens (SI) posted €1.260 billion vs. €1.078 billion first-quarter income from operations on a 6.7% revenue rise. The company said achieving previously announced income targets for fiscal 2009 has become even more ambitious due to market conditions.