Dow Hits Fresh Record as Oil Plunges
The Dow Jones industrial average hit another record on Tuesday, while many areas of the market struggled. Trading was choppy as investors grappled with a wave of fourth-quarter earnings, including some profit warnings, takeover deals, and plunging crude oil prices, says Standard & Poor's Equity Research.
The Dow Jones Industrial average rose 26.51 points, or 0.11%, to 12,582.59 -- posting a new closing high for the third straight session . The broader Standard & Poor's 500 index edged up 1.17 points, or 0.08%, to 1,431.9. The tech-heavy Nasdaq composite was down 5.04 points, or 0.2%, to 2,497.78, hurt by downgrades of Cisco Systems (CSCO) and other tech news.
After the three-peat of records for the Dow average, some analysts are worried that the blue chip benchmark's good times might not last. "The market obviously has good momentum, but with the extremely long string of trading days without even one 2% down day in the DJIA, very positive investor sentiment and high margin debt, the market is in need of some kind of correction," wrote Alexander Parris of Barrington Research in a note on Jan. 16. "That is difficult to time but the sooner it comes the more modest it can be."
In the energy markets Tuesday, February West Texas Intermediate crude oil futures skidded $1.78 to $51.21 a barrel -- a 19-month low. Saudi Arabia's oil minister, al-Naimi, said overnight there was no reason for an emergency OPEC meeting, saying the production cuts previously implemented were working and balancing the market, reports Action Economics.
In economic news, the New York Fed Empire State index, which measures manufacturing activity, plunged to 9.13 in January, well below the median forecast and 22.19 in November, reports Action Economics. "While the data was expected to weaken, the depth of the decline was not anticipated and cut against the grain of the series of stronger reports last week," says Action Economics. "Bulls are not likely to get too much ammunition from this regional business index, however, with inflation data around the corner starting with December PPI tomorrow."
Traders will have a plateful on Wednesday with December PPI, net foreign security purchases, industrial production, capacity utilization, NAHB Housing Market Index and the Fed Beige Book. In addition, Fed Chairman Bernanke testifies to the Senate Budget Committee Thursday.
Earnings season picks up this week with quarterly results from Intel (INTC) reporting after the market close today. Wells Fargo (WFC), and Freeport McMoRan (FCX) also report earnings today.
TD Ameritrade Holding (AMTD) reported a 69% jump in first-quarter net earnings Tuesday, thanks to its merger with TD Waterhouse a year ago. The brokerage also reaffirmed the midpoint of its $1.10 EPS guidance for fiscal year 2007.
In tech, Symantec (SYMC) shares fell after the security software maker cut its third-quarter revenue and earnings forecast on weaker-than-expected performance in its Data Center Management business.
Homebuilders lost ground after Centex (CTX) said it posted a $2.00 third-quarter loss from continuing operations, citing option deposit and walk-away costs, and land valuation adjustments.
Skywest (SKYW) sees lower-than-expected fourth-quarter earnings per share of 44-50 cents. It cited the closing of the Denver airport for about 2 days, accelerated pilot training, and additional maintenance charges.
In deal news, General Electric (GE) agrees to purchase Smiths Aerospace, a British supplier of integrated systems for aircraft manufacturers, components for engine builders, for $4.8 billion in cash.
Verizon Communications (VZ) plans to spin off its wireline operations in Maine, New Hampshire, and Vermont and to sell the entity, pending necessary approvals, to Fairpoint Communication in a tax-free transaction.
USI Holdings (USIH) agreed to be acquired by GS Capital Partners, a private equity affiliate of Goldman Sachs (GS), in deal valued at about $1.4 billion, or $17 per USI share.
WCI Communities (WCI) shares headed higher on news that Carl Icahn boosted his stake in the company to 14.6%.
Smith & Wollensky (SWRG) shares rose after Landry's Restaurants offered to acquire the steak house for $7.50 per share in cash.
Among other stocks in the news, Cisco Systems (CSCO) fell after Prudential downgraded the stock to neutral from overweight, and Banc of America cut to neutral from buy.
JP Morgan reportedly upgraded XM Satellite Radio (XMSR) and Sirius Satellite Radio (SIRI) to overweight from neutral. Banc of America reportedly downgraded XM Satellite to neutral.
European markets finished lower. The FTSE-100 index in London fell 47.8 points, or 0.76%, to 6,215.7. Germany's DAX index edged down 14.92 points, or 0.22%, to 6,716.82. In Paris, the CAC 40 index lost 39.54 points, or 0.7%, to 5,591.54.
Asian markets ended modestly lower Tuesday. In Japan, the Nikkei 225 index fell 7.46 points, or 0.04%, to 17,202.46. In Hong Kong, the Hang Seng index lost 40.61 points, or 0.2%, to 20,027.95.
Yields drifted down slightly after the long weekend after setting 2.5-month highs on Friday following the firmer round of December retail sales data, says Action Economics. The weak Empire State index at 9.13 in January came in well below expectations of 20.0 and December's level of 22.2. That alone knocked yields a couple basis points lower before rebounding ahead of Wednesday's PPI and housing data, reports Action Economics. The 10-year note yield finished at 4.75%.