By Mark Cotton, MarketWatch
Jan 3, 2006
U.S. stocks turned mixed Tuesday as a disappointing December sales update
from Wal-Mart and a price target cut for General Motors Corp. weighed on the
Dow Jones Industrial Average, with weaker-than-expected data also hurting
sentiment.
Caution ahead of the release of the Federal Open Market Committee's
minutes of its December meeting on interest rates was also keeping the market
in check.
The Dow Jones Industrial Average was off a morning high of 10,768.01, down
5 points at 10,712.
The Nasdaq was off 3 points at 2,202, but the S&P 500 Index held onto a
slim gain, up 1 point at 1,249.62.
"An end to Fed rate hikes, benign inflation, more acceptable energy
prices, higher capital spending, decent job growth, and potentially some
better news out of Iraq should benefit the equity markets," in 2006 said
Tobias Levkovich, equity strategist at Citigroup.
Levkovich holds a "conservative" year-end 2006 target of 1,400 for the S&P
500 and 11,900 for the Dow.
On a historical basis, S&P performance in early January can be a good
gauge on what to expect for the remainder of the year.
Gains in the broad gauge in the first five days of the month have preceded
full-year gains 85.7% of the time, according to the Stock Trader's Almanac.
However, 2006 is a midterm year, and the indicator has had a spotty record
in such periods.
"In the last 14 midterm years only six full years followed the direction
of the first five days, and none did in the last seven," the Almanac said.
Weaker-than-expected data saw stocks pare early gains.
Factory activity in the United States decelerated in December, the
Institute for Supply Management reported Tuesday. The ISM index fell to 54.2%
in December from 58.1% in November. The decline was larger than expected. The
consensus forecast of estimates collected by MarketWatch was for the index to
slip to 57.6%.
Outlays on U.S. construction projects meanwhile increased 0.2% in
November, the smallest gain since June, the Commerce Department estimated.
The data filtered through the rest of the financial markets.
The dollar, which was already weak, fell further on the economic reports.
At last check, the euro was up 1.1% at $1.1941. Against the Japanese yen,
the dollar was off 0.7% at 116.97.
Gold futures meanwhile extended early gains. The benchmark February
contract was up $11.40 at $530.30 an ounce.
On the bond market, long-term Treasuries traded lower. The benchmark 10-
year note was off 8/32 at 100 20/32, with its yield at 4.41%.
Crude oil futures rose 86 cents to $61.90 a barrel in New York trading, as
the Russian-Ukrainian dispute over gas prices ignited concerns that Russia may
use its energy resources as a political tool.
Dow stocks in focus
Shares in Wal-Mart Stores Inc. slipped $1.05 to $45.75 after the world's
largest retailer warned December same-store sales would come in at the lower
end of its forecast range.
General Motors Corp. was under pressure, down 4.8% to $18.48, after Banc
of America cuts its price target on the beleaguered car maker to $13 from $16.
Johnson & Johnson was the biggest percentage gainer on the Dow, up 2.5% at
$61.58, buoyed by a J.P. Morgan upgrade to overweight from neutral. The broker
expects its 2006 outlook to be a positive catalyst for the stock, with a
strong drug pipeline likely to lend further support.
Also in the health care sector, Wyeth has agreed to develop and market
antibody drugs from privately-held Trubion Pharmaceuticals in a deal worth
more than $800 million, The Wall Street Journal reported, citing a Wyeth
executive. Wyeth shares rose 13 cents to $46.20 in early trading.
Shares in Pilgrim's Pride Corp. tumbled 16.2% to $27.79 after the poultry
producer cut its first-quarter outlook, citing a "significantly worse" than
expected performance in its Mexico operations.
CBS starts trading on the NYSE
CBS Corp. shares began trading Tuesday, following the weekend completion
of the New Year spin-off of the company from former parent Viacom Inc.
CBS.A shares were up 3.2% at $25.90, but its Class B stock, which is
trading under "CBS" was up 2.6% at $25.65.
Google Inc. shares rose $7.70 to $422.56 after Piper Jaffray raised its
price target on the Internet giant to $600 from $445. The broker believes that
2006 will be a "banner year" for the company.
"Given the company's performance, market share gain and the pipeline of
new products, we believe outperformance is still very likely," said analyst
Safa Rashtchy said. "We expect new initiatives, in particular Google's ad
network and Google Base, to generate meaningful revenues by the end of 2006."
This MarketWatch news update is provided to you courtesy of Thomson
Financial.
This is Thomson Financial's Market Commentary, which is issued three times
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The information herein is believed to be true and accurate. We take no
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SOURCE Thomson Financial Corporate Group
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