By Leslie Wines, MarketWatch
Jan 12, 2006
U.S. stocks opened lower Thursday, with the Dow Jones Industrial Average
hit by downgrades for Coca-Cola Co. and J.P. Morgan Chase and the broader
market pressured by questions about the strength of fourth-quarter earnings.
The market also took in news of a narrower U.S. trade gap, and an unexpected
drop in prices of imported goods linked to lower petroleum prices. The Dow
industrials were down 33.54 points at 11,009.90. The S.500 was 3.08 points
lower at 1,291.10 and the Nasdaq Composite down 6.19 points at 2,325.17.
As the fourth-quarter earnings season gets underway, there is nervousness
about the strength of upcoming reports. Investors were given pause earlier in
the week when Dow industrials components Alcoa Inc. and DuPont had negative
earnings news.
Marc Pado, U.S. market strategist at Cantor Fitzgerald, pointed out that stock
market rallies tend to peak in January. "If the rally can be sustained, it
will have to come from earnings," Pado said. "So far, the reports have not
been good but the big names -- DuPont, Alcoa, and Phelps Dodge -- are all in
the same group of basic materials and have been impacted by the hurricanes,"
he said. "What we need is to hear from companies that take the pulse of the
consumer," Pado said. "Tech will be one of those groups. Retailers will be
another."
There was limited reaction to news from the Commerce Department that the U.S.
trade deficit narrowed 5.8% to $64.2 billion in November. The improvement in
the trade deficit was better than expected. The consensus forecast of Wall
Street economists was for a deficit of $66.2 billion in November.
In addition, the Labor Department said that in December prices of imported
goods dropped 0.2%, marking the second monthly decline. According to the
MarketWatch survey, economists were expecting import prices to rise 0.1%.
Crude futures were on the rise once more, as the front-month contract rose 68
cents to $64.62 a barrel. Resumption of nuclear research by Iran has led to
fears of restricted oil supplies in the Middle East. According to the BBC,
Tehran broke the United Nation's seals on two more nuclear sites in Iran,
causing the U.K., France and Germany to call for an emergency International
Atomic Energy Agency meeting.
Gold futures backed away from their recent peaks, but were still near 25-year
highs. Demand for gold has been sparked by inflation fears and heavy
consumption in Asia.
The front-month contract was down $3.80 at $546.40 an ounce. The dollar was
mixed after the trade figures, falling almost 0.02% to 114.18 yen as the euro
dropped 0.2% to $1.2033. In recent years a swelling trade gap has put pressure
on the dollar. Earlier the Bank of England held its key rate steady at 4.5%
and the European Central Bank held onto a 2.25% rate.
ECB President Jean-Claude Trichet stated that risks to price stability remain
on the upside, singling out high oil prices and housing market lending in
particular. There is some speculation that the ECB may be at just the
beginning of its rate tightening cycle, even as the Federal Reserve appears to
be nearing the end of its rates increases. However, Trichet said the most
recent decision was unanimous.
Treasuries drew safe-haven interest from the unfolding events in Iran,
eclipsing the impact of the latest data reports. The benchmark 10-year
Treasury last was up 6/32 at 100 17/32 with a yield of 4.432%.
Stocks on the march
Shares of Coca-Cola Co. were down 27 cents at $41.40 after Goldman Sachs
reduced its rating on the soft drink maker to in-line from outperform, urging
investors not to put fresh money into the stock.
Goldman also cut Anheuser-Busch to underperform from in-line, citing similar
concerns. That stock dipped 83 cents to $42.28. J.P. Morgan Chase fell 36
cents to $40.34. The bank was cut to market perform at Piper Jaffray, which
thinks that synergy benefits from the Bank One merger are fully priced into
the stock.
Apple Computer Inc. rose 90 cents to $84.85 after Bear Stearns upgraded it to
outperform from peer perform, citing strong revenue and earnings growth rates.
Google stock rose 84 cents to $472.47. The stock was initiated with a buy
rating by Oppenheimer, while CIBC increased its target for the share to $540
from $400.
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SOURCE Thomson Financial Corporate Group
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