By Mark Cotton, MarketWatch
Dec 13, 2005
U.S. stocks hovered around the flatline Tuesday amid some caution ahead of
a Federal Reserve decision on interest rates, but Procter & Gamble shares
gained after the household products giant offered an upbeat profit outlook.
The Dow Jones Industrial Average came off an early low of 10,751.36, and
was last up 0.80 point at 10,768.
The Nasdaq Composite Index lost nearly 1 point to 2,259 while the S&P 500
Index put in a fractional gain, up 0.4 point at 1,260.
"Retail sales came in a little weaker than expected but that's going to
have only a minimal impact," said Peter Cardillo, chief market analyst at S.W.
Bach. "The big story of the day is the Fed."
Cardillo said he expects the Federal Open Market Committee, the central
bank's rate-setting body, to lift its key short-term rate by a quarter
percentage point to 4.25%. The decision is due around 2.15 pm Eastern.
"I also suspect they will probably indicate the end of the Fed tightening
cycle is at hand. Any reference to that would add bullish sentiment to the
market."
On the broader market for equities, advancers and decliners were evenly
balanced on the New York Stock Exchange, while losers had a slight 13 to 11
edge over winners on the Nasdaq.
Ahead of the Fed's rate decision, investors had some data to chew over.
U.S. retail sales increased a modest 0.3% for the third straight month in
November, as a rebound in auto sales offset a big decline in gasoline, the
Commerce Department said. Excluding auto sales, sales fell 0.3%, the biggest
decline in 19 months.
With the upward revision to October's sales, November's total was a bit
higher than economists' expectations of a 0.5% increase.
Also, inventories increased 0.3% in October, while sales grew by 0.8%, the
largest gain since July, the Commerce Department said. As a result, the
inventory-to-sales ratio remained at a record low 1.25, giving companies a
strong incentive to increase production and hiring. Imports are also likely to
increase. Economists had been expecting inventories to rise 0.5%.
On the currency markets, the dollar recouped some of its heavy prior-
session losses, sparked by concern the Fed might signal an end to its cycle of
interest-rate hikes. Rising rates raise the attractiveness of dollar-
denominated assets. At last check, the euro was down 0.2% at $1.1930 after
rising Monday to its best level against the dollar since Nov. 7. Against the
Japanese yen, the dollar was up 0.3% at 120.26.
Gold futures were lower for the first time in eight sessions, pulling back
as traders locked in some of the metal's recent gains ahead of the Fed
meeting. Gold for February delivery was last down $5.10 at $526.40 an ounce.
On the bond market, long-term Treasury prices rose, sending yields lower.
The benchmark 10-year note was up 9/32 at 99 26/32, with its yield at 4.52%.
Crude-oil futures held above $61 a barrel in morning trading after the
International Energy Agency upped its forecast for 2006 demand. The agency
also said demand in the medium term remained robust.
Dow stocks in focus
Altria Group Inc. gained 2.2% to $74.10. Goldman Sachs said it expects the
stock to move higher ahead of an anticipated favorable decision in a consumer
fraud case. The decision is due Thursday.
The firm said it expects the Illinois Supreme Court to decertify class
action status in the Price/Miles "Lights" case, which alleges Altria's Philip
Morris USA unit led consumers to believe light cigarettes were less harmful
than regular brands, and dismiss the original $10 billion damages verdict.
Shares in Procter & Gamble climbed 1% to $57.50 after the household
products giant lifted the lower end of its previous forecast range for second-
quarter sales and earnings.
The company said its revised profit forecast reflects a lower-than-
expected negative earnings impact related to its acquisition of Gillette.
Strength in its household and beauty units boosted sales.
General Motors Corp. fell 2.2% to $22.55 after Standard & Poor's analysts
stirred up bankruptcy fears and downgraded the automaker's debt deeper into
junk a day earlier.
Other stocks of note
Lehman Bros. kicked off the fiscal fourth-quarter earnings season for the
brokerage sector. The investment bank posted earnings and revenue ahead of
analyst expectations, but some analysts warned the company would "likely
disappoint some of the bulls" in the market.
Morgan Stanley analysts Chris Meyer and Chetan Karkhanis pointed out that
Lehman beat the Wall Street consensus forecast by a margin of 5%, which is
less than its average beat of 21% since the end of 2002. The stock was off
1.6% at $126.16.
Late Monday, ConocoPhillips confirmed a Wall Street Journal report it is
buying Burlington Resources Inc. for $35.6 billion to create the nation's
largest natural gas producer. The deal will help it move closer to challenging
Chevron Corp. for the No. 2 position among global integrated oil companies
based in the U.S. ConocoPhillips' stock was down 3.8% at $58.91 while Burling
shares rose 4.7% to $86.40.
Best Buy Co Inc. shares tumbled more than 8.9% to a more than 3-week low
of $45.41 after the consumer electronics retailer's third-quarter earnings
came in shy of Wall Street expectations.
This MarketWatch news update is provided to you courtesy of Thomson
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SOURCE Thomson Financial Corporate Group
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