By Mark Cotton, MarketWatch
Dec 14, 2005
U.S. stocks traded mixed Wednesday as two broker downgrades of Apple
Computer weighed on the technology sector, but shares of Honeywell
International surged on an upbeat profit outlook.
The Dow Jones Industrial Average rose 46 points at 10,868.
The Nasdaq Composite Index fell 3 points to 2,262 while the S&P 500 Index
was up 3 points at 1,270.
On the broader market for equities, advancers outpaced decliners by 9 to 6
on the New York Stock Exchange, while winners and losers were evenly
balanced on the Nasdaq.
"We're seeing a bit of follow-through from the Fed decision yesterday,"
said Michael Malone, trading analyst at SG Cowen. "The market of late has
been consolidating gains going back to the middle of October and it has
been waiting for a catalyst to make the next move up to year end."
Malone said the Fed has provided that catalyst by offering investors the
possibility that its cycle of interest-rate increases may end sooner
rather than later.
In its statement accompanying a quarter percentage point rate hike in
short-term rates to 4.25%, the central bank removed language that judged
interest rates to be "accommodative," or in other words, adding to growth.
Instead, it said it simply stated that "some further measured policy
firming is likely.'
"The Fed has definitely left the window open for further rate hikes. They
did try and make it fairly clear that you should expect one or two more
rate hikes at which point they will certainly entertain the thought of
ending this rate hiking campaign."
The reverberations of the Fed's shift in its outlook on interest rates
continued to be felt across the financial markets.
The dollar was sharply lower against its major counterparts on a possible
end to the rate-hike cycle. Rising rates typically raised the
attractiveness of dollar-denominated assets.
The euro surged 0.7% to $1.2018. Against the Japanese yen, the greenback
tumbled 2.5% to 117.09. A Japanese business survey confirming the rebound
in the country's economy also helped support the yen.
Gold futures also pulled back smartly as the Fed's new stance suggested it
is less worried about inflation than it has been of late. The central
bank, however, in its revised statement, said high energy prices and
possible increases in resource utilization could add to inflation
pressures going forward. At last check, gold for February delivery was
down $9.50 at $514.60 an ounce.
On the bond market, long-term Treasury prices rose, sending yields lower.
The benchmark 10-year note was up 16/32 at 100 10/32, with it yield at
4.46% from 4.54% on Tuesday.
On the data front, the U.S. trade deficit widened 4.4% in October to $68.9
billion, the Commerce Department. The increase caught economists by
surprise. Analysts surveyed by MarketWatch had expected the deficit to
narrow to $62.9 billion.
Crude-oil futures briefly extended losses before turning higher after the
Energy Department reported that distillate supplies, which includes winter
heating oil, fell only 100,000 barrels in the week ended Dec. 9.
The American Petroleum Institute, however, reported a much larger 3.5
million drop in distillate supplies. Forecasts had ranged between a drop
of 1 million to 2 million barrels to a build of 600,000 barrels.
Crude for February delivery was last up 23 cents at $61.60 a barrel.
Dow stocks in focus
Honeywell International Inc. was the biggest percentage gainer on the Dow
industrials, up 5.8% at $37.96, after the diversified industrial
manufacturer affirmed its earnings and sales targets for 2005, and
forecast 2006 results that would be in line with analysts' projections.
Boeing Co. shares rose to a new all-time high, up 95 cents to $71.54 after
the aerospace giant confirmed it has received orders for up to 115 of 787
Dreamliner airplanes from Australian airline Qantas.
Merger and acquisition deals
General Dynamics Corp. said it has agreed to buy Anteon International
Corp. for $2.2 billion, or $55.50 a share in cash. The deal price includes
the assumption of $100 million in debt, and General Dynamics said the
acquisition of the systems integration company would immediately boost
earnings. General Dynamics shares fell 37 cents to $111.71 in morning
trading. Anteon's stock soared more than 30% to $54.20.
In the utilities sector, FPL Group Inc. is in talks to buy Constellation
Energy Group Inc. for more than $11 billion, the New York Times reported.
FPL share were off 35 cents at $43.23. Contellation Energy's stock shot up
7.7% at $60.65.
Shares in Apple Computer Inc. fell 4.4% to $71.70 after brokers Bank of
America and Bear Stearns downgraded the maker of the iPod digital music
player on valuation grounds.
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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p.m.). The information herein is believed to be true and accurate. We
take no responsibility for inaccurate information and reserve the right to
update our reports. If you have any questions please e-mail James Sang at
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SOURCE Thomson Financial Corporate Group
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