By Mark Cotton, MarketWatch
Dec. 14, 2005
U.S. stocks ended mixed Wednesday after broker downgrades for Apple
Computer weighed on the technology sector, but the broader market rallied,
with the S&P 500 Index hitting a 4 1/2-year high, amid easing
interest-rate concerns.
The Dow industrials rose to a session high of 10,919.77 before paring
gains. The benchmark index ended up 59.79 points at 10,883.51.
The S&P 500 Index rose 5.31 points to 1,272.74, its best level since June
2001.
The Nasdaq Composite Index was down 2.41 points at 2,262.59.
"We're seeing a bit of follow-through from the Fed decision yesterday,"
said Michael Malone, an 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 the 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 increase in
short-term interest rates to 4.25%, the central bank removed language that
had judged interest rates to be "accommodative," or stimulative to
economic growth. Instead, the Fed said 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."
In the broader market for equities, advancers outpaced decliners by 5 to 3
on the New York Stock Exchange, but losers had a slight 15 to 14 edge over
winners on the Nasdaq.
Volume was 1.64 billion on the Big Board, and 1.73 billion on the Nasdaq.
The reverberations of the Fed's shift in its outlook on interest rates
continued to be felt across the financial markets.
Dollar, gold, bonds, oil
The dollar was sharply lower against its major counterparts on a possible
end to the rate-raising cycle. Rising rates typically raise the
attractiveness of dollar-denominated assets.
The euro surged 0.9% to $1.2022. Against the Japanese yen, the greenback
tumbled 3% to 116.99. A Japanese business survey confirming the rebound in
the country's economy also helped support the yen.
Gold futures ended lower for a second day as traders moved to lock in some
of the metal's recent gains. A change in the wording of the Federal
Reserve policy statement Tuesday was an excuse for the selling, traders
said. Gold for February delivery was down $14.60 at $507.30 an ounce.
On the bond market, long-term Treasury prices rose, sending yields lower,
as economic data showing a risk to growth and milder inflation supported
the revised outlook for interest rates spawned by the Federal Reserve's
modified policy statement issued Tuesday.
The benchmark 10-year Treasury finished up 20/32 at 100 13/32, yielding
4.45% compared to 4.55% Tuesday.
On the data front, the U.S. trade deficit widened 4.4% in October to $68.9
billion, the Commerce Department said. The increase caught economists by
surprise. Analysts surveyed by MarketWatch had expected the deficit to
narrow to $62.9 billion.
Crude-oil futures ended lower after the Energy Department reported that
distillate supplies, which include winter heating oil, fell 100,000
barrels in the week ended Dec. 9.
The American Petroleum Institute, however, reported a much larger 3.5
million-barrel 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 ended down 52 cents at $60.85 a barrel.
Stocks in focus
Honeywell International Inc. rose as much as 7% to $38.42 after the
diversified industrial manufacturer reaffirmed its earnings and sales
targets for 2005, and forecast 2006 results that would be in line with
analysts' projections. The stock ended up 4.5% at $37.50.
Boeing Co. shares rose to a record high, up 86 cents to $71.45, after the
aerospace giant confirmed it has received orders for up to 115 of its 787
Dreamliner airplanes from Australian airline Qantas.
Merck shares gained 1% to $29.20 as investors waited to see whether an
advisory panel of the Food and Drug Administration will recommend its new
vaccine for rotavirus, a gastrointestinal virus.
Pfizer Inc. shares climbed 2.4% to $22.85. European approval for Macugen,
a treatment for wet age-related macular degeneration, has moved a step
closer. The company is the international marketing partner for Macugen, a
drug developed by Osi Pharmaceuticals Inc.
Shares in Apple Computer Inc. fell as much as 6.3% to $70.27 after brokers
Bank of America and Bear Stearns downgraded the maker of the iPod digital
music player on valuation grounds. The stock closed out the session, down
4% at $72.01.
Merger and acquisition deals
General Dynamics Corp. said it agreed to buy Anteon International Corp.
for $2.2 billion, or $55.50 a share, cash. The 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 41 cents to $111.68 as Anteon's
stock soared more than 30% to $54.02.
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 up 13 cents at $43. Constellation Energy's stock shot up
8.6% to $61.10.
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
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SOURCE Thomson Financial Corporate Group
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