By Tomi Kilgore, MarketWatch
Dec 29, 2005
U.S. stocks opened with tentative gains Thursday, as jobless claims data
that met expectations and a potential multi-billion dollar hotel deal helped
distract investors from the meanderings of the Treasury yield curve.
Upcoming data on existing home sales and manufacturing activity in the
Chicago region, both due out at 10:00 a.m. Eastern, may help solidify the
market's direction.
The Dow Jones Industrials Average edged up 18 points to 10,814, with 25 of
30 components contributing to gains.
Within the Dow industrials, Merck rose 1.7% to pace the gainers after
Morgan Stanley raised its price target on the stock to reflect recent cost
cutting moves by management and improved clarity on the outlook for its new
products.
General Motors fell 0.8% to lead the losers after CS First Boston said it
expected the automaker to report December light vehicle sales that are 12% to
14% below year-earlier levels, vs. an expected industry decline of 6% to 8%.
The broker also expects GM's market share to fall 1.5 percentage points to
26%.
The Nasdaq Composite rose 3 points to 2,232 and the S&P 500 Index tacked
on 2 points to 1,260.
"So far, Santa has been stingy," said Miller Tabak chief technical analyst
Phil Roth, referencing the so-called "Santa Claus effect," or the tendency for
stocks to rise over the last five trading days and the first two days of each
year.
"Next, we worry about the 'January effect,' or lack of it," Roth said. He
refers to the tendency for smaller capitalization stocks to outperform the
broad market.
The Treasury yield curve has been on close watch ever since it inverted on
Tuesday -- the yield on the 10-year Treasury note fell below the two-year
yield -- for the first time in five years, triggering a sharp sell-off in
stocks. In the past, inverted yield curves have usually preceded economic
recessions.
At last look, the curve was virtually flat, with the 10-year yield down
0.004 percentage points at 4.374% vs. a 2-year yield of 4.368%.
On the data front, new claims for U.S. state unemployment benefits edged
higher by 3,000 to a seasonally adjusted 322,000 in the week ending Dec. 24,
the Labor Department said, matching expectations.
Existing home sales are expected to decline slightly to a rate of 6.99
million in November from 7.09 million in the prior month, and the Chicago
Purchasing Managers Index is expected to fall to 60% in December from
November's 61.7%, according to a MarketWatch survey of economists.
In corporate news, Hilton Group is close to buying the international
hotels of Hilton Group PLC, reuniting the brands after a 40-year separation.
Media reports value the deal at around $6 billion.
Hilton shares were last trading up 2%.
Outside of the equity arena, the U.S. dollar nudged higher vs. its major
counterparts, gaining 0.1% vs. the euro to $1.1830 and adding 0.1% against the
yen to 117.85.
February crude futures fell slightly after running up to a 2-week high on
Wednesday. The front-month contract fell 25 cents to $59.57. February natural
gas futures lost 12.9 cents to $11.508 per million British thermal units,
after rising on Wednesday to end a three-session losing streak.
February gold futures ticked $1.40 higher to $517.70.
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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