US stocks ignore earning reports and end lower

Bank stocks try to support the financial sector

US stocks ended deep drowned in the red on Wednesday, 20 January 2010. This was despite a batch of better than expected earning reports from companies in the financial sector. The economic data also did little to help pull up stocks. The financial and healthcare sectors tried to garner support.

At the end of the day on Wednesday, 20 January, 2010, the Dow Jones Industrial Average ended lower by 122.28 points at 10,603.15. Nasdaq ended lower by 29.15 points at 2291.25. S&P 500 ended lower by 12.19 points at 1138.07. Earlier in the day, Dow was down by 195 points.

All ten economic sectors ended in the red led by energy, materials, and technology sectors. Kraft was a major Dow laggard while Bank of America was a Dow winner.

In the currency market on Wednesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 1.1%. The dollar strengthened on fears that China will curb bank lending. The China Banking Regulatory Commission said it hasn't "specifically" told banks to suspend lending in January, but a report said that it had asked several banks to stop issuing loans.

This week is quite heavy on earning reports. Among earning reports expected for the day, Bank of America and Wells Fargo both reported improved fourth-quarter results. Bank of America came closer to the black and Wells swung to a profit. Both banks join peers that have also posted better results a year after the depths of the financial crisis. Morgan Stanley also posted a fourth-quarter profit of $617 million, though its revenue of $6.85 billion was below expectations. With the help of these bank shares, the financial sector was able to limit its losses.

In the technology sector, IBM topped expectations. But Microsoft, Yahoo, Apple, RIMM, Cisco all weighed on the Nasdaq.

Among economic data expected for the day, The Labor Department in US reported on Wednesday, 20 January 2010 that prices at the wholesale level in US increased a seasonally adjusted 0.2% in December 2009 largely due to a sharp increase in food costs.

Core producer prices, excluding volatile food and energy inputs, were unchanged. Market was expecting a 0.1% decline in overall produce prices and a 0.1% increase in the core rate. A month back in November 2009, higher energy costs sent the U.S. producer-price index surging 1.8%, its biggest one-month gain since last summer. Energy costs retreated in December, however.

Separately, the Commerce Department in US reported on Wednesday, 20 January 2010 that housing starts fell 4% to a seasonally adjusted annual rate of 557,000 in December 2009. Starts are down about 75% from the peak in 2006. The December estimate of 557,000 was however better than the 540,000 unit rate expected.

For all of 2009, an estimated 554,000 homes were started, which is down 39% from 2008's total and the lowest on record. Starts of single-family homes dropped 29% to a record-low 444,000 in 2009. Housing starts of single-family homes, condominiums, and apartments have been essentially flat over the past year. Compared with December 2008, starts are up 0.2%, the first year-over-year gain since early in 2006.

Crude oil prices ended lower once again on Wednesday, 20 January 2010. Prices fell as the dollar headed up strongly. Yesterday, prices had closed higher for the first time in six sessions. On Wednesday, crude-oil futures for light sweet crude for February delivery closed at $77.62/barrel (lower by $1.4 or 1.8%). The February contract ended today. Crude ended last week lower by 5.7%. On a year to date basis till date, crude is lower by 3.9%.

All Indian ADRs ended in the red today. Dr Reddys, MTNL and VSNL were the largest losers shedding 6.5%, 6.3% and 3.9% respectively. HDFC Bank and ICICI Bank shed 1.5% and 1.4% respectively.

Tomorrow, the day will feature economic reports including initial claims and continuing claims. Other than that, earning reports will continue to dominate.