US stocks surrender all gains

Indices fail to cling on to their early day gains at the end

US stocks stayed strong and steady for most part of the day on Tuesday, 26 January 2010. Better than expected earning reports and consumer confidence data helped market pick up gains during the course of the day after a sluggish start. It was mainly the technology sector that helped the broader market bounce back. But a late sell off knocked out all the gains accumulated and the indices ultimately ended in the red. There was no major catalyst for this sell off.

At the end of the day on Tuesday, 26 January, 2010, the Dow Jones Industrial Average ended lower by 2.57 points at 10,194.29. Nasdaq ended lower by 7.07 points at 2203.73. S&P 500 ended lower by 4.61 points at 1092.17. Earlier in the day, Dow was trading higher by almost 87 points.

Eight of ten economic sectors ended in the red led by financial, materials, and telecom sectors. Utilities and consumer discretionary were the only sectoral gainers.

While Travelers was a major Dow gainer, Verizon and Johnson & Johnson weighed on the Dow.

News that China followed through with plans to hike reserve ratios at select banks and a negative outlook for Japan's sovereign debt rating led to steep losses in Asia and weighed on sentiment in the early going. However, consumer confidence during January and earning reports helped stop the morning slide.

Among economic data expected for the day, the Conference Board reported on Tuesday, 26 January 2010 that U.S. consumer confidence index rose to a 16-month high in January 2010.

The report detailed that consumer confidence index rose to 55.9 in January from an upwardly revised 53.6 in December. Market was expecting a figure around 53.5. It's the highest reading since September 2008, when the financial crisis intensified. It was the third straight increase for consumer confidence.

Once stocks steadied, the technology sector emerged to trade with strength. Tech stocks made their way with help from Apple, which posted upside earnings and a strong forecast. In addition, both Texas Instruments and Corning exceeded earnings estimates, but its shares lagged.

Participants also witnessed upside earnings surprises from Dow component Johnson & Johnson and Verizon. But their stocks failed to join the rally. Their weakness caused the health care sector and telecom sector to trail the broader market. However, fellow Dow component Travelers helped financials advance on better-than-expected earnings.

Crude oil prices dropped on Tuesday, 26 January 2010. Prices fell as traders mulled over China's tightening of the current monetary policies, which will lead to demand concerns for crude in coming months. Prices also fell in anticipation of buildup in crude and gasoline inventories for last week. But prices recovered from their intra day lows as consumer confidence data showed improvement for third straight time.

On Tuesday, crude-oil futures for light sweet crude for March delivery closed at $74.71/barrel (lower by $0.55 or 0.7%). During intra day trading, prices fell to a low of $73.82. Last week, crude ended lower by 4.7%. On a year to date basis till date, crude is lower by 7%.

In the currency market on Tuesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 0.3%.

Through the end of the week, traders will digest hearings on the bailout of AIG, an interest-rate decision from the Federal Reserve, a reconfirmation battle for Fed Chairman Ben Bernanke, and a State of the Union Address in which President Obama may offer new details on his proposal to restrict banks' speculative trading.

Trading volume was light today as some participants stayed on the sidelines altogether. Composite turnover in New York Stock Exchange-listed companies was 4.8 billion shares.

Barring WNS and Punjab Tractors, all Indian ADRs ended in the red today. ICICI Bank and Punjab Tractors were the largest losers shedding 6.4% and 3.7% respectively. WNS Technologies gained 2%.

Tomorrow, there are no economic reports scheduled for the day. Other than that, earning reports will continue to dominate.