Earning reports boost US stocks

Stocks register strong weekly gains for the second consecutive week

US stocks ended with strong gains for the week that ended on Friday, 14 January 2011. Better than expected earning and economic reports boosted stocks since the very start of the week. In addition easing of Europe's sovereign debt problems further improved sentiment.

For the week, that ended on Friday, 14 January 2011, Dow ended higher by 112.62 points (1%) at 11,787.38. Nasdaq ended higher by 52.19 points (1.9%) at 2,755.3. S&P 500 ended higher by 21.74 points (1.73%) at 1,293.24.




Nine out of ten economic sectors ended higher led by financial and energy sectors. Telecom sector was the sole loser.

During the week, Alcoa kicked off the earning season reporting earnings better than expected. The company also issued better than expected guidance.

Among economic data expected for the week, the Labor Department in US reported on Thursday, 13 January 2011 that the number of U.S. workers who filed new applications for jobless benefits jumped 35,000 last week to 445,000, the highest level in more than two months. A government official attributed the sharp increase largely to administrative backlogs. Still, the sharp rise in new claims, which had fallen steadily since last summer, is likely to put investors on guard following a disappointing December employment report last week.

In addition, the Commerce Department in US reported on Thursday, 13 January 2011 that the U.S. trade deficit narrowed for a fourth straight month in November 2010. The nation's trade deficit contracted a slight 0.3% to $38.3 billion from a revised $38.4 billion in October. This marked the smallest trade gap since January. The trade deficit shrank 13.9% in October. Both exports and imports rose in November, but exports expanded at a slightly faster pace.

The Fed's latest Beige Book indicated during the week that across the various Fed districts conditions were better in manufacturing, retail, and nonfinancial services than they were in financial services or real estate, which remained weak across all districts. Labor markets were said to be firming somewhat in most districts.

Pharmaceutical giant Merck fell considerably during the week following the company's statement on changes to the clinical studies for vorapaxar, an investigational cardiovascular medicine.

On Friday, 14 January, 2011 a spike by bank stocks and semiconductor issues helped the major equity averages overcome a sluggish start to set new two-year highs issues. Early trade lacked direction as market participants processed varied losses among overseas markets.

For the day, Dow ended higher by 55.48 points (0.47%) at 11,787.38. Nasdaq ended higher by 20.01 points (0.73%) at 2,755.3. S&P 500 ended higher by 9.48 points (0.73%) at 1,293.24.

Nine out of ten sectors ended higher for the day led by financials, energy and technology sectors. Consumer staples remained unchanged.

At Wall Street on Friday, Intel and JP Morgan Chase both reported earnings beating expectations. The same boosted banking and semiconductor stocks.

In the currency market on Friday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies was in constant search of direction and dropped marginally.

Overnight, the People's Bank of China said it would raise the reserve-requirement ratio of major lenders by half a percentage point from Jan. 20, as it steps up efforts to control excess money supply.

Among economic data expected for the day, the December Consumer Price Index showed a slightly stronger-than-expected 0.5% increase, but core consumer prices increased just 0.1%. Overall retail sales for December increased 0.6% while sales less autos increased 0.5%, which is a bit shy of what had been widely expected. December industrial production increased 0.8%, which is double the rate of increase that had been generally expected. The preliminary Consumer Sentiment Survey for January from the University of Michigan came in at 72.7. It was down from the prior month, but it's also shy of what had been expected. Business inventories for November were up 0.2%. That's considerably more modest than what had been widely anticipated.

Crude prices pared earlier losses and ended marginally higher on Friday, 14 January 2011 at Nymex. Prices rose due to better than expected earning reports and mixed economic data. On Friday, crude oil futures for light sweet crude for February delivery closed higher by $0.14 (0.15%) at $91.64/barrel. Earlier in the day, prices fell to a low of $90. For the week, crude gained 4%. On a year to date basis, crude is almost unchanged.

Among other energy products, gasoline for February rose 4 cents to $2.49 a gallon, giving a 3.3% advance for the week. Heating oil for the same month gained 4 cents to $2.65 a gallon. It jumped 6.4% this week.

February natural gas rose to $4.47 per million British thermal units, gaining 1.4% for the week. The Energy Information Administration reported during the week that natural gas in storages declined 138 million cubic feet. Market had expected a decline of 139 to 143 billion cubic feet.

Precious metals ended considerably lower on Friday, 14 January 2011 at Comex. Prices fell to lowest levels in two months as most of the pressure in the European region regarding concerns over sovereign debt problems eased and also as China hiked its reserve requirements. On Friday, gold for February delivery fell by $26.5 (1.9%) ending at $1,360.5 an ounce on the New York Mercantile Exchange. For the week, gold ended lower by 0.6%. Gold prices have dropped 4.3% this year till date. On Friday, March Comex silver futures ended lower by 94 cents (3.2%) at $28.32.

Indian ADRs ended mixed on Friday. HDFC bank and Tata Motors slipped the most losing 2.9% and 2.7% respectively. Wipro Tech gained 2.5%.

For the year, Dow, Nasdaq and S&P 500 are higher by 1.8%, 3.9% and 2.8% respectively. For next week, U.S. equity and bond markets are closed on Monday in observance of Martin Luther King Jr. Day. For the rest of the week, earning reports will attain more prominence.