Earning reports fail to drive stocks considerably higher

Economic data for the day paint a mixed picture

It was quite a lackluster day at Wall street on Thursday, 27 January 2011. The day was heavy with economic and earning reports. Though earnings surpassed expectation in most cases, the economic data checked in mixed in nature. While pharmaceutical and technology companies beat estimates, the FMCG sector bore the brunt of higher input costs. The indices traded within narrow band for most part of the day and Dow slipped in the red for a very brief period. Nevertheless, at the end, all three major indices ended higher with the Nasdaq leading the way.



For the day, that ended on Thursday, 27 January 2011, Dow ended higher by 4.39 points (0.04%) at 11,989.83. Nasdaq ended higher by 15.78 points (0.57%) at 2,755.28. S&P 500 ended higher by 2.91 points (0.22%) at 1,299.54. Dow was trading higher by 21 points earlier during the day.

Six out of ten economic sectors ended higher led by financial, technology and consumer discretionary sectors. Energy, materials, and telecom sectors featured among laggards.

In the currency market on Thursday, the dollar index ended fractionally down at the end of the trading day after staying strong for most part of the day.

Among economic data expected for the day, the same checked in mixed in nature. Durable goods orders for December dropped 2.5% in addition to the 0.1% decline that was recorded in the prior month. Market was expecting a 1.5% increase. Excluding transportation, durable goods orders increased 0.5%, but that still is not as strong as the 0.6% increase that had been expected.

The latest initial jobless claims tally for the week ended 22 January 2011 came in at a three-month high of 454,000, which is well above the 410,000 claims that had been widely expected. Continuing claims came in at 3.99 million, up from 3.90 million.

But pending home sales proved to be a much more positive surprise. They climbed 2.0% when a 0.5% decline had been expected.

Earning reports dominated the day. Earnings from a batch of bellwether consumer companies and a pair of drug makers got a mixed reaction in the market. Shares of Microsoft closed marginally higher after the software giant's earnings topped analysts' expectations. Other than this, Netflix and Qualcomm helped the Nasdaq Composite lock in a nice lead over its counterparts for the entire session. The two stocks were distinguished by their bottom line beats and upside forecasts.

Heavy-machinery maker Caterpillar rose after the company's fourth-quarter earnings soared, beating analysts' estimates as demand recovered from slumping levels a year earlier.

Among the ones that misses estimates, consumer giant Procter & Gamble sank after its fiscal second-quarter profit slid 28% from a year-earlier period that included a large gain from discontinued operations, as profit margins were narrowed by rising commodity costs. Colgate-Palmolive, the world's largest toothpaste maker by sales, lost ground after its fourth-quarter earnings fell 1.1% on lower-than-expected revenue, as higher materials costs hit margins.

In the telecom sector, AT&T was hurt by a steep decline in the number of net new customers the telecommunications company signed to a long-term service contract in the fourth quarter. Earnings narrowly beat analysts' expectations, but revenue came up short of forecasts.

In the pharmaceutical sector, Eli Lilly reported that its fourth-quarter earnings rose 28%, as higher sales of an antidepressant and a cancer drug helped boost revenue. Bristol-Myers Squibb rose after the drug maker said it and partner Pfizer expect to complete an application to U.S. regulators by the end of this year for an experimental anticoagulant, apixaban. But the company issued a profit forecast for 2011 that fell short of Wall Street expectations, citing the effects of a product recall and higher costs associated with the health-care overhaul enacted in the U.S. last year.

Crude prices ended considerably lower on Thursday, 27 January 2011 at Nymex. Negative economic data pushed prices lower despite the dollar ending fractionally lower for the day. On Thursday, crude oil futures for light sweet crude for March delivery closed lower by $1.69 (1.9%) at $85.64/barrel.

February natural gas widened losses after the weekly inventories report and settled nearly 4% lower. Natural gas for February delivery retreated 18 cents to $4.316 per million British thermal units. The upcoming March contract retreated 18 cents, or 4%, to $4.319 per million Btus. The Energy Information Administration said supplies of the product in storages fell 174 billion cubic feet for the week ended 21 January against an expected decline between 168 and 172 billion cubic feet.

Precious metals ended the day in a weak mode on Thursday, 27 January 2011 at Comex. Gold prices surprisingly slipped to four month low levels even as economic data pained a mixed picture of the economy and also as the dollar lost grounds.

On Thursday, gold for February delivery ended lower by $14.6 (1.1%) at $1,318.4 mark on the New York Mercantile Exchange. Gold had wavered between small gains and losses earlier in the session, but seemed to regain enough footing to spend most of the morning in the black. On Thursday, March Comex silver futures ended lower by $0.10 (0.4%) at $27.03. Prices rallied more than 50 cents higher during the day.

Indian ADRs ended mostly lower on Thursday. VSNL, ICICI Bank and Wipro Technologies slid the most shedding 4.8%, 1.8% and 1.4% respectively.

For tomorrow, the advance GDP reading for last quarter is the main economic report expected. Earning reports will continue to flow in.