US stocks end strongly higher

Earning and economic reports coupled with FOMC minutes push stocks higher

US stocks finished strongly higher on Wednesday, 16 February 2011. It was mainly better than expected earning and economic reports that helped stocks bounce back after incurring losses for two straight days. The dollar remained strong initially but pared its gains in the later part. Latest minutes from the Federal Open Market Committee meet also boosted stocks.



For the day, that ended on Wednesday, 16 February 2011, Dow ended higher by 61.53 points (0.5%) at 12,288.53. Nasdaq ended higher by 21.21 points (0.75%) at 2,825.56. S&P 500 ended higher by 8.31 points (0.62%) at 1,336.51.

Eight out of ten economic sectors ended higher led by energy, technology, materials and consumer discretionary sectors. Utilities and telecom featured among the laggards.

Stocks started the session in higher ground with help from overseas strength. Buyers were also bolstered by the premise that the stock market's ability to limit losses in the prior session was another indication of its resilience and that participants will presumably continue to buy the market's dips for fear of missing out on further gains.

Stocks continued to reclaim gains after suffering a midsession sell-off, but a slight slip followed the minutes from the latest FOMC meeting. According to the minutes, the Fed has raised its economic forecast and noted that risks to GDP growth have diminished. Projected increases in PCE are expected to remain subdued in 2011 and 2012.

Economic data on Wednesday showed that producer prices for January increased by 0.8%, which is slightly greater than the 0.7% increase that had been generally expected. Producer prices had increased 1.1% in the prior month. As for core producer prices, they increased a more tepid 0.5% month over month, but that is still sharper than the 0.2% increase that had been widely expected after a 0.2% increase in the prior month.

Housing starts for January spiked 14.6% month over month to an annualized rate of 596,000. Market was expecting a figure around 540,000. The surge makes for a sharp rebound from the downwardly revised 5.1% decline that was reported for the prior month. Building permits for January dropped 10.4% from the prior month to an annualized rate of 562,000. January building permits had been widely expected to come in at 575,000.

Industrial production for January fell 0.1%, which contrasts with the call for a 0.6% increase.

Among corporate news in the market, traders remained focused on Genzyme, which agreed to the terms of a long-awaited takeover by French pharmaceutical group Sanofi-Aventis. Genzyme gained 1.5% to $75.41, while Sanofi gained 3.4% on the Paris market. Sanofi will pay $20.1 billion in cash along with a series of milestone payments based on the performance of certain drugs, ending months of uncertainty. Genzyme separately reported stronger earnings, sales and margins in the fourth quarter.

Among other earning reports expected for the day, Comcast, Dell and Deere, beat earnings expectations by comfortable margins.

In the currency market on Wednesday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, rose initially but then slipped by 0.3%.

Crude prices ended higher on Wednesday, 16 February 2011 at Nymex. Prices rose as EIA reported less than expected rise in crude inventories for last week. Prices also rose as dollar pared initial gains. On Wednesday, crude oil futures for light sweet crude for March delivery closed higher by $0.67 (0.8%) at $84.99/barrel.

In the latest weekly inventory report on crude and crude products, the EIA reported today that crude inventories rose 900,000 barrels for the week ended 11 February. Market had expected a rise of 2.8 million barrels. The report also stated that gasoline inventories increased by 200,000 million barrels against an expected increase of 1.7 million. Supplies of distillates, which include diesel and heating oil, decreased by 3.1 million barrels against an expected decline of 1.1 million barrels.

Among other energy products on Wednesday, gasoline for March delivery added 6 cents, or 2.3%, to $2.54 a gallon. Natural gas futures stumbled 5 cents, or 1.4%, to $3.92 per million British thermal units.

Precious metals fluctuated between red and green on Wednesday, 16 February 2011 at Comex. Prices wavered between small gains and losses throughout the session as tensions in the Middle East, as well as worries about inflation and the European sovereign debt crisis, supported buying, but the metal had felt the pinch of a stronger dollar. On Wednesday, gold for April delivery ended higher by $1 (0.07%) at $1,375.1 mark on the New York Mercantile Exchange. March Comex silver futures pared early gains and ended lower by $0.07 (0.2%) at $30.63.

Indian ADRs ended mixed on Wednesday. Tata Motors, ICICI Bank and HDFC Bank lost 0.8%, 1.4%, and 07% respectively. Infosys gained 0.6%.

For tomorrow, three economic reports are scheduled to be released – consumer price index, core CPI and initial claims together with continuing claims. Earning reports will continue to flow in.