Market summary 10/13/2006

[Thierry Martin]

End of Day Market Summary Friday, 10/13/2006
by Portfolio Crafter
30-day risk-free trial

Stocks closed higher with the Dow Jones Industrial Average finishing at a fresh record high, capping off a solid week that saw the Nasdaq Composite post a 2.5% gain. Initially, the index was weighed down by uninspiring earnings from General Electric Co. and a broker downgrade for Home Depot. However, investors shrugged off these reports and a weak retail sales report to keep the market's recent rally going.

Today, the Dow Jones Industrial average closed up 12.81 or 0.11% to 11,960.51, setting a new closing high for the sixth time in the last nine sessions. The broader S&P 500 index closed up 2.79 or 0.2% to 1,365.62, while the tech-fueled Nasdaq composite closed up 11.11 or 0.47% to 2,357.29. For the week, the Dow gained 0.9%, the S&P 500 advanced 1.2%, while the Nasdaq rose 2.5%.

Market breadth was positive. On the New York Stock Exchange, winners beat losers nearly 19 to 13 on volume of 1.507 billion shares. On the Nasdaq, advancers topped decliners 18 to 11 on volume of 1.978 billion shares.

The good week for the market is a result of cheering news from the Beige Book and the minutes of the last FOMA meeting. While there are indications of a solid economic growth going through into 2008, there are some concerns about inflation. Michael Moskow, the president of the Chicago Federal Reserve Bank stated that the risk of inflation remaining too high is greater than the risk of growth being too low. Therefore, some additional rate hikes may be necessary to bring inflation back into a range of stable prices.

In data news, retail sales fell 0.4% in September on a record 9.3% drop in gasoline sales, but were up 0.6% excluding gasoline. Analyst had predicted a 0.2% increase. This is in contrast to robust same-store sales readings issued earlier this month by some of leading retail chains. The University of Michigan's preliminary reading on consumer sentiment in October was 92.3, up from September's final reading of 85.4. This is against the expected rise to 86.5. While retail sales have set us up for good solid fourth quarter, the consumer sentiment came in as you would expect with energy prices falling. U.S. business inventories increased 0.6% in August, slightly slower than the 0.8% increase in sales. Therefore, its all a balance between the negative news and the positive news out there.

Shares of General Electric Co. closed down 0.7% at $35.98, despite reporting earnings of 49 cents a share in the third quarter. The company narrowed its full-year earnings guidance to a range that includes the current consensus forecast. The company earned $5.1 billion, up from $4.6 billion in the year-earlier period. Its revenue rose 12% to $40.9 billion. However, broker Citigroup expressed some disappointment over operating margins, and this led to the decline.

Stock of Microsoft Corp. closed up $0.14 to $28.36, after it stated it will not delay shipping its new Windows operating system, Vista, to Europe, after fears that it might do so because of disputes with regulators there. The software giant confirmed it plans to release Vista on schedule in both Europe and Korea following "constructive dialogue" with the trade commissions of both regions.

Shares of Home Depot Inc. fell 2.6% to $36.90 after broker Raymond James downgraded the company to outperform from strong buy. The company has made some leadership changes and organizational shifts that were met with skepticism from some investors.

U.S. light crude for November delivery climbed 71 cents to settle at $58.57 a barrel on the New York Mercantile Exchange. Traders continued to weigh a sizeable decline in distillate supplies in the latest week as unseasonably cold weather, including record snowfalls, hit the northern U.S. Additionally, safety authorities in Norway have ordered a production shutdown at two offshore platforms.

Try Portfolio Crafter risk-free for 30 days.