Daily Market Summary 12/5/06

[Portfolio Crafter]

End of Day Market Summary Tuesday 12/5/2006
by Portfolio Crafter
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Stocks closed higher after data showed service-sector growth improving in November, while inflation was weaker than expected in the third quarter, fueling hopes of a soft landing for the U.S. economy. The Standard & Poor's 500 got pushed to a fresh 6 year high and lifted the Dow Jones industrial average to within shouting distance of a new record close.

Today, the Dow Jones Industrial Average closed up 47.75 or 0.39% to 12,331.60, the broader S&P 500 index closed up 5.64 or 0.40% to 1,414.76, and the tech-fueled Nasdaq closed up 3.99 or 0.16% to 2,452.38.

Market breadth was positive. On the New York Stock Exchange, winners topped losers 20 to 11 on volume of almost 1.54 billion shares. On the Nasdaq, advancers topped decliners by a narrow margin of 15 to 14 on volume of 2.05 billion shares.

Investors eyed the day's economic news, including reports that suggested lower wage inflation and surprising strength in the service sector of the economy. A big drop in factory orders, higher Treasury yields and fluctuating oil prices kept a lid on the market's gains, but failed to spark a sell-off. The employment report due on Friday is expected to show a rise in the unemployment rates and payrolls, but a smaller rise in average hourly earnings. A more bullish growth, and by extension, more of a threat of wage inflation would be preferable to slower payroll growth.

On the economic front, the Institute for Supply Management's survey of the service sector showed better than expected growth. The ISM non-manufacturing index rose to 58.9% in November from 57.1% in October. Economists had expected it to fall to 55.5. Factory orders fell 4.7% in October, against the expected 4% fall. Third quarter productivity rose 0.2%, missing economists' forecasts for a rise of 0.5%.

Shares of Toll Brothers closed up $0.96 to $32.87, after reporting a sharp drop in fiscal fourth-quarter earnings that nonetheless topped analysts' estimates. But despite that bad news, chairman and CEO Robert Toll said that the market for new homes may finally be leveling off after more than a year's worth of declines.

Shares of Sirius Satellite Radio slumped 7.7% at $4.17, after it said that retail sales since Thanksgiving were below forecast. It now expects to have between 5.9 million and 6.1 million subscribers by the end of the year, compared with its previous expectation of 6.3 million subscribers. This however, represents a growth rate nearly 20% above that of 2005.

Shares of Coca Cola closed up $1.17 to $48.00, after Merrill Lynch boosted its 2007 and 2008 earnings forecasts on the stock, reflecting what it said was the company's improving fundamentals and potential attractiveness as a defensive play in a slowing economy.

Stock of Microsoft Corp. dropped 0.7%, as its CFO said that the company remains on track to achieve revenue growth of 13% to 15% in 2007, with sales of its new Vista software product likely to be a key contributor. It also expects the EPS to grow 13% to 15%. They also believe that they can sell 10 million XBox Live units by the end of the Christmas season. Microsoft has earmarked additional spending of $300 million for acquisitions and operating costs, $1 billion for high growth products, and $500 million for online services.

U.S. light crude oil prices for January delivery fell a penny to $62.43 a barrel on the New York Mercantile Exchange. Volatility was added on talk that dollar weakness may force the OPEC to cut production.

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