Daily Market Summary 12/11/06

[Portfolio Crafter]

End of Day Market Summary Monday 12/11/2006
by Portfolio Crafter
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Stocks closed higher after flurry of merger news. However, investors limited the gains in a sign of caution one day ahead of a Federal Reserve decision on interest rates. While a rising dollar helped lower crude oil prices, the positive impact on sentiment was offset by declining energy shares.

Today, the Dow Jones industrial average closed up 20.99 or 0.17% to 12,328.48, the broader Standard & Poor's 500 index closed up 3.20 or 0.23% to 1,413.04, and the tech-fueled Nasdaq composite closed up 5.50 or 0.23% to 2,442.86.

Market breadth was positive. On the New York Stock Exchange, advancers topped decliners by a margin of 19 to 13 on volume of 1.3 billion shares. On the Nasdaq, winners narrowly beat losers 15 to 14 as 1.84 billion shares changed hands.

All eyes and ears would be on the Fed meeting tomorrow. The ongoing weakness in the housing sector has led many investors to believe the Fed could cut rates sometime in 2007. However, the upward pressure on wages as well as rising raw material prices - both flags for inflation - could pressure the central bank to resume raising rates. A hawkish tone in the Fed policy statement will probably result in a negative market reaction. Investors will closely monitor the language of the statement to see whether central bankers mention any of the weakness seen in recent economic data. While the economy is holding up aside from housing and autos, investors would like to see easing inflationary pressures in the November consumer price index, due to be released on Friday.

Shares of Texas Instruments fell 1% after the company cut its earnings outlook for the current period. The chipmaker became the latest maker of semiconductors to warn of weaker-than-expected sales.

The biggest decliner on the Nasdaq was biotech Nuvelo that closed down $15.50 or 80% to $4.05, after it said its experimental drug for dissolving blood cots didn't meet its goal in late-stage studies. On the other hand, shares of J.P Morgan closed up $0.79 or 2% to $47.55, after Morgan Stanley upgraded the stock to overweight from equal weight and raised its share-price target to $53 from $44.

Stock of DuPont gained 1.1% to $47.42 after it lifted its 2006 earnings forecast and said it would cut 1,500 jobs worldwide. The company plans to cut jobs in its agricultural business and then funnel the cost savings into seeds, where it has struggled to keep pace in the market for genetically modified corn. Additionally, it will also close or streamline manufacturing units at about 10 of the division's 250 sites.

Shares of Southwest Airlines Co. rose 1.7% after a story said that the shares could advance 15% next year, and the airline could be the target of a leveraged buyout. The stock has been outperformed by the so called legacy carriers, noting that the Amex Airline Index is up 8% for the year so far, while Southwest is down about 5%.

Stock of American International Group Inc. rose almost 1% after it said that one of its subsidiaries is buying port operations in several U.S. cities from Dubai Ports World for an undisclosed sum.

Oil prices sank on strong inventory expectations. U.S. light crude for January delivery fell 81 cents to settle at $61.22 a barrel on the New York Mercantile Exchange.

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