Daily Market Summary 12/12/06

[Portfolio Crafter]

End of Day Market Summary Tuesday 12/12/2006
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Stocks closed lower after the Federal Reserve noted a "substantial cooling" in the housing market but also kept its emphasis on inflation fighting in the statement accompanying its decision to leave interest rates unchanged. While some market participants hoped the Fed might open the door for eventual rate cuts next year, policymakers maintained a bias towards more tightening as they still see inflation as a risk.

Today, the Dow Jones industrial average closed down 12.90 or 0.10% to 12,315.58, the Standard & Poor's 500 index closed down 1.48 or 0.10% to 1,411.56, and the tech-heavy Nasdaq composite closed down 11.26 or 0.46% to 2,431.60.

Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by a margin of 9 to 7 on volume of 1.525 billion shares. On the Nasdaq, losers beat winners by a margin of nearly 18 to 11 as 1.972 billion shares changed hands.

Today, the Feds held the target for the federal funds rate, steady at 5.25%. While there was a slight change in the wording of the policy statement, treasury investors bet the Fed may be more concerned about economic weakness and cut rates soon. Many stock investors had been hoping for a rate cut in early 2007, but that prospect is looking less likely. The Wall Street needs to accept that the Fed will maintain a vigilant stand on inflation and there most likely won't be any Fed action until well into 2007.

Stock of Texas Instruments closed up $0.47 or 1.6% to $29.77, after it cut its earnings and revenue outlook. Despite that, J.P. Morgan upgraded the chipmaker. TI forecast sales in the range of $3.35 billion to $3.50 billion. It also forecast an EPS of 37 cents and 40 cents from its previous range of 40 cents to 46 cents.

Shares of Best Buy closed down $2.62 or 5% to $51.30, despite reporting higher earnings for the latest quarter. However, the results missed forecasts. It stated that its battle to sell flat-panel TVs, MP3s and other hot electronic gadgets has slashed prices and cut into profit. The company held its profit to $150 million, up nearly 8% from last year's income of $138 million. Sales jumped 15.5% to $8.47 billion while same-store sales rose 4.8%.

Stock of Citigroup Inc. closed down $0.63 or 1% to $52.25, after the company failed to announce a major management shakeup. It has promoted corporate and investment banking head Robert Druskin to chief operating officer, but CEO Chuck Prince said there wouldn't be any further changes. This ended market speculation that the bank would announce an in-depth restructuring.

Shares of Caterpillar Inc. lost about 1.3%, after competitor agricultural equipment manufacturer AGCO Corp. said it sees sales rising only 3-5% in 2007 and wants to cut the number of dealers that sell its products by 20% over the next two years.

U.S. light crude oil for January delivery lost 20 cents to settle at $61.02 a barrel on the New York Mercantile Exchange.

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