Daily Market Summary 1/8/07

[Portfolio Crafter]

End of Day Market Summary Monday, January 8, 2007
by Portfolio Crafter
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Stocks reversed early weakness to close higher as comments by a Federal Reserve official helped soothe recent concerns about the economy and Fed policy, while optimism about the technology sector helped offset concerns about the upcoming earnings season. Investors welcomed lower oil prices, a spate of mergers and some bullish analyst comments on the technology sector.

Today, the Dow Jones industrial average closed up 25.48 or 0.21% to 12,423.49, the S&P 500 closed up 3.13 or 0.22% to 1,412.84, and the Nasdaq closed up 3.95 or 0.16% to 2,438.20.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by 19 to 13 on volume of 1.6 billion shares. On the Nasdaq, advancers narrowly edged out decliners by 15 to 14 on volume of 1.93 billion shares.

Investors remain confused about the direction of interest rates after last week's events. The surprisingly strong December jobs report raised bets that the Fed won't begin cutting interest rates anytime soon. However, Fed Vice Chairman Donald Kohn said in a speech that the economy looked set for a soft landing despite the downturn in housing, reinforcing expectations that Fed rate cuts may be delayed. Now, Kohn's comments on inflation have left the door open for rate cuts. These comments have helped clarify the Fed's intentions to some extent.

Shares of Gap closed up $1.37 or 10% to $20.26, on reports that that it has hired Goldman Sachs to help it look into strategic alternatives, including the possibility of putting itself up for sale. The company has been plagued with a protracted string of sales declines at its namesake stores.

Shares of IBM gained 1.5% after a UBS analyst upgraded the world's largest technology services company to "Buy" from "Neutral" and raised the price target. On the other hand, shares of Wal-Mart closed down $0.39 to $47.00, and Home Depot closed down $0.30 to $39.49, on being downgraded by Goldman Sachs.

Shares of General electric closed down $0.01 to $37.55, after it stated that it will buy privately owned Vetco Gray for $1.9 billion. The company supplies drilling and production equipment. Vetco Gray is a subsidiary of Vetco International Ltd, which is owned by three private equity firms, Candover, 3i Group and JP Morgan Partners.

Shares of Forest Oil closed down $1.09 to $30.13, after it stated that it will buy Houston Exploration for $1.5 billion in cash and stock. Shares of Houston Exploration closed up $2.00 to $50.69.

U.S. light crude oil prices for February delivery fell 22 cents to settle at $56.09 a barrel on the New York Mercantile Exchange. The unusually warm winter weather in the Northeast and signs that supplies are ample have contributed to a nearly 9% slide in oil prices since last week. Additionally, Saudi Arabia said it would fully implement the production cuts agreed to previously and there have been further talk on OPEC production cuts.

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