Daily Market Summary 1/17/07

[Portfolio Crafter]

End of Day Market Summary Wednesday, January 17, 2007
by Portfolio Crafter
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Stocks ended lower after the Dow Jones Industrial Average backed off an all time high and technology sector weakness linked to Intel Corp. offset strong results from financial giant J.P. Morgan Chase The tech sell off sank the Nasdaq composite and forced the Dow Jones industrial average to give up its attempt at closing at a record high for the fourth straight session.

Today, the Dow Jones Industrial average closed down 5.44 or 0.04% to 12,577.15, the S&P 500 closed down 1.28 or 0.09% to 1,430.62, and the Nasdaq closed down 18.36 or 0.74% to 2,479.42.

Market breadth was mixed. On the New York Stock Exchange, winners topped losers by a narrow margin of 17 to 15 on volume of 1.524 billion shares. On the Nasdaq, decliners beat advancers 17 to 12 on volume of 2.314 billion shares.

The earnings reporting period amps up this week. Earnings are currently on track to have risen 8.8% in the fourth quarter. However, with less than 10% of the S&P 500 having reported results, the figure will change over the next few weeks. Nonetheless, the fourth quarter remains likely to post the slowest year-over-year earnings growth since the first quarter of 2002, and that's a concern for investors.

The December PPI rose a greater than expected 0.9% and the core PPI rose 0.2%, also exceeding forecasts. December industrial production and capacity utilization, both rose more than economists were expecting. Tomorrow's CPI number would be a key on the inflation outlook and the direction of Federal Reserve policy. If the number is lower than estimates, stocks could break out, but if it follows the PPI, we could see selling. However, a very strong CPI number would raise concerns that inflation is not cooling fast enough and that, as a result, the Fed might eventually need to start lifting interest rates again.

The Fed said in its "beige book" that U.S. economic growth is expanding at a modest pace, while the labor market remains tight. This furthered bets that the Fed won't soon cut rates. San Francisco Fed President Janet Yellen, stated that the economy seems to be achieving a "soft landing" rather than a recession and that the impact from the housing market slowdown is proving to be limited.

Shares of Intel closed down $1.26 or 5.7% to $21.04, after reporting quarterly EPS of 26 cents, a penny more than what analysts were expecting but down from 40 cents a year earlier. It also warned that gross margins, a key measure of profitability, would be weaker in 2007.

Shares of JP Morgan Chase closed up $0.04 to $48.43, on reporting quarterly earnings that surged from a year ago and topped estimates. Strength in investment banking helped it post record quarterly results, but it also reported a decline in retail banking profit. Its fourth-quarter net income soared 68% from the year-ago period to $4.5 billion, and the revenue climbed 14% to $16.9 billion from the same quarter last year.

Stock of McDonald's Corp. closed up $0.29 to $44.86, after stating that fourth-quarter earnings and December sales would top estimates. It expects an EPS of 61 cents from continuing operations for the fourth quarter, against the expected 58 cents. Its sale at its hamburger restaurants rose 7.2% in December, against the expected 4%.

U.S. light crude oil for February delivery gained $1.03 to settle at $52.24 a barrel on the New York Mercantile Exchange. After falling below $51 a barrel, crude oil prices bounced back in the afternoon.

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