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Stocks Struggle for Direction; 3M Falls

CNBC.com
Monday, 11 Oct 2010 | 11:53 AM ET

Stocks struggled for direction amid quiet holiday trading as investors considered the next steps from the Federal Reserve in the wake of a disappointing jobs report on Friday, and ahead of several third-quarter earnings reports this week.

The Dow Jones Industrial Average was slightly higher, after bobbing in and out of negative territory.

JPMorgan , Boeing , and Intel rose. 3M and Home Depot fell.

The S&P 500 and the Nasdaq also rose modestly. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell more than 6 percent, below 20.

Most of the key S&P 500 sectors rose, led by technology, utilities, and energy.

Stocks ended higher Friday with the Dow closing above the psychologically important 11,000-level for the first time since early May. The U.S. Treasurys market is closed Monday for the Columbus Day holiday.

Market activity is fairly quiet with the bond market closed, and as the traders catch their breath after Friday's move above 11,000 and ahead of a batch of earnings due out later this week from Intel, JPMorgan, Google, AMD , and GE, among others.

The one surprise Monday was a sharp downdraft in the VIX. While "peculiar," the lower level is consistent with Schaeffer Investment Research's view that the VIX is moving toward 15, the level it was at in April. according to Ryan Detrick, senior technical strategist.

That's also a sign stocks are poised to move to their April highs, Detrick said.

"This market is probably working its way higher, to its April peak, and probably higher before the end of the year," he said.

Most participants surveyed by CNBC over the weekend believe the Federal Reserve will buy assets to boost the economy, in a strategy known as quantitative easing. Nearly 93 percent of the 70 respondents, including economists, fund managers and traders, believe the Fed will buy assets, up from 69 percent in a survey published two weeks earlier.

In economic news, Kansas City Federal Reserve Bank President Thomas Hoenig said over the weekend that higher capital standards were needed to ensure the banking industry was able to provide stable growth in the future.

And tougher rules on bank dividends were needed to stop excessive payouts during times of financial stress, Boston Federal Reserve Bank President Eric Rosengren said.

At 2 p.m., Fed Vice-Chairman Janet Yellen will speak on monetary policy at the National Association for Business Economics annual meeting in Denver, Colorado.

There is no economic data scheduled for Monday.

In technology news, Microsoft released a line of smartphonesrunning its Windows software on Monday, to compete against Apple's iPhone and Google'sAndroid system.

Google

China's CNOOC agreed on Sunday to a one-third stake in Chesapeake Energy's Eagle Ford shale property in South Texas for $1.08 billion in cash.

Gymboree shares soared after the children's retailer agreed to a $1.8 billion buyout from affiliates of asset management firm Bain Capital. Rival Children's Place also rose after the news.

Solar-energy stocks rose after LDK Solar raised its revenue and shipment outlook for the third quarter. Suntech Power Holdings , Evergreen Solarand First Solarwere all higher.

Meanwhile, Ascent Solar Technologies soared more than 30 percent after the solar company said it was the first to have its specialized thin-film solar module to receive full IEC certification, allowing the ocmpany to use the product in building applications for commercial, industrial and residential rooftops.

JP Morgan rose after a report in Barron's that the bank plans to raise its dividend in the first quarter. Eventually the bank expects the dividend to be about 30 percent to 40 percent of earnings.

Bank stocks overall were mixed despite an upbeat review of the sector by Citigroup, which said U.S. banks should meet or exceed third quarter estimates. Specifically, Citi said Wells Fargo and JPMorgan will outperform, and the brokerage raised its price target for Fifth Third Bancorp to $15 from $14. Citi, however, cut its price target for Bank of America to $20 from $22 and for PNC from $62 to $75.

Assurant was slightly lower after it was downgrounded by two brokerages.

Eli Lilly's shares fell after the drugmaker pulled plans to have Alimta, an established drug, approved as a treatment for head and neck cancer after the medicine failed in a late-stage clinical trial.

Potash shares were higher after news two teams are working on bids for the Canadian fertilizer company. Shares of BHP Billiton , which has offered $130 a share for Potash, were slightly lower.

U.S. professors Peter Diamond and Dale Mortensen and British-Cypriot citizen Christopher Pissarides won the Nobel Prize for economicsfor their work analyzing the process of buying and selling and unemployment.

European stocks rose, tracking Friday's gains in the U.S. and Asian stocks ended higher, as the Shanghai market jumped 2.5 percent.

The prices of oil remained near multi-month highs and gold hovered near its recent all-time peaks as the dollar continued its decline against other major currencies.

On Tap For Next Week:

MONDAY: Blackberry suspension goes into effect in UAE.
TUESDAY: NFIB small biz index; employment trends index; employment optimism index; Kansas City Fed Pres Hoenig speaks; CFTC hearing on high frequency trading and flash crash; 3-year note auction; FOMC meeting minutes; P&G shareholder meeting; Earnings from Intel and CSX
WEDNESDAY: Weekly mortgage applications; import & export prices; 10-year note auction; Richmond Fed Pres Lacker speaks; Earnings from JPMorgan
THURSDAY: International trade; PPI; weekly jobless claims; oil inventories; 30-year bond auction; Minnesota Fed Pres Kocherlakota speaks; OPEC meeting; Earnings from Google and AMD
FRIDAY: Atlanta Fed Pres Lockhart speaks; Bernanke speaks; CPI; retail sales; Empire State mfg survey; consumer sentiment; credit card default rates reported; Earnings from GE and Mattel

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