Stocks Hold Gains Ahead of Close; Citi Skids
Stocks continued to trade modestly higher ahead of the close Tuesday as strength in energy and materials stocks outweighed pressure from financials in the wake of a disappointing earnings report from Citigroup and ahead of more reports from banks later this week.
The Dow Jones Industrial Average rose more than 45 points, led by Boeing, Caterpillar and Alcoa after ending at new highsin the previous week. Verizon and Bank of Americaslipped.
The S&P 500 and the Nasdaq advanced slightly. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose to nearly 16.
Among key S&P 500 sectors, energy, industrials and materials gained, while financials and telecom fell.
Many market pros remain upbeat about the near-term prospects for the market. Expect to see a rally in the short-term, David Hefty, chief executive at Hefty Wealth Partners, said on CNBC.
“There’s only about a 20 percent probability that the market can break below 1,280 on the S&P,” Hefty said. “If we extend that forward, over the next 100 trading days, there’s about a 24 percent average return...so we’re very bullish here on the short-term.”
Apple shares were off the lows of the day, but remained down about 2 percent in the wake of the company's announcement that CEO Steve Jobs was taking a leave to focus on his health, and ahead of its earnings release after the bell.
The tech giant was expected to report a 50 percent jump in sales, according to analysts, thanks to the popularity of the iPhone and iPad during the recent holidays. Analysts polled by Thomson Reuters expect the group to have earned $5.40 per share on sales of $24.4 billion for its fiscal first quarter.
In the meantime, Apple announced that Tim Cook, the chief operating officer, will take charge of the firmin the interim. (Read More: Apple Shows Resilience Short Term)
IBM was scheduled to post earningsafter the bell Tuesday. Analysts expect the tech giant to report earnings of 4.08 per share on revenues of $28.3 billion.
Elsewhere in tech news, Intel fell after it was downgraded to "underperform" from "market perform" by First Global, while Yahooalso declined after it was downgraded to "equal-weight" from "overweight" by Morgan Stanley.
Meanwhile, Google rose after at least four brokerages raised their price targets on the search-engine giant.
On the financial front, Citigroup shares slipped more than 5 percent after the banking giant posted a profit but missed analyst estimates. S&P Equity Research, meanwhile, maintained its "buy" rating on Citi, citing the bank's 13 percent drop in non-accrual loans from the previous quarter and an 18 percent drop in loan loss provisions.
Goldman Sachs and Wells Fargo were also in focus as both financial firms were slated to post earnings before the bell Wednesday. Goldman Sachs meanwhile said it will limit its private placement of shares of social networking site Facebookto investors outside the United States.
Comerica also sank after news the Dallas bank was buying Sterling Bancshares, a regional bank, in a stock deal worth about $1.03 billion. The move will give the Dallas bank an even bigger stake in the Texas market. Comerica was scheduled to report earnings Wednesday.
Other regional banks are also scheduled to report earnings tomorrow morning including Bank of New York Mellon, Northern Trust, State Street and USBancorp.
While most banks were in the red, JPMorgan shares rose slightly after analyst Meredith Whitney of Meredith Whitney Advisory Group upgraded the firm to a "buy," her first upgrade of a big bank since the upgrade of Goldman Sachs in 2009. Meredith has "buy" ratings on only two other stocks—Visa and MasterCard .
Boeing announced it would deliver its first 787 Dreamlinerin the third quarter instead of the first quarter after an electrical fire on a test flight in November. Shares of the airline company gained more than 3 percent as investors were relieved the widely expected delay was not longer. Boeing is scheduled to release earnings results on Jan. 26.
Delta Airlines shares were under pressure after the airline firm reported a profit that was below Wall Street estimates.
Energy stocks gained even as the price of oil slipped near $91 a barrelamid a restarting of the Trans-Alaskan pipeline. ExxonMobil traded above its 52-week high, as other companies, including energy producer EOG Resources and oil and gas driller Helmerick & Payne also gained.
In other news, Comcast rose after news the Federal Communication Commission approved the cable company's acquisition of NBC Universal from GE by a 4-1 vote.
TD Ameritrade rose after the online broker reported a profit that rose 6 percent, in line with expectations, as trading activity picked up.
Caterpillar advanced more than 2 percent, supporting the Dow's gains, after Raymond James raised its price target on the stock to $116 from $95.
Sysco led consumer staples stocks lower after BB&T Capital Markets downgraded the food service distributor to "hold" from "buy."
McDonald's also gained after RBC Capital Market raised its rating on the fast-food chain to "outperform," after news the Big Mac maker will raise prices by 2 to 3 percent in 2011 to combat inflation.
And Yum Brands climbed after the owner of KFC and Taco Bell fast-food chains put its Long John Silver's and A&W All-American Food Restaurants up for sale as it focuses on growth in China and other international markets.
The dollar fell slightly against a basket of currencies, while the euro gained as sovereign funds stepped in to buy. The drop in the dollar contributed to a boost in gold prices, as the precious metal rose above $1,368 an ounce.
On the economic front, an index of U.S. home-builder sentimentin January unchanged at a low level of 16 for the third straight month according to the National Association of Home Builders/Wells Fargo Housing Market Index, less than what economists had expected.
Also, a gauge of manufacturing in New York State rose in January as shipments surged, the New York Federal Reserve said in a report. The New York Fed's "Empire State" general business conditions index rose to 11.92 in January from a downwardly revised 9.89 in December.
European shares closed higher Tuesday, supported by resource-related stocks and banks, but amid fading hopes that euro zone finance ministers will reach an agreement to increase the region's rescue fund limited gains.
On the Calendar This Week:
TUESDAY: Earnings after-the-bell from Apple, IBM.
WEDNESDAY: Weekly mortgage applications, housing starts, Obama hosts Chinese President Hu; earnings before-the-bell from Goldman Sachs, Wells Fargo; earnings after-the-bell from eBay.
THURSDAY: Weekly jobless claims, existing home sales, leading indicators, Philadelphia Fed survey, oil inventories; earnings before-the-bell from Morgan Stanley, Fifth Third, Huntington Bank, Southwest Airlines, United Health, Union Pacific; earnings after-the-bell from Advanced Micro, Capital One.
FRIDAY: Dodd-Frank rulemaking deadline; earnings before-the-bell from Bank of America, GE, BB&T, Schlumberger and Sun Trust.
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