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Stocks Gain as Materials, Tech Advance

CNBC.com
Monday, 24 Jan 2011 | 11:31 AM ET

Stocks extended modest gains as tech stocks rose and lifted the Nasdaq for the first time in several sessions.

The Dow Jones Industrial Average rose more than 60 points after ending up last week, amid a mixed performance for the major market indexes.

Alcoa , Microsoft and IBM gained, while Bank ofAmerica fell.

The S&P 500 and the tech-heavy Nasdaq traded modestly higher. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 19.

Among key S&P 500 sectors, materials, technology and utilities advanced.

The earnings began before-the-bell, with Dow component McDonald's falling after reporting earnings of $1.16 a share, slightly shy of expectations due to a penny-per-share of income from its Latin America business. McDonald's sales results were better than expected, however, rising to $6.21 billion from $5.97 billion last year. The fast food chain was expected to earn about $6.20 billion, according to the consensus of analysts surveyed by Thomson Reuters.

And Halliburton shares also slipped despite reporting better-than-expected profits and sales. Rival Schlumberger was flat after reporting strong results on Friday.

Fellow Dow component American Express reports earnings after the bell, along with CSX , Amgen and Texas Instruments .

On Friday, CNBC parent posted a better-than-expected profit, helped by strong emerging-market demand for heavy equipment, boosting the market and sparking optimism the economy was strengthening.

Shares of the world's largest maker of jet engines and electric turbines rose 7 percent on Friday, hitting their highest level since November 2008, and making GE the biggest lift to the Dow Jones industrial average.

Philips Electronics, which competes with General Electric in some businesses, warned on Monday however that consumers in mature markets would be reluctant to spend this year. The group blamed weak TV sales for disappointing fourth-quarter profit.

RadioShack sank to the bottom of the S&P 500 after news Chairman and CEO Julian Day will retire in May. The electronics retailer also forecasted disappointing earnings for its fiscal fourth quarter.

JCPenney rose after news it was closing some stores, outlets and call center locations to streamline operations and boost profits, and that Steven Roth, chairman of Vornado Realty Trust William Ackman, the activist investors, were joining the board.

RockTenn has agreed to buy its bigger competitor, Smurfit-Stone Container, for $3.5 billion in cash and stock. Smurfit-Stone emerged from bankruptcy just seven month ago. The combined company would be the second largest container board producer after International Paper . The merger was approved by the boards of both companies.

Intel shares rose after news the tech giant would increase stock buybacks by $10 billion., for a total of $14.2 billion, and raised its dividend by 15 percent to 18.12 cents a share.

Shares of Salesforce.com , which provides cloud computing services, fell nearly 2 percent Monday after a report in Barron's said the "momentum" stock could fall by 20 percent, saying analysts were ignoring the company's high valuations, and potential for a "huge employee-options expense to roil results.

Among health care stocks, Clinical Data skyrocketed more than 50 percent after a drug it has developed to treat adult depression was approved by the Food and Drug Administration.

Also, shares of Vivus slumped after the FDA asked the biopharmaceutical company for more data to assess whether an ingredient in its weight-loss drug Qnexa causes birth defects.

And Novartis was buying Genoptix , a cancer diagnostic laboratory company, for $470 million. Sales of Genoptix soared more than 20 percent on the news.

Among financial stocks, Citigroup slipped after news the government on Tuesday would sell 465.1 million Citigroup warrantsthat give the holder the right to buy Citi common stocks at a fixed price.

Shares of Berkshire Hathaway gained after news in Barron's that the company, run by Warren Buffett, may pay a dividend in the next 12 to 18 months.

First Solar jumped after Goldman Sachs added the solar-energy company to its conviction buy list, citing costs cuts and reduced exposure to European markets.

With no macroeconomic data scheduled for Monday, investors will look ahead to the Federal Reserve’s meeting Tuesday and Wednesday, and several measures of the housing market, including the S&P Case Shiller Home Price Index on Tuesday and new home sales figures on Wednesday.

The Fed was not expected to take any action at its two-day meeting, but it could comment on the economy and inflation outlook. Later this week, the focus will shift to reports on consumer sentiment and the first reading of fourth quarter gross domestic product.

Upbeat on US Earnings Season
David Buik, partner at BGC Partners, expects solid earnings out of the U.S. this week. He tells CNBC's Chloe Cho and Anna Edwards that this will lend support to global equities over the next few days.

Also, President Obama gives his State of the Union address Tuesday. Obama has signaled he will call for efforts to tackle the problem of high annual U.S. deficits and surging debt in his nationally televised annual address.

In the bond markets, U.S. Treasury will be auctioning $35 billion in 2-year notes, $35 billion in 5-year notes, and $29 billion in 7-year notes Tuesday through Thursday.

Shares fell in Europe Mondayas investors remain nervous as the debt crisis continues to take its toll and after Philips' warning.

French Finance Minister Christine Lagarde told CNBC on MondayEuropean banks will have to undergo another round of stress tests which will be far more strict and credible, needed to restore credibility.

In Ireland, the political fallout from the country’s financial meltdown continued and early elections were looming after the Green Party pulled out of the government led by Prime Minister Brian Cowen.

Cowen ruled out resigning as prime minister, but did resign Saturday as leader of Ireland's political heavyweight, the Fianna Fail party.

On the Calendar Next Week:

MONDAY: After-the-bell earnings from American Express, Amgen, CSX, and Zions Bancorp.
TUESDAY: President Obama's State of the Union address; S&P Case Shiller Home Price Index, consumer confidence, Richard Fed business activity survey, state-by-state unemployment, two-year Treasury note auction, API weekly report; Bank of Japan monetary policy meeting; before-the-bell earnings from Johnson & Johnson, 3M, Travelers, Verizon and US Steel; after-the-bell earnings from Yahoo!
WEDNESDAY: Davos/World Economic Forum; mortgage applications, new home sales, oil inventories, five-year Treasury note auction, FOMC announcement; earnings before-the-bell from Boeing, United Technologies, Xerox; earnings after-the-bell from Netflix.
THURSDAY: Durable goods, jobless claims, pending home sales, natural gas inventories, seven-year Treasury note auction, money supply; before-the-bell earnings from AT&T, Caterpillar, and Colgate-Palmolive; after-the-bell earnings from Microsoft.
FRIDAY: GDP (first reading), consumer sentiment; NBCU/Comcast deal closes; before-the-bell earnings from Chevron and Honeywell.

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