Stocks End Up; Dow's Best January in 14 Years
Stocks rebounded on Monday as investors returned to stocks after a sharp sell-off on Friday, but yet kept a cautious eye on events unfolding in Egypt.
The Dow Jones Industrial Average rose 68.23 points, or 0.6 percent, to close at about 11891.93, after falling 1.4 percent on Friday. For the month, the Dow gained 314.42 points or 2.72 percent, its best January performance since 1997 and its first January gain in four years.
IBMwas the best performer on the Dow in January, rising 10.38 percent, while Merckwas the worst, falling 7.96 percent.
The S&P 500 gained 9.78 points, or 0.77 percent, to close at 1,286.12. For the month, the broad market index rose 28.48 points, its best January performance since 2006.
Nvidia was the best performer on the S&P 500 in January, rising 55.32 percent, while Monster Worldwide was the worst, falling 29.54 percent.
The Nasdaqrose 13.19 points, or 0.5 percent, to close at 2,700.08. For the month, the Nasdaq rose 47.21 points, or 1.78 percent.
The Russell 2000 Small Cap Indexsnapped a four-month winning streak, falling 2.40 points or 0.3 percent, to close at 781.25.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to under 20 on Friday. The VIX skyrocketed nearly 24 percentFriday as the crisis in Egypt flared, its biggest daily spike since May 20, according to Schaeffer's Investment Research.
Among key S&P sectors, energy, materials and financials gained, while consumerstaples fell.
Investors remained concerned that unrest in Egypt could spread to the rest of the Middle East, although analysts have said fears are already priced in after stock markets tumbled on Friday. Still, Moody's cut Egypt's credit rating, citing government spending in the wake of the crisis.
As stocks rose, the flight to safe-haven assets also eased. The price of gold fell more than 6 percent to $1,333.8 an ounce, its biggest decline since December 2009, and U.S. bond prices declined.
The dollar, meanwhile, fell against a basket of currencies. Bond prices fell as investors took profits. Oil prices, meanwhile, rose 3 percent to close above $92 a barrel.
The market "is amazingly resilient," Jeffrey Saut, chief market strategist at Raymond James, told CNBC.com. "After what happened on Friday you would have expected a second shoe to fall."
But, Saut said, the markets had been due for a correction for sometime, and had been indicating one was on the way. After the sell-off, however, the market is no longer "overbought," he said.
Saut remains bullish and one of his favored sectors are banks, which he had not bought for 10 years until last November. Since then, banks, as measured by the Financial Select SPDR Fund , have risen more than the S&P 500 on a relative basis.
"I think that is extraordinarily positive for the equity markets and the economy," he said.
The turmoil in Egypt, combined with good earnings results from Exxon Mobil, means commodities and cyclically-oriented companies, particularly in the materials and energy sectors, are poised to do well, Burt White, chief investment officer at LPL Financial told CNBC.com.
But the cross-current the market is trying to figure out, White said, was how several major snowstorms will affect the economy, especially as another storm is forecast to hit a broad swath of the country later this week.
"We think it will be more substantial than people think," he said. "What the market is trying to figure out is how much is old news, and how much is a speed bump on the recovery."
White expects the market has gotten ahead of itself, and is still due for "a little bit of a pullback here, or consolidation, as the market comes to grip with the snowstorms, and increased geo-political risks from around the world."
But he added that a 3-to-5 percent pullback will be an opportunity to buy as the Federal Reserve continues to provide stimulus to an economy that is already on the mend. White said the S&P 500 could hit 1,400 before it pulls back again in the second half of the year.
Banks were among the better performing sectors on Monday, as the sector continued to show signs of improvement. A senior loan officer survey from the Federal Reserve, for instance, indicated that banks "continued to modestly ease lending standards," JPMorgan said Monday. The bank said this was particularly true for commercial and industrial loans and consumer loans, while standards for residential mortgage loans tightened.
"The easing in lending standards for business and consumer loans has been ongoing for much of the past year; what was different about today's figure was the reported uptick in loan demand," JPMorgan said in a note. "The demand for consumer loans, commercial real estate loans, and C&I loans were all at their highest level since 2005."
Aetna traded flat after news a Florida judge struck down the healthcare law. Overall, health care stocks didn't move much on the news, while the sector was up slightly for the day.
Energy stocks were among the best performing sectors throughout Monday's session, advancing in the wake of better-than-expected earnings from Exxon Mobil. The oil giant reported earnings of $1.85 a share, thanks in part to strong gains in natural gas production. Other natural gas producers also rose, including Chesapeake Energy, Devon Energy and EOG Resources.
Imperial Oil also reported better-than-expected results. Anadarko Petroleum reports after the market closes, and BP reports earnings on Tuesday.
Meanwhile, Massey Energy
The news lifted most stocks in the coal sector, including Arch Coal , International Coal Group , and Natural Resources Partners .
Intel shares ended flat after the chipmaker reported it was cutting its first-quarter sales forecastby $300 million to pay for a fix of a design problem in a recently released "support" chip. The total costs to repair and replace the chip is about $700 million, Intel said, according to Reuters.
In some cases the serial-ATA (SATA) ports within the chipsets may degrade over time, causing SATA-linked devices such as hard disk drives and DVD drives to malfunction, Intel said in a press release.
The news lifted shares of rival chipmakers, including Advanced Micro Devices .
Elsewhere in technology news, Baidu.com , a Chinese-language Internet search provider, rose ahead of reporting earnings after the market closes.
Genzyme gained after news the biotech company reached an "agreement in principal" with Sanofi-Aventis on a merger deal structure, according to two sources familiar with the situation, Reuters reported.
Home Depotgained after Goldman Sachs upgraded the home improvement retailer to "buy," and said it expected the company to outperform as it "delivers on well-articulated strategies to propel profitability," according to Goldman.
But the brokerage cut rival Lowes to "neutral," citing limited upside for the company during a period of management transition in the wake of Larry Stone’s retirement as President.
Chrysler said Monday it would make between $200 million and $500 millionthis year, putting the bankrupt automaker in a position to go public before the year ends. Chrysler is currently controlled by Fiat Group SpA of Italy. The U.S. government also owns a 10 percent stake in Chrysler, which the government expect to relinquish when the automaker goes public.
Pall , a filtration-and-purification company, surged after news its chairman and CEO would retire by March 2012, a move Credit Suisse said could lead to the company being sold or acquired.
And Borders sank after news the troubled bookstore retailer said it would delay payments to vendors again in a bid to preserve cash, and that it may file for Chapter 11 bankruptcy protection.
Companies affected by the events in Egypt include and Nissan, which have said they will halt production in Egypt temporarily.
Alcoa's gain came after news the aluminum producer said it would buy an aerospace fastener business from TransDigm Group for $240 million.
In other M&A news, ProLogis and AMB Property announced they would merge in a stock-for-stock deal. The new company, to be named ProLogis, would have a market capitalization of about $24 billion.
And Sunoco fell slightly after news it would spin-off its SunCoke unit, after reaching a settlement with ArcelorMittal on coke pricing litigation.
Meanwhile, hedge-fund managers remain upbeat on U.S. stocks, but they aren't as bullish as they were in December, according to TrimTabs/BarclayHedge's January survey. The survey showed about 37 percent of 91 hedge fund managers are bullish on the S&P 500, down from 46 percent in December, while 26 percent are bearish, up from 19 percent.
In U.S. economic news, the Chicago Purchasing Managers Index, a gauge of mid-west manufacturing activity, rose to 68.8 in January from 66.8 in December, thanks to a boost in orders and stronger employment. The gain was more than expected.
And personal spending rose 0.7 percentin December, up from a 0.3 percent rise in November, for the sixth straight month of gains, the Commerce Department said Monday. Spending was expected to rise 0.5 percent according to economists surveyed by Reuters.
Meanwhile, personal income rose 0.4 percent, while savings dropped to $614.1 billion from $634.4 billion in November, the lowest level since March.
European stocks closed slightly higher on Monday on the strength of energy companies. The FTSEurofirst300 index gained 0.1 percent.
On Tap Next Week:
MONDAY: Farm prices; after-the-bell earnings from Baidu.com.
TUESDAY: Auto sales, ISM manufacturing index, construction spending; Earnings from BP, Pfizer, UPS, Aflac, Broadcom and Electronic Arts.
WEDNESDAY: Weekly mortgage applications, Challenger job-cut report, ADP employment report, oil inventories; earnings from Marathon Oil, Mattel, NewsCorp., Visa and Yum Brands.
THURSDAY: Chain store sales, ECB announcement, jobless claims, productivity and costs, factory orders, ISM non-manufacturing index, Bernanke at National Press Club, Minneapolis Fed President speaks, Verizon begins iPhone pre-orders; earnings from GlaxoSmithKline, Merck, Royal Dutch Shell, Sony, Unilever, MasterCard and Sunoco.
FRIDAY: Nonfarm payrolls; earnings from Aetna.
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