Strong 1st Trading Day — With Caveats

A strong first day of trading, but with caveats. Notable midday drops in commodities, along with midday drops in our parent company General Electric , Potash , Freeport McMoran , and others, all without news, led many to conclude that a simple sell program of recent market leaders had come through.

First day rally, corrections likely? Much has also been made of the January barometer (as goes January, so goes the year), which has not been an accurate indicator the last two years, and the idea that strong gains on the first day of the year is somehow an indication of future activity.

Lowry, the dean of technical analysis research, throws cold water on this belief:

"The bottom line is, while the market appeared to start off 2011 with a bang, big gains on the first day of the year have been followed by corrections each time they occurred over the past ten years...the record, combined with the current conditions reflecting investor complacency, extended prices and selective buying, suggests the risk of a correction is likely high enough to warrant near term caution."


1) Motorola (former ticker: MOT) begins its first day of trading at the NYSE as two separate companies: Two of the company's three divisions — Home & Networks Mobility and Mobile Devices — will be spun off into consumer company Motorola Mobility (cell phones, set-top boxes).

Motorola holders will receive 1 share of Motorola Mobility for every 8 shares of Motorola common they hold.

The good news for Mobility: Android phone sales are strong.

The remaining division, Enterprise Mobility, will be renamed Motorola Solutions, which will sell communications equipment to government agencies (think police scanners) and large companies. Motorola will implement a 1 for 7 reverse stock split of the remaining company.

The good news: sales at Motorola Solutions have been recovering after a disastrous drop in 2008-2009 (sales to government agencies way down). The bad news: it's not clear how far government spending will recover, so growth is the big issue.

2) BP rises 3 percent after the U.K.'s Daily Mail reported that the oil company may still draw takeover interest from Royal Dutch Shell . The report reveals Shell explored a bid for BP during the Gulf of Mexico spill last year, but backed off due to concerns of ballooning liabilities (that was before BP and the White House agreed to cap private claims at $20 billion). According to the report, Shell would now likely only pursue for BP if another rival announced a bid for the beleaguered oil producer, whose shares have rebounded to a 7-month high.

3) Rite Aid saw a 0.6 percent rise in December same-store sales - better than the Street had expected. Although nearly flat general merchandise sales ahead of the holidays were disappointing, a surprising gain in pharmacy comps (up 1.0 percent) helped propel the drugstore's sales in the month.

4) Borders drops another 13 percent after announcing that 2 of its executives — its chief information officer and general counsel — have left the company for undisclosed reasons. This follows last week's revelation that the troubled bookseller is delaying vendor payments as it attempts to get new financing.

Bookmark CNBC Data Pages:



Want updates whenever a TraderTalk blog is filed? Follow me on Twitter:

Questions? Comments?