Market Set for Best January Since 1997

Yesterday's (Monday) broad rally was encouraging. It wasn't just the Dow at a new high, it was that two indexes that were recent laggards — the Nasdaq and the Russell 2000 — also had healthy gains.

That's the good news. The bad news is that the NYSE consolidated volume — at 4.1 billion shares — was the lightest day of trading since January 6. We have had a few decent volume days over 5 billion in January, so the old lament of light volume is not entirely accurate for this month.

Regardless: with five trading days left in the month, the S&P 500 is posting healthy gains of 2.6 percent. If we close the month out at this level, it will be the best January since 1997's 6.1 percent gain.


1) The FTSE in London is down 1 percent as Q4 UK GDP was down 0.5 percent — this is a miss, as expectations were for a gain of 0.5 percent. (See: UK Economy May Be Heading for a Double-Dip)

2) Johnson & Johnson2) Johnson & Johnson earnings of $1.03 were in line with expectations, but that's not the problem. Revenues were below expectations at $16.03 billion ($15.64 b consensus).

The company has three divisions: consumer, pharmaceutical, and medical devices/diagnostics. Two of the three had problems.

That consumer product recall continues to weigh heavily: Q4 sales decreased 5.5 percent, with consumer sales down 15 percent. Even pharmaceutical sales were below expectations.

Guidance for 2011 ($4.80-$4.90 excluding items) also below consensus of $4.97.

Lower taxes helped several companies beat earnings estimates this morning.

2) Dupont2) Dupont earnings of $0.50 were well ahead of expectations ($0.32), but most of the gain was due to a lower tax rate. Revenues of $7.40 billion were also ahead of consensus of $6.95 billion consensus. Guidance for 2011 was raised to $3.45-$3.75; prior guidance was $3.30-$3.60; consenus is $3.50.

3) MMM3) MMM reported earnings of $1.28, slightly ahead of consensus of $1.27, revenues of $6.71 billion also ahead of consensus of $6.62 billion. However, as with Dupont, lower taxes helped the bottom line; margins were lighter in some segments. 2011 guidance was raised slightly, to $5.95-46.20 vs. prior guidance of $5.90-$6.10; consensus is $6.14.

4) Corning4) Corning earnings of $0.46 missed consensus by a penny. The good news: a 79 percent increase in the segment that includes Gorilla Glass, the scratch resistant glass used in smart phones. So volumes are increasing, but price declines continue.

5) Data storage giant EMC5) Data storage giant EMC reported record results — $0.42 and revenues of $4.89 billion, both ahead of consensus. Demand for storage has been strong, and EMC's stock price reflects that, up 30 percent since the beginning of September, far outperforming the broader market. Their 2011 guidance is above consensus.

6) Higher raw material costs are definitely seeping into consumer prices, but companies are also eating some of those costs. Look at Sherwin Williams 6) Higher raw material costs, where Q4 earnings were also slightly above consensus, Q1 guidance of $0.48-$0.50 was slightly above consensus of $0.47. Sales in the Paint Stores Group were up 4.1 percent due to price increases and improving sales, but the company acknowledged that the bottom line was still impacted by higher raw material costs.

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