January Ends on Strong Note

Thoughts on the markets today:

1) Markets stable, but Egypt million person march planned for tomorrow a wild card.

2) We're out of January, thank heavens! January ending with healthy gains for all major indices; "as goes January, so goes the year" crowd will be happy...

Dow Industrials up 2.7% (best January since 1997)

Dow Transports down 1.6% (3rd straight January drop)

S&P 500 up 2.3% (best January since 2006)

Nasdaq Composite up 1.8% (best January since 2007)

Russell 2000 down 0.3% (down 4th straight Januarys)

3) Earnings seasonwinding down. Nearly half the companies of the S&P 500 have reported, including the major banks, industrials and energy names. Seventy-one percent of those reporting in the S&P 500 have beaten estimates, close to the historic average.

But some sectors have done notably better than others—particularly large industrial names. Deutsche Bank, in a review of the earnings of 11 large industrial stocks, noted that:

a) Earnings were up 28 percent, revenues were up 12 percent;

b) The majority of companies raised their 2011 outlooks;

c) Growth prospects remain strong within the US, with many citing support from the extension of the Bush tax cuts and additional stimulus measures.

One word of caution: "Raw material inflation was a major theme and remains a concern." This impacted margins (5 of 11 companies reported weaker than expected core margins).

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