Fundamentals

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U.S. Equities Break Key Support Amid Euro Zone Budget Concerns

U.S. Session Key Developments

•    Dow Jones Industrial Average Closes Below 10,000 Level
•    Group of Seven Meeting Ends With No Greek Bailout
•    Upgrades To Disney And Home Depot Do Little To Soothe Concerns

US markets were choppy in today’s session as investors debated whether to place more weight on analyst upgrades or European government finance concern.  Eventually the latter prevailed sending equity markets lower and allowing the Dow Jones Industrial Average to close below 10,000 for the first time in three months.  With no notable US economic releases and mixed earnings reports, price action was driven by the news on the macro environment.  A JP Morgan analyst’s upgrade of Walt Disney Co. and a Morgan Stanley upgrade of Home Depot Inc. initially provided equity markets with some support.  The upgrade of two members of the Dow blue-chip index provided reassurance that the economic revival would continue.  That support eventually gave out as sellers looked towards Europe and the growing budget concerns of its member nations.  Sellers had been worried that a G7 meeting in Canada over the weekend would yield a bailout of Greece and possibly Spain, the European Union member states with the worst budget concerns.  Instead, Finance Ministers from other EU member nations noted only that they would continue monitoring the situation.  European Central Bank President Jean-Claude Trichet added that he is “confident” that Greece will cut its deficit below the limit of 3 percent of GDP by 2012 from 12.7 percent.

Commodities were able to maintain their earlier gains despite the downturn in equity markets and the revival in the dollar’s rally.  The dollar index, which had been 0.4 percent lower earlier in the day, rallied in late trading to limit its loss to just 0.1 percent.  Nonetheless, the CRB Commodity Index closed the day 1.2 percent higher.  March crude finished the day up 0.72 percent at 71.70 and gold spot was unchanged at $1,062 per ounce.  Looking ahead to tomorrow, another insignificant US economic slate will probably leave investors continuing to digest macroeconomic headlines and should make for continued choppiness in trade.

DJIA 30                     9,908.39                      -103.84                       -1.04%
The blue-chip index closed below the psychologically significant 10,000 level for the first time in three months.  Though the index had traded below the level several times last week, a close below the level could send renewed selling signals to bearish investors.  The Dow was led lower today by Bank of America Corp. which was down 3.47 percent on the day.  American Express Co. was right behind it, losing 2.8 percent.  Home Depot Inc. was one of only two components that were up, after the company was upgraded by a Morgan Stanley analyst.

S&P 500                     1,056.74                       -9.45                            -0.89%
Financials and Basic Materials stocks led the broader Standard and Poor’s 500 Index lower today as there was one advancing issue for every four that declined and all ten subsectors of the index were in the red.  Basic Materials stocks were 1.53 percent lower despite today’s rise in commodity prices.  Meanwhile, Financials fell 2.06 percent amid continued talks of a sovereign debt crisis in Europe.

NASDAQ                    2,126.05                       -15.07                          -0.70%
Tech stocks were down 0.69 percent sending the tech heavy Nasdaq Composite into negative territory.  The index was led lower by tech giants Microsoft Corp. and Oracle Corp. which were both down over one percent amid renewed threats to an economic recovery.  Nasdaq OMX Group Inc., the company that runs the index that bears its name, slid 4 percent for the biggest drop on the S&P 500.  The company announced today its forecast for 2010 operating expenses, which exceeded one analyst’s estimate by as much as $25 million.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com

U.S. Equities Recover Losses In Last Hour Of Trade

U.S. Session Key Developments

•    US Economy Loses 20K Jobs In January
•    Consumer Credit Falls Lower Than Expected
•    Speculation That EU May Bailout Member Countries Increases

After trading lower for most of the day, U.S. Equity indexes closed in the green following a report on US Consumer Credit and speculation that the European Union may bail out Greece and Spain.  The Dow Jones Industrial Average was down as much as 1.8 percent at its lowest point of the day.  The blue chip index broke through 10,000 and proceeded to trade down to 9,835 before closing right above 10,000 for the second day in a row.  The all-important Non-Farm Payrolls report drove stocks lower in the early going.  The report showed that the U.S. had lost another 20,000 jobs even as expectations were for a rise of 15,000.  Nonetheless, the U.S. Unemployment Rate actually fell from 10.0 percent to 9.7 percent in January.  The divergence in the data is because the payroll data and the unemployment rate come from two different surveys.  The morning’s economic slate also showed that Average Hourly Earnings rose more than anticipated.

Stocks weren’t the only securities on the move this morning as the dollar index traded to a six-month high of 80.683 and commodities were broadly lower.  That all changed in the final hour of trading after the Federal Reserve reported that consumer credit in the U.S. declined in December by $1.7 billion, less than the $10 billion decrease economists estimated.  Additionally, there may have been profit taking by investors on short positions ahead of the weekend.  Uncertainty about how the European Union will react to growing budget concerns in Greece and Spain add incentive to investors to close those positions for fear of being on the wrong side of a market moving announcement over the weekend.  Still, in a speech from the Group of Seven meeting in Canada, German Finance Minister Wolfgang Schauble said Greece has to “pay the price” for running up the largest budget deficit in the EU.  The single currency ended the day 0.3 percent weaker against the dollar while the dollar index, which measures the greenback against a basket of currencies, gained 0.3 percent.  After closing pit trading much lower, commodities advanced in electronic trading after 2 PM EST.  Crude was unable to recover completely, continuing its month-long decline to 71.19, down 2.67 percent from yesterday.  On the other hand, gold spot made a full recovery to close 0.24 percent higher at 1,066.

DJIA 30                      10,012.23                    +10.05                         +0.10%
The blue-chip index was slightly higher after a 167 point swing enabled the index to recover its earlier losses.  Three stocks advanced for every two that declined while Cisco Systems Inc., Intel Corp. and Alcoa Inc. each climbed over 2 percent for the biggest gains on the index.  Industrials dropped by 0.5 percent for the biggest drop on the index.  The sector was led by Boeing Co. and General Electric, which were both down over 1.5 percent.

S&P 500                      1,066.19                       +3.08                           +0.29%
The broad base Standard & Poor’s 500 Index was led higher by Basic Materials stocks as commodities rebounded in electronic trading after the close of commodities exchanges.  Resource companies, led by Newmont Mining and Freeport-McMoran, gained 3.62 percent in today’s session.  Moreover, Airgas Inc., the largest distributor of industrial gases, gained 40 percent for the biggest gain on the S&P 500.  The shares rose after Air Products & Chemicals Inc. offered a $60-a-share bid for the company.

NASDAQ                     2,141.12                        +15.69                          +0.74%
The tech-heavy Nasdaq Composite Index was the best performer of the three major US Indices as tech stocks were among the best performers throughout the day.  Large-cap tech issues provided strength for the index as Cisco maintained momentum from its better than expected earnings announcement on Wednesday.  Apple Inc. and Intel Corp. also gained 1.71 percent and 2.42 percent respectively.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com

US Stocks Plunge On Concerns About Jobs

U.S. Session Key Developments

•    Initial Jobless Claims Unexpectedly Exceed Estimates
•    Insurance On Sovereign Debt Soars In Europe
•    Commodities Plummet On Risks To Recovery

US Stocks sank to their lowest level in almost three months and the Dow Jones Industrial Average threatens to break the psychologically significant 10,000 level.  The index, which measures the performance of blue chip issues, closed right above the level at 10,002, after briefly trading to 9,998 immediately before the close.  Investors dragged stocks and commodities lower on concerns that rising unemployment and sovereign debt concerns threaten to destabilize the economic recovery.  Portuguese government credit default swaps soared 27 basis points to a record 223, as investors grow nervous about Portugal and Spain’s deficit-reduction plans on top of the concerns about Greece.  Benchmark equity indices in Portugal and Spain dropped the most in 15 months.  Initial jobless claims for the week ending January 30^th were 480,000.  That is the highest reading in seven weeks and 25,000 claims higher than the average of analysts’ estimates.  The jobs report did little to reassure investors ahead of tomorrow’s more important Non-Farm Payrolls report.  A disappointing reading tomorrow could send the Dow through 10,000, exposing 9,679, the November 2^nd low, as the next level of support.  In the commodity space, the threats to the economic revival as well as a stronger dollar sent the CRB Commodity Index to a new three-month low and a 2.6 percent loss for the session.  Weakness among commodities was broad based as crude lost 5.13 percent, its biggest dive in 6 months, to end the day at 73.03.  Gold dropped 4.39 percent to $1,063.  Meanwhile the greenback appreciated against nine out of the ten G10 currencies, with the traditionally risk-averse Japanese Yen as the lone exception.  High-yielding commodity currencies like the Australian and Kiwi dollars were among the worst performers with both losing over 2 percent on the day.  The dollar index traded above 80 for the first time since July 2009.

DJIA 30                     10,002.18                    -268.37                        -2.61%
Only one company in the Dow – Cisco Systems Inc. – advanced today as the index traded below 10,000 for the first time since November before settling just above that level at the close.  Cisco advanced after it had posted better than expected earnings after the close yesterday.  The decline was led by financials with Dow components JPMorgan Chase and Bank of America down 4.82 and 5.02 percent respectively.  Banks fells as MasterCard reported profits that missed estimates and concern over sovereign debt increased.

S&P 500                     1,063.11                         -34.17                           -3.11%
The broad-base S&P 500 was the worst performer of the three major indices with only 11 issues advancing.  The decline was led by Basic Materials which dropped 4.31 percent.  Basic Materials stocks dropped as the CRB Commodity Index fell to its lowest level in three months.  Energy stocks were also down 3.83 percent as oil had its biggest drop in six months.

NASDAQ                    2125.43                        -65.48                           -2.99%
The tech heavy Nasdaq Composite Index fell as tech stocks finished the day down 2.91 percent.  Big name tech stocks like Apple, Microsoft, and Google were down 3.60, 2.76, and 2.60 percent respectively as traders grew jittery about jobs after a report showed more claims for unemployment insurance than expected.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com

US Stocks Struggle As Service Businesses Lag

U.S. Session Key Developments

•    Service Businesses Report Disappoints Investors
•    Report Shows US Shed Least Private Sector Jobs In Two Years
•    Dollar Appreciates For First Time This Week

A weak service industries report sent most U.S. stocks into the red today.  The decline comes after the past two days saw the S&P 500 Index make its biggest rally since October.  The report in question comes from the Institute for Supply Management, which announced today that the Non-Manufacturing Composite rose to 50.5 in December.  Despite moving into growth territory, the advance was not as strong as had been expected.  Earlier this week the ISM announced that manufacturing businesses had expanded at the fastest pace since 2004.  That report ignited the stock rally over the past two days.  Still service businesses make up ninety percent of the world’s largest economy and a lagging service sector could be very bad for US growth.  On the jobs front, a report showed that the US only shed 22,000 jobs in January.  The report, which only looks at private payrolls and doesn’t take into account government hiring, should give investors some guidance as to what to expect in the Non-Farm Payrolls report this Friday.  As it stands right now, analysts are expecting that payrolls actually rose by 15,000 employees in January.  That would be only the second time in 25 months that the economy added more jobs than it lost.  Today also marked the first time this week that commodities fell and the dollar gained.  The dollar index gained 0.5 percent today and crude and gold were 0.23 and 0.72 percent lower respectively.  This comes as 10 year treasury yields climbed to 3.71 percent, the highest since January 19^th.  In central bank news, Ben Bernanke vowed to increase transparency and maintain independence for the Fed.  Across the pond, the Bank of England and the European Central Bank announce rate decisions tomorrow, which should create some interesting price action in their currencies tomorrow.                                                     

DJIA 30                     10,270.55                    -26.30                          -0.26%
The Dow Jones Industrial Average, led by Health Care, closed lower for the first time this week.  Pfizer Inc. was the worst performing component after the company announced earnings that trailed the average analyst estimate by 3.2 percent, on higher costs from the purchase of rival Wyeth.  The company’s stock was down 3.2 percent at the close.

S&P 500                     1,097.28                       -6.04                             -0.55%
The broad-base S&P 500 was the worst performer of the three major indices, with Technology the only sector that finished the day higher.  Financials were lower by 1.41 percent after a report showed that the service sector expanded slower than expected and a disappointing result from MetLife Inc.  The company reported that its book value at yearend missed a December forecast, sparking concern about additional write-offs in the financial sector.

NASDAQ                    2190.92                        +0.85                            +0.04%
The tech heavy Nasdaq Composite Index was the lone gainer of the three major US indices after tech stocks advanced 0.52 percent.  Tech giants Apple, Google, and Microsoft led the advance as their shares were higher by 1.72, 1.83, and 0.53 percent respectively.  Yahoo shares were higher 1.91 percent after the company announced plans to sell its HotJobs website to Monster for $225 million cash.  After the market closed, Cisco Systems Inc. announced second quarter earnings that exceeded analysts’ average estimate by 14 percent.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com

Corporate Earnings Drive US Equities Higher

U.S. Session Key Developments

•    Corporate Earnings Continue To Beat Expectations
•    Commodities Higher As Dollar Pullbacks
•    Obama Proposes Plan To Help Small Businesses

US Stocks posted significant advances for the second straight day as Corporate America is on track to report one of the best quarterly earnings seasons on record in terms of how many companies beat expectations with their profits.  Today alone, nineteen of the twenty-two S&P 500 companies that reported had better than expected profits.  D.R. Horton Inc., the second-biggest U.S. homebuilder by revenue, posted a 318 percent earnings surprise, the biggest one today.  With data showing that monthly pending home sales increased one percent in December, signs point to a recovering housing sector.  In addition to stocks, commodities also gained for the second straight day with the CRB commodity index up almost three percent over the last two sessions.  March crude contracts traded to 77.02, up 3.5 percent today and up about 7 percent this week.  Gold was also higher to 1,114, up almost one percent in the session.  The move in commodities was facilitated by a weak dollar, which was lower against 9 out of the 10 G10 currencies.  The Australian Dollar was the major exception after the Reserve Bank of Australia defied forecasts by maintaining its cash rate at 3.75 percent.  As investors await this Friday’s Non-Farm Payrolls figure, President Obama intensified his focus on job creation by announcing a plan to redirect $30 billion in repaid TARP bailout loans to small community banks in hopes of making it easier for them to lend to small businesses.  Republicans criticize the plan as they had tapped those funds to bring down the budget deficit.

DJIA 30                      10,296.85                   +111.32                       +1.09%
The Dow Jones Industrial Average was up over 1 percent for the second straight day.  General Electric Co. was the top performing component of the index after the company’s backup engine for the F-35 Joint Strike Fighter won support from the Armed Services committee chairman after Defense Secretary Robert Gates excluded it from the Pentagon’s 2011 budget proposal.  The company’s shares were up 3.69 percent to 16.85.

S&P 500                      1,103.32                       +14.13                         +1.30%
The broad-base S&P 500 was the best performer of the three major indices, closing back above the psychologically-significant 1100.  All 10 of the index sectors were in the green with all but 3 posting gains over 1 percent.  Health Care was the top performing sector, up 1.92 percent, even as President Obama urged Congress to push his health-care initiative through the House of Representatives.  Lawmakers warned that further delay could jeopardize passage.

NASDAQ                     2190.06                      +18.86                         +0.87%
The Nasdaq Composite Index was higher today after technology stocks, which hold by far the most weight, gained 0.79 percent on the day.  Adobe Systems Inc. gained 1.54 percent after its chief technical officer criticized Apple for not supporting Adobe Flash on its iPhone and iPad devices.  Apple, which is the only smartphone provider that does not support Flash, saw its shares gain 0.58 percent in today’s session.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com

US Equities Open New Month Higher As Data Beats Estimates

U.S. Session Key Developments

•    US Factory Output Expands At Fastest Pace Since 2004
•    Commodities Higher As Dollar Pullbacks
•    Exxon Mobile Earnings Exceed Estimates

US Equities opened February with a bang as each of the three major US indices rallied more than a full percentage point higher.  The lift came after the Institute for Supply Management reported that factory output, as measured by its Manufacturing Index, expanded at the fastest pace since 2004.  Analysts had been expecting a reading of 55.6 while the actual figure was 58.4.  Of less importance on the economic docket this morning were the Commerce Department’s reports on Personal Income and Personal Spending.  Though personal income growth exceeded analysts’ estimates, personal spending continues to lag, suggesting that consumers continue to save more as the world’s largest economy exits a recession many believe was brought on by consumers over levering.  Currencies rallied against the greenback as investors used the positive ISM data as an opportunity to buy riskier assets.  The dollar index was off Friday’s six-month high to close the session at 79.192.  The dollar’s pullback, coupled with the morning’s data, led commodities to advance and the Materials and Energy sectors to lead the stock markets higher.  In the energy space, crude was 2.83 percent higher to 74.95 and natural gas was 5.85 percent higher to close at 5.43.  Among precious metals, gold was 2.05 percent higher to 1,105 and silver was up 2.90 percent to 16.66.  Tomorrow’s economic slate is clear of any high importance announcements so price action will probably come from earnings and overseas data as investors position ahead of the Non-Farm Payrolls report this Friday.

DJIA 30                     10185.53                    +118.20                       +1.17%
The Dow Jones Industrial Average was higher as only two of its components finished the day in the red.  Basic Materials stocks were the best performers of the day as DuPont and Alcoa Inc gained 3.22 percent and 4.95 percent respectively.  The sector was higher off of strength in the commodities space.  Energy stocks, led by Exxon Mobil Corp., were right behind materials.  Exxon, the world’s largest oil company announced today that profits were 8 percent higher than the analysts’ average.

S&P 500                     1089.19                       +15.32                         +1.43%
The broad-base S&P 500 was the best performer of the three major indices as there were nine advancers for each declining issue.  All 10 sectors of the index were in the green today and all components of the Basic Materials and Energy sectors were higher in today’s session.  Gannett Co., the largest US newspaper publisher, was the worst performer on the S&P 500, as it forecast first-quarter revenue that trailed analysts’ estimates.

NASDAQ                    2171.20                       +23.85                        +1.11%
The tech-heavy Nasdaq Composite was higher today after tech stocks dragged the broader market lower last week.  Amazon.com Inc. was in the news after the world’s largest internet retailer first stopped selling Macmillan books on its web site and then gave in to the publisher’s demands to charge more for titles on the Kindle digital reader.  This is the first sign of the effect Apple’s newly released iPad will have on the e-book space and how Amazon will react to the threat.  Amazon’s stock was down 5.2 percent on the day.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com

US Equities Close Month In Red Despite Strong Economic Growth

U.S. Session Key Developments

•    US Economy Grows At Fastest Pace In Six Years
•    Dollar Index At Highest Level In Five Months
•    Technology Stocks Drag Down Broader Market

Stocks ended the month of January in the red as data that showed that US Gross Domestic Product grew at a 5.7 percent rate was unable to overcome disappointing results from technology companies.  The 3.7 percent January decline in the broad-base S&P 500 Index is the first monthly decline since October and does not bode well for equities for the remainder of the year.  Since 1950 there have only been 5 years in which the index decreased in January yet finished the year in positive territory.  A notable exception to the “January barometer” is last year, when the index dropped 8.6 percent in January yet managed to finish the year up 23 percent.  Markets had started today’s session in positive territory, trading a full percent higher, after the Commerce Department reported that the economy grew at the fastest pace in six years.  The University of Michigan Confidence Survey also surprised to the upside as the actual figure of 74.4 exceeded analysts’ average estimate of 73.0.  However, stocks were unable to maintain their momentum as lower sales forecasts from some large-cap tech stocks pushed markets into negative territory.  The better than expected GDP report renewed speculation that interest rates would be hiked sooner than previously expected, which sent the dollar index to its highest level in five months.  Dollar strength weighed on commodities, which finished the day modestly lower.  Crude was down 1.28% to 72.70 and gold finished the day down 0.17% to 1,081.80.  Looking ahead to next week, investors will be anxiously awaiting Friday’s Non-Farm Payrolls figure, which has traditionally been the biggest market mover of the month.  We will see on Friday if economic growth can translate into new job creation, which the Obama administration has made its top priority.

DJIA 30                      10067.33                     -53.13                          -0.52%
The Dow Jones Industrial Average gave up early gains in the last two hours of trading to finish in the red for the third day this week.  The index was dragged down by tech stocks as well as Boeing Co., which closed down 3.13 percent after another manufacturer, Honeywell, set a first-quarter profit target that fell short of analysts’ expectations.

S&P 500                      1073.87                        -10.66                          -0.98%
The broad-base S&P 500 finished January at its lowest level in three months as all sectors finished today’s session lower.  Besides technology, the worst two performing sectors were Basic Materials and Energy.  The two sectors were down 2.01 percent and 1.27 percent as commodities were weaker this week amid dollar strength.  Oil in particular, had its worst monthly decline since December 2008 this month.

NASDAQ                     2147.35                        -31.65                           -1.45%
The tech-heavy Nasdaq Composite was the worst performer of the three major U.S. Indices as tech stocks dragged the broader market lower.  Investors sold off shares of technology leaders such as Apple Inc, Microsoft Corp and International Business Machines.  Their stock prices were lower by 3.63 percent, 3.36 percent, and 1.10 percent respectively.  The drop in prices was spurred by Microsoft announcing that its enterprise businesses have not yet recovered from the worst recession since World War II.  Still, the company posted a second-quarter net income that beat analysts’ estimates by 15 cents off of stronger than anticipated sales of its newly released Windows 7 operating system.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com

U.S. Equities Trade to Lowest Level In Nearly Three Months

U.S. Session Key Developments

•    Qualcomm Lowers Sales Forecast on “Subdued” Economic Recovery
•    Initial Jobless Claims Higher Than Anticipated
•    Senate Votes to Reappoint Bernanke to Second Term

Mixed economic data, renewed concern about Greece, and a stiff economic warning from Qualcomm sent the broad-base S&P 500 Index to its lowest level in almost three months.  These concerns overcame a flood of upbeat earnings announcements and a State of the Union Address that focused on bipartisanship and fiscal responsibility.  The economic slate featured durable goods orders, which rose 0.3 percent in December while economists surveyed anticipated a rise of 2.0 percent.  In addition, more Americans than expected filed claims for unemployment benefits last week.  The mixed data was emphasized when Qualcomm, the biggest mobile-phone chip maker, lowered its sales forecast and their CEO went on to blame the “subdued” economic recovery.  With the substance of the economic recovery being questioned and renewed concern that Greece will require a European Union bailout, the greenback was primed for a positive day, particularly against the single currency.  The Euro extended its decline to 1.3968, down 0.38 percent and the worst performer of the major currencies.  The dollar’s strength did not translate to commodities as gold and crude both finished the session marginally higher.  Gold was up 0.13 percent to $1,085.50 and crude was 0.30 percent higher to 73.89.  After the market closed, the Senate finally voted to reappoint Ben Bernanke for a second four-year term as chairman of the Federal Reserve.  The news should bode well for the markets, which reacted violently to uncertainty about his reappointment last week.  In addition, tomorrow features a full economic slate headlined by US fourth-quarter GDP and the University of Michigan Confidence survey.

DJIA 30                     10,120.46                   -115.70                       -1.13%
The Dow Jones Industrial Average fell as four stocks fell for each that gained.  Large-cap tech issues were the worst performers of the group, led by IBM and Hewlett-Packard, which were down 2.04 percent and 3.36 percent respectively.  Proctor & Gamble Co. was one of the lone advancers after the company reported second-quarter earnings that beat analysts’ estimates by 12 percent.

S&P 500                     1,084.53                     -12.97                          -1.18%
The broad-base S&P 500 closed at its lowest level in almost three months as every sector was lower on the day.  The Basic Materials Sector was one of the worst performers, down 1.99 percent as all 26 components were in the red because of weakness in commodities over the week.  Financials were among the best performers after President Obama promised to restrict risk taking and said he wasn’t interested in “punishing” banks.

NASDAQ                    2179.00                     -42.41                           -1.91%
The tech-heavy Nasdaq Composite was the worst performer of the three major U.S. Indices as tech stocks dragged the broader market lower.  Qualcomm slid 14 percent, dragging the Nasdaq lower, as the world’s biggest maker of mobile-phone chips lowered its 2010 sales outlook.  Apple gave up its gains from yesterday and then some as some experts were dissappointed with some of the iPad’s features.  Netflix soared 24 percent as the company reported better than expected earnings and added 12 million subscribers.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com

U.S. Equities Close Higher as FOMC Keeps Rate Unchanged

U.S. Session Key Developments

•    New Home Sales Unexpectedly Declines
•    FOMC Leaves Fed Funds Rate Unchanged
•    Commodities Suffer Worst Decline in Two Months

U.S. stocks gained in the last hour of trading today, with all three major US Indices closing higher after trading in the red for most of the day.  Stocks rose after the FOMC decided to keep the federal funds rate near zero and reiterated its plans to wind down its agency mortgage-backed securities purchases by the end of the first quarter.  The Fed continued to be optimistic about the economy, saying “economic activity has continued to strengthen and that the deterioration in the labor market is abating.”  Perhaps the most telling information from the statement was Kansas City Fed President Thomas Hoenig’s dissent from the committee’s statement promising to keep rates low.  Major stock indexes had fallen before the Fed released its statement as US new-home sales unexpectedly declined 7.6 percent from November to December and global equities fell for a sixth day.  The greenback was higher throughout the day as investors sought safety in US Treasury bills.  The dollar strength helped push commodities lower throughout the session.  The CRB Commodity Index registered a 1.9 percent loss, its worst single-session percentage slide in two months.  Pit trading in crude closed with a 1.4 percent loss at $73.64, and had been as low as $72.65, a one-month low.  Precious metals were no better this session with gold sinking 1.3 percent to close at $1084.50 and silver also lower.  Among the event risk on the economic slate tomorrow is Initial Jobless Claims for the week ending January 23^rd.  Better than expected data would confirm today’s Fed statement that the labor market is improving.  Markets will also continue to look for news regarding the confirmation proceedings of Fed Chairman Ben Bernanke.  With Bernanke’s first term ending this Sunday and a Senate vote yet to happen, investors have reacted negatively to the uncertainty of who will be leading the world’s strongest economy.

DJIA 30                      10,236.16                   +41.87                    +0.41%
The Dow Jones Industrial Average ended the session higher after spending most of the day in the red.  Boeing Co. was the best performer of the thirty companies, adding 7.3 percent on the day.  The company reported fourth-quarter profit that beat the average analyst estimate by 31 percent and registered a 42 percent increase in sales.  The worst performer was Caterpillar Inc., which slid 4.3 percent after declaring that fourth-quarter earnings fell 65 percent.

S&P 500                        1,097.50                     +5.33                    +0.49%
The broader S&P 500 was pushed higher by financial stocks as the sector added 2.34 percent in the session.  The sector gained as concerns over financial regulation eased and the FOMC reassured investors that its unprecedented easy money policies will continue.  The worst performing sectors were materials and energy, which lost 0.8 percent and 0.6 percent respectively.  The losses came amid renewed weakness in commodities.

NASDAQ                       2,221.41                    +17.68                 +0.80%
The tech-heavy Nasdaq Composite was the best performer of the major US Indices.  The index was pushed higher by Apple, which gained 0.99 percent amid a favorable reaction to the company’s newly launched iPad, as well as pricing for the product.  In addition, Gilead Sciences added 7.1 percent after reporting fourth-quarter profit that beat the average analyst estimate by 10 percent.

Written by Gary Chalik, CFDTrading Research
Please send any comments about this report to GChalik@fxcm.com

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