PortfolioCrafter - Market Commentary 1/24/06
January 25th, 2006 / 12:00 am / by portfoliocrafter
A pull back in oil prices and some solid earnings from Dow components United Technologies and McDonald’s saw the stocks rise today. However, the revenue shortfalls from Johnson & Johnson and Texas Instruments served to remind investors what a bumpy ride the fourth-quarter earnings season has been so far.
Today, the Dow Jones industrial average closed up 23.45 to 10,712.22, the broader Standard & Poor’s 500 index closed up 3.04 to 1,266.86, and the Nasdaq composite index closed up 16.78 or 0.8% to 2,265.25.
Some good earnings helped the market recover from the spate of bad news from Citibank, GE and a bunch of others last week. While fears about weaker earnings have not been quelled, the negative reaction last week to some of the earnings news was probably stronger than it should have been. After the steep sell off, investors are now willing to step back into equities.
The biggest after closing news was that Mickey Mouse and Nemo are now corporate cousins. Walt Disney announced that it is buying Pixar, in a deal worth $7.4 billion. This includes $6.3 billion in stock plus $1.1 billion of the computer animation specialist’s cash. Pixar shareholders will get 2.3 shares of Disney stock for every Pixar share they own. That amounts to $59.77 a share.
On earning announcements, United Technologies closed up $1.98 to $56.45, McDonald’s gained $0.14 to $35.85, Johnson & Johnson lost $1.83 or 3% to $59.36, and DuPont closed down $0.29 to $39.26. 3M slipped down $1.50 to $74.20, after reporting higher earnings and sales that were short of forecasts. American Express closed up $1.38 or 2.7% to $52.82, after reporting higher quarterly earnings that topped estimates. Stock of Lexmark International closed up $5.18 to $51.08, after reporting sharply lower fourth-quarter profit that nonetheless beat analysts’ forecasts. Shares of Coach closed up $2.82 to $34.89, after it posted higher quarterly earnings and revenue.
Falling oil prices also provided support. U.S. light crude oil for March delivery fell $1.04 to settle at $67.06 a barrel on the New York Mercantile Exchange after OPEC member Saudi Arabia offered to pump more to make up for an outage in Nigeria.
All the best,
Manuel Jesus-Backus
The Portfolio Crafter
