Traders-Blog.com

Caution ahead of the Federal Reserve meeting on interest rates kept a lid on the major indexes today. While investors eyed a rise in oil prices, Treasury bond yields and geared up for Tuesday’s Federal Reserve meeting; the markets remained relatively flat. The stars today were Exxon Mobil Corp. after record-setting earnings, and General Motors Corp. whose bankers sought bidders for the company’s financing arm.

Today, the Dow Jones industrial average closed down 7.29 to 10,899.92, the Standard & Poor’s 500 index closed up 1.48 to 1,285.20, and the Nasdaq composite closed up 2.55 to 2,306.78.

Market breadth was negative. On the New York Stock Exchange, losers narrowly beat winners on volume of 1.67 billion shares. On the Nasdaq, decliners narrowly topped advancers 16 to 15 on volume of 1.94 billion shares.

While investors welcomed earnings from Exxon and other upbeat corporate news, the persistent increase in oil prices, and concerns about tomorrow’s Fed meeting kept the markets steady. This is the last meeting, led by Chairman Alan Greenspan and it is expected that he would boost the Fed funds rate by a quarter-percentage point to 4.5 percent. If he hints that the rate-hiking campaign is nearly over, the market may jump in joy. However, many of the recent economic data have been upbeat, and the central bank may not be ready to pause just yet. Some analyst feel that irrespective of the Fed decision tomorrow, the market may be due for a pullback. They opine that it is a bit overbought right now and may need to consolidate.

The corporate ‘trial of the century’ that of the Enron CEO started today with the selection of 4 men and 8 women for jury. It is four years since Enron became the largest bankruptcy in corporate history, that cost employees and investors billions of dollars. Its founder and former chief executive will finally get their day in court.

The Democratic attempt to a filibuster of Supreme Court nominee Samuel Alito was defeated 72-25. This all but assures Alito’s appointment to the high court. The vote would be tomorrow, just hours before President Bush’s State of the Union address.

The economic data has been encouraging. U.S. consumer spending revived at the end of the year, and rose 0.9% in December. Personal incomes increased 0.4% in December. Inflationary pressures eased. The core personal consumption expenditure price index rose 0.1% in December after 0.2% gains the previous four months. In the past 12 months, the core PCE price index has increased 1.9%, just inside the Fed’s comfort zone of 1% to 2%.

The star today, Exxon Mobil Corp. set U.S. records for annual and quarterly profits. It reported net income in the fourth quarter of $10.7 billion, compared to $8.4 billion a year earlier. For the year the company earned net income of $36.1 billion, up 31% from the $25.9 billion it earned last year. The stock closed up $1.82 or 3% to $63.11.

Amongst gainers, Apple Computer closed up $2.97 to $75.00, Juniper Networks closed up $0.82 to $18.30, and SanDisk closed up $2.91 to $66.29. All these shares had slid last week. Wal-Mart closed up $0.57 or 1.2% to $46.41, and Fairmont Hotels gained $0.45 to $44.27, after saying it was being bought by investment groups Kingdom Hotels International and Colony Capital for $3.9 billion. Shares of USG closed up $15.93 or 20% to $95.78, after it said it reached a nearly $4 billion settlement to resolve asbestos-related claims.

On Tuesday is an important OPEC meeting. In anticipation, U.S. light crude oil for March delivery rose 59 cents to $68.35 a barrel on the New York Mercantile Exchange.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter