Traders-Blog.com

Stocks finished the year with strong gains with all three major stock averages booking their best performance since 2003. However, for the day, the investors backed off a bit at the end of an upbeat quarter. Markets will be closed Monday for New Year’s Day and Tuesday for the national day of mourning for President Ford, marking a rare four-day closure for U.S. trading.

Today, the Dow Jones industrial average closed down 38.37 or 0.31% to 12,463.15, the broader S&P 500 closed down 6.43 or 0.45% to 1,418.3, and the Nasdaq closed down 10.28 or 0.42% to 2,415.29. For the year, the Dow gained 16.3%, the S&P gained 13.6% and the Nasdaq Composite advanced 9.5%.

Market breadth was negative and volume was light. On the New York Stock Exchange, decliners beat advancers 10 to 6 as 1 billion shares changed hands. On the Nasdaq, losers topped winners 9 to 6 on volume of around 1.4 billion shares.

There was little corporate or economic news to focus on and investors seemed content to hold on to gains through most of the session, before bailing out a little in the last half hour of trade. 2006 marked the fourth year in a row that the S&P 500 and Nasdaq composite posted gains. While, for the Dow, it was the third of four upbeat years. The stock gains were far better than what many prognosticators were expecting.

Analyst opine that January could bring some weakness as investors that have held off taking profits on 2006 gains for tax reasons opt to sell some winners. In addition, the arrival of the new Congress in late January and the start of fourth-quarter earnings pre-announcements could all set markets up for a pullback.

Shares of Apple closed up $3.97 to $84.84, after the company restated its earnings and acknowledged that options were wrongly dated but it said CEO Steve Jobs didn’t benefit as a result. Apple said it has recognized total additional non-cash stock-based compensation expenses of $84 million after taxes, including $4 million and $7 million in fiscal years 2006 and 2005, respectively. The board of directors is confident that the company has corrected the problems that led to the restatement, and it has complete confidence in Steve Jobs and the senior management team.

It is reported that Marsh & McLennan Cos. has agreed to sell Putnam Investments unit to fellow financial firm Power Corp. of Canada for $3.9 billion. This led the shares of MMC to close down $0.08 or 0.2% to $30.66. A deal could be announced early next year.

Shares of AT&T closed up $0.22 or 0.7% to $35.72, on news that it has offered concessions that should lead the way to winning approval of its $85 billion buyout of BellSouth. The stock of BellSouth closed up $0.31 to $47.11. New conditions include a promise to observe “network neutrality” principles, an offer of affordable stand-alone digital subscriber line service and divestment of some wireless spectrum. This would be the largest telecommunications merger in U.S. history. For the year, shares of AT&T Corp. have gained 46%.

Stock of Goodyear Tire & Rubber gained 5%, as the company said it plans to achieve savings through a three-year deal with the United Steelworkers union. The contract would give Goodyear the ability to save up to $610 million over the term of the contract and $300 million a year in ongoing savings.

Shares of General Motors closed up $0.11 to $30.73, and this was the best performing Dow stock of the year. GM that lost half of its value in 2005 as investors feared the automobile giant might go bankrupt, rose 58.2% in 2006.

U.S. light crude oil for February delivery rose 52 cents to $61.05 a barrel on the New York Mercantile Exchange.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter
30-day risk-free trial