Traders-Blog.com

Stocks rallied and pushed the Dow Jones Industrial Average to a record close as investors cheered soothing words from Federal Reserve Chairman Ben Bernanke on inflation. The market also welcomed upbeat earnings from Applied Materials Inc. and discussion of a restructuring at DaimlerChrysler Corp. Bernanke spoke of inflation moderating, that unemployment won’t be a problem and that there are tentative signs of housing stabilizing.

Today, the Dow closed up 87.01 or 0.69% to 12,741.86, to close at a record high, taking out its previous record from two weeks ago. The broader S&P closed up 11.04 or 0.76% to 1,455.30, and the tech-fueled Nasdaq closed up 28.50 or 1.16% to 2,488.38.

Market breadth was positive. On the New York Stock Exchange, winners trounced losers seven to four on volume of 1.5 billion shares. On the Nasdaq, advancers topped decliners nine to seven as 2.2 billion shares changed hands.

The broad market was pushed higher as investors were reassured by Bernanke’s views on inflation. In his speech, the Fed chief said that, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing of core inflation. However, he also reiterated that the main risk to current policy is that inflation doesn’t ease as expected, at which point the Fed will be prepared to “take action.” Investors reacted positively to his outlook on inflation.

Investors also responded well to the January retail sales report, which showed a smaller-than-expected rise in both overall sales and sales excluding autos. This seemed to temper recent worries that stronger-than-expected economic growth could cause the Fed to start raising rates again this year.

Shares of DaimlerChrysler jumped 8.3% to close at $69.78, after the automaker said it would consider “far reaching” options for Chrysler, including finding a partner. It also expects to eliminate 13,000 jobs in the Chrysler division. The move aims to cut $4.5 billion in costs as the company struggles to get back in the black by 2008.

Shares of Applied Materials closed up $0.70 or 4% to $18.89, after reporting quarterly earnings that beat forecast. While revenue was less than expected, investors focused on the strong earnings and positive forecast. Its net profit was $403.5 million, compared with $142.8 million a year earlier. Revenue was $2.28 billion, up 23% from a year earlier but lower than the $2.35 billion expected by analysts.

Shares of IBM closed up almost 1%, after the company claimed a breakthrough in developing circuitry to store data on future microprocessor chips. Stock of Coca-Cola fell 0.7% after the company said fourth-quarter net income dropped 22%, hurt by an impairment charge for Coca-Cola Enterprises. However, these results excluding the charge still beat forecasts

U.S. light crude oil for March delivery slumped $1.06 to $58 a barrel on the New York Mercantile Exchange after a mixed weekly inventory report. The report showed a surprise drop in gasoline and crude supplies but a less than expected drawdown of distillates used to make heating oil.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter
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