PortfolioCrafter - Market Commentary 4/17/07
Tuesday, April 17th, 2007
Stocks finished mixed with the Dow Jones Industrial Average brushing with record highs, as investors welcomed upbeat economic data as well as earnings from Coca-Cola Co. and Johnson & Johnson, but remained cautious about key technology earnings due after the close. The bullish underlying tone continues with the help from benign readings on core inflation, upbeat earnings news, and better-than-expected housing data.
Today, the Dow Jones industrial average closed up 52.58 or 0.41% to 12,773.04, briefly topped its record closing high of 12,786.64 hit last February, before scaling back. The broader S&P 500 index closed up 3.01 or 0.20% to 1,471.48, and the Nasdaq composite ended lower by 1.38 or 0.05% to 2516.95.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by a narrow margin of 16 by 15 on volume of 1.57 billion shares. On the Nasdaq, decliners topped advancers 17 to 12 on volume of 1.95 billion shares.
Stocks surged as investors eyed merger news and a rash of earnings, even while the tech-driven Nasdaq struggled. While the first wave of earnings have been strong, the overall earnings reporting period is expected to be weak. S&P 500 earnings are currently on track to rise 3.4% from a year earlier. That rate of earnings growth will be the slowest in more than 3-1/2 years, slipping below 10% on a year-over-year basis after 14 quarters of double-digit growth.
In mixed economic news, the rising gasoline costs drove consumer prices up 0.6% in March, the sharpest rise in nearly a year. The core prices rose a smaller-than-expected 0.1%. Both housing starts and building permits rose more than expected in March but results were affected by severe weather in the Midwest and were weaker versus prior-year levels. There has been a surprise drop in industrial production in March, missing forecasts for a flat reading. Capacity use dropped more than expected.
Shares of Coke closed up $1.30 or 2.6% to $51.57, on reporting first-quarter earnings and sales that rose from a year ago and topped estimates. The company posted earnings of 56 cents a share on sales of $6.1 billion. Analysts were expecting 53 cents and sales of $5.63 billion. However, sales in North America declined 3%.
Stock of Johnson & Johnson closed up $1.53 or 2.4% to $64.55, after reporting higher quarterly earnings and sales that topped estimates. Excluding special items, it earned $1.16 a share, against the expected $1.04. The results were hurt by a $807 million charge related to a recent acquisition.
U.S. light crude oil for May delivery fell 51 cents to settle at $63.10 a barrel on the New York Mercantile Exchange, retreating after an early advance.
All the best,
Manuel Jesus-Backus
The Portfolio Crafter
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