Stocks Rally to Start the Year (AA, AAPL, BAC, CHK, CSCO, CVX, FCX, GOOG, HAL, KFT, MCD, MU, NBR, NFLX, TRIP)

Published on Tuesday, 03 January 2012 17:52 Written by Christopher Lynn

New York, January 3^rd (TradersHuddle.com) – Stocks started the year with a bang, as participants cheered encouraging economic data around the world. Particularly better than expected manufacturing data points in China and the U.S. spurred risk appetite and a pullback in the Dollar, which in turn helped equities.

The Dow Jones Industrial Average gained 179.82 points, or 1.47%. The S&P 500 index jumped 19.46 points, or 1.55%, while the NASDAQ rallied 43.57 points, or 1.67%

The market started with solid gains following better than expected manufacturing points around the world helped spurred risk appetite, which in turn pushed the Dollar lower and equity markets higher. The official Chinese purchasing managers’ index showed a slight rise in factory activity in December, which in turn helped natural resources plays and metal prices. The data showed a return to expansion territory with a 50.3 figure versus 49.0 in the prior month reading.

Stocks extended their gains after U.S. manufacturing sector accelerated in December, rising to 53.9 in December, according to the Institute for Supply Management. Economists had expected a reading of 53.2. And construction spending climbed 1.2% in November, the highest reading since June 2010. The Dow jumped more than 250 points at the highs of the session.

In Europe, equity markets extended their prior session rally, hitting a 2-month high as cyclical mining shares led the way amid improved manufacturing data points around the globe. Meanwhile euro zone debt crisis jitters weighed on the Spanish and French markets, which underperformed. UK and German PMI showed PMI contraction but still less than it was feared; even German unemployment fell to its lowest level since 1998.

Gains eased somewhat in the afternoon trading, but still the market closed sharply higher, as participants were encouraged by the economic reports, which spurred risk appetite and a pullback in the Dollar. Most of the S&P 500 sectors closed with sharp gains, with energy, materials, and financials leading the advance. Meanwhile, utilities and consumer staples fell, with the Utilities SPDR ETF (NYSE:XLU) closing with a sharp decline of 1.8%. The Utilities SPDR ETF was the best performer sector last year.

NextEra Energy (NYSE:NEE), the Florida based electric utility, pressured the sector lower, as shares tumbled 3.17% to $58.95 after posting a new 52-week high of $61.20 last Friday. NextEra was downgraded to Market Perform from Outperform at Wells Fargo.

In the consumer arena, both McDonald’s (NYSE:MCD) and Kraft (NYSE:KFT) posted new record highs today before reversing and ending with a loss for the session. McDonald’s, the world’s largest restaurant chain, fell 1.49% to $98.84, posting the biggest percentage decline in the Dow Jones Industrial Average, after posting a new all-time high of $101.59. Meanwhile, Kraft lost 0.24% to $37.27 after posting a fresh 52-week high of $38.05.

Lifting the consumer discretionary sector were shares of TripAdvisor (NASDAQ:TRIP). The online travel research Company rallied 5.16% to $26.63 after it was upgraded to a Buy from Neutral at Bank of America Merrill. Netflix (NASDAQ:NFLX), the online video rental company, was also among the top performers in the space during the session. Netflix jumped more than 4%. Last year the stock was among the worst S&P 500 performers, plunging 60.6% during the year after it plunged sharply from its all-time high of $304.79 that was posted mid-July.

Wynn Resorts (NASDAQ:WYNN), the luxury casino operator, jumped 3.15% to $113.97 after the Macau Gaming Inspection and Coordination Bureau reported December gross gaming revenue jumped 25% year over year to 23.6 billion patacas. It also reported that Macau gross gaming revenue for 2011 jumped 42% to 267.9 billion patacas versus a 58% increase for 2010. Wynn Resorts generated 73% of its third quarter net revenues and 78% of its third quarter adjusted-EBITDA in Macau.

Materials also benefited from the drop in the Dollar and the increased bid on natural resource plays, which came on higher metal prices, as the major consumer of metals had encouraging economic reports that bode well for future demand. Gold prices also moved higher following an additional boost from increased Iranian tensions.

Alcoa (NYSE:AA), the aluminum producer, rallied 6.71% to $9.23, posting the biggest percentage gain in the blue chip index, while Freeport McMoRan (NYSE:FCX), the world’s largest publicly traded copper producer, surged 7.37% to $39.50, posting the biggest gain in the sector amid a rally in copper prices, which benefited from the better than expected manufacturing data in China and U.S., the biggest consumers of the metal. Freeport closed above calculated resistance at $38.66.

Energy also benefited from the risk on trade and the lower greenback. Crude oil rallied to close near $103 per barrel after improved economic reports in the U.S. and China and on concern over possible supply disruptions, as the tensions with Iran continue to rise.

Chevron (NYSE:CVX), the second largest U.S. energy producer, jumped 3.73% to $110.37 after trading at a new 52-week high of $100.99. Chevron posted one of the biggest gains in the blue chip index. Nabors Industries (NYSE:NBR), the land driller contractor, surged to the top of the sector and the S&P 500, as shares rallied 9.69% to $19.02.

Meanwhile, Chesapeake Energy (NYSE:CHK), the onshore natural gas and oil producer, rallied 5.88% to $23.60 after Total (NYSE:TOT), the French energy giant, signed a $2.3 billion deal with Chesapeake Energy and EnerVest for a 25% stake in a joint venture with the two U.S. companies in the liquids-rich Utica Shale area of eastern Ohio.

Halliburton (NYSE:HAL), the provider of oilfield technologies and services to upstream oil and gas customers, didn’t benefited from the rally in crude oil, as shares fell more than 1% on news that BP (NYSE:BP) will sue the company to recoup cleanup costs related to the 2010 Gulf of Mexico oil spill that resulted from the Deep Horizon rig accident.

Financials also saw a strong bid, but closed off its highs of the session. The Financial sector was the worst S&P 500 performer sector last year, but at the start of 2012 participants amid the encouraging economic data embraced it. Bank of America (NYSE:BAC), the largest U.S. lender, rallied 4.32% to $5.80, closing above calculated resistance at $5.63, and posting one of the biggest percentage gains in the Dow Jones Industrial Average. Bank of America was the top “Dog” of the Dow in 2011.

Technology was also active in the rally. Google (NASDAQ:GOOG) gained 3% to $665.41 after posting a fresh 52-week high of $668.15.

Apple (NASDAQ:AAPL), the maker of iPads and iPhones, gained 1.54% to $411.23, reaching a multi month high of $412.50. The stock jumped above calculated resistance at $409.09, as Ticonderoga recommended Apple as its top overall pick in the IT Hardware & Networking space it covers. The firm picked Apple as its top pick in 2011, with shares responding with a gain of 26% for the year. Ticonderoga believes Apple's portfolio in 2012 has the opportunity to create more excitement around the story with its expectation for the unveiling of iTV, a possible "iPad mini" and a major upgrade with the iPhone 5, while firm expects the company to finally come to grips with its surging cash balance and issue its first cash dividend. Apple is expected to report its earnings results on January 24^th, with current consensus at $9.83 per share for the quarter and $34.79 per share for the year.

Micron Technology (NASDAQ:MU), the dynamic random access memory chips maker, rallied 7.31% to $6.75, posting one the biggest gains in the sector after the stock was upgraded to Overweight from Equal Weight at Barclays. Micron traded as high as $6.96. Cisco Systems (NASDAQ:CSCO), the world’s largest networking equipment maker, also benefited from analysts actions. Cisco jumped 3.55% to $18.66 after JPMorgan upgraded the stock to Overweight from Neutral. The firm expects margins to rebound, while sales should benefit from increases in government spending.

And Research In Motion (NASDAQ:RIMM), the maker of the Blackberry maker, rallied 6.97% to $15.51 after trading as high as $15.86. The stock saw a sharp bid amid speculation of a management shakeup at the co-CEO level, which is view by many bulls as a catalyst for a possible takeover or M&A.