Stocks Gain; S&P 500 Highest Close Since July (AA, AAPL, BAC, BWA, CAT, CF, FCX, FSLR, GT, NFLX, TIF, TRIP)

Published on Tuesday, 10 January 2012 19:05 Written by Christopher Lynn

New York, January 10^th (TradersHuddle.com) – Stocks gained extending the January’s rally and closing at their highest level since July, amid improved sentiment on the outlook of economic growth. Alcoa gave an upbeat demand outlook and participants bid materials higher on speculation of China easing its monetary policy after weaker than expected economic data.

The Dow Jones Industrial Average gained 69.78 points, or 0.56%. The S&P 500 index climbed 11.38 points, or 0.89%, while the NASDAQ jumped 25.94 points, or 0.97%

The market started with a strong bid, with Wall Street poised to extend January’s rally on the back of an improved sentiment following better than expected revenue and outlook from Alcoa (NYSE:AA) and on hopes China will ease monetary policy to avoid further slowdown in the economy. The Shanghai Composite extended its rally to a third session, jumping after weak trade figures bolstered the prospects of the Chinese Central Bank acting before the Chinese New Year.

In Europe, equity markets closed with solid gains following the Wall Street rally, with cyclical and mining plays leading the advance on the back of Chinese hopes and Alcoa’s positive spin on its quarterly results and outlook. Financials also received strong bids after Fitch ratings said that it does not expect to downgrade France’s AAA credit rating this year.

A pullback in afternoon trading, send stocks to close considerably off their session highs, but still with solid gains to keep the rally alive. Gains were broad based with all of the S&P 500 sectors posting gains. Materials, financials, and industrials saw the biggest advances, while consumer staples and utilities posted the smallest gains.

The combination of improved economic sentiment, along with positive news coming from the euro zone helped financials moved higher, with the embattled shares of Bank of America (NYSE:BAC) once again posting the biggest gain in the Dow Jones Industrial Average. The lender rallied 5.74% to $6.63, closing at the highest level this year and above its calculated resistance at $6.35.

Materials received the strongest bid helped by the increased appetite for commodities amid Alcoa’s outlook for growth and hopes that easing in China will spur future demand. Alcoa (NYSE:AA) gained 0.16% to $9.44 after trading as high as $9.85. The stock closed below calculated resistance at $9.50, as it posted mixed quarterly results, with revenues beating expectations, while providing a robust outlook for the global aluminum market. Alcoa forecast that global aluminum demand will grow 7% in 2012 and expects that the global aluminum market to turn into a deficit this year as Chinese demand remains robust and output falls. Shares pullback after participants digested the results spin.

Metal prices saw upside moves, with copper rallying also on reports of Chinese re-stocking. Freeport McMoRan (NYSE:FCX), the world’s largest publicly traded copper producer, jumped 4% to $40.6, posting one of the biggest gains in the sector as copper prices moved higher on signs of increased demand in China, the world’s largest user of the industrial base metal.

Also in the sector, CF Industries (NYSE:CF), the North American Fertilizer producer, was among the top performers in the sector, with shares jumping 4.01% to $166.21. CF Industries was upgraded to Outperform from Market Perform at BMO Capital.

The economic sensitive sector of industrials also benefited from the improved global sentiment, with Caterpillar (NYSE:CAT) posting the second biggest gain in the blue chip index. The world’s largest maker of earthmoving equipment jumped 2.95% to $99.96 amid improved sentiment over future demand.

Consumer discretionary stocks were also active amid analyst actions and retailers issuing earnings guidance. Netflix (NASDAQ:NFLX), the video streaming company, fell 2.39% to $95.83 after Bank of America downgraded the stock to Underperform. Netflix had soared this New Year by 41.7%, amid M&A chatter, positive comments from its CEO Reed Hastings regarding positive U.S. subscriber growth and 2012 profitability. Also yesterday, bullish comments on CNBC from hedge fund manager Whitney Tilson, who remains long with a multiyear horizon, boosted the stock.

Also on the losing side were shares of Goodyear Tire (NYSE:GT). The tire manufacturer tumbled 8.31% to $14.01 after it said that the unusually warm winter was impacting sales of winter tires.

However the biggest drop in the sector and the S&P 500 was Tiffany & Co (NYSE:TIF). The fine jewelry maker and luxury retailer plunged 10.46% to $59.94 after the company lowered its fiscal 2012 earnings guidance below consensus. Tiffany said that worldwide net sales climbed 7% to $952 million in the holiday period, thanks to double-digit growth in Asia-Pacific and Japan and smaller increases in the Americas, with a 4% gain, and Europe, with a 1% gain. The stock was hammered as both U.S. and European consumers restrained spending for fine jewelry during the holiday period. Tiffany now expects fiscal 2012 EPS in the range of $3.60 to $3.65 versus consensus of $3.78.

On the flip side, BorgWarner (NYSE:BWA), the provider of engineered systems and components for automotive power-train applications, posted the biggest gain in the sector and the S&P 500 after improved sentiment on the automotive market following Alcoa’s forecast for demand growth in aluminum and after the company issued upside fiscal 2012 EPS guidance and inline fiscal 2012 revenue guidance. BorgWarner said it sees EPS of $5.35 to $5.65 versus consensus of $5.21. The company said it expects another year of record revenues and earnings, as the strong backlog of net new business is expected to drive sales growth of 10% to 12% in 2012 compared with 2011.

Also in the sector, TripAdvisor (NASDAQ:TRIP), the online travel research Company, rally 5.67% to $27.75 after Susquehanna initiated coverage with a Positive, while Nomura initiated its rating on TripAdvisor with a Neutral.

In tech land, Apple (NASDAQ:AAPL) gained 0.36% to $423.24 after trading as high as $426 and as low as $421.50. The stock posted a new all-time high of $427.75 in the prior session, but in this session, Apple underperformed after late in the session, Eastman Kodak (NYSE:EK) said that it was suing Apple on patent infringement of certain Kodak patents relating to digital imaging technology. Yesterday, Goldman Sachs bumped its target price to $550 from $520, citing upside in the December quarter and better than expected results in 2012; while Needham maintained its Buy rating and target price of $540, citing blow out iPhone sales. The firm raised its EPS estimate to $10.85 for the quarter from $9.55. For the full year Needham said that Apple should earn $38.70 on revenues of $151.95 billion. Last week, The ISI Group raised its estimates on Apple, citing better than expected iPhone and iPad units and a robust product pipeline in 2012.

And First Solar (NASDAQ:FSLR) rallied 5.24% to $38.77, posting the biggest percentage gain in the technology sector. The stock continued in an upswing amid M&A rumors.