Stocks Flat Ahead of Earnings and the Fed

Published on Monday, 23 January 2012 20:18 Written by Christopher Lynn

New York, January 23^rd (TradersHuddle.com) – Stocks closed practically unchanged after a choppy trading session, with the major benchmark indices trading in a tight range. Participants were unable to commit ahead of a busy earnings reporting season and a two-day Fed meeting. Developments on the negotiations of a Greek debt swap plan were also in focus and weighing on sentiment through out the session.

The Dow Jones Industrial Average fell 11.66 points, or 0.09%. The S&P 500 index climbed less than 1 point, or 0.05%, while the NASDAQ lost 2.53 points, or 0.09%.

The market started near the unchanged line following quiet overseas markets, with the majority of Asian markets closed due to the Lunar New Year Holiday. On the earnings front, it was also quiet, with Halliburton reporting its results ahead of what its expected a very busy earnings reporting week. European markets grinded higher amid optimism over the prospects of a deal with private bondholders on a Greek debt swap plan.

In Europe, stocks closed higher on news that Greece was close to a deal with private bondholders. Banks were among the best performers after a report in the Financial Times cited France and Germany to be calling for banking capital rules to be relaxed, in order to avoid credit from frying up.

The market remained in a tight range and choppy trading for most of the session, with participants digesting the impressive January rally. In the S&P 500, it was a mixed bag with energy, utilities, and financials posting the biggest gains, while healthcare, industrials, consumer staples, and materials fell.

The Energy Select SPDR ETF (NYSE: XLE) gained 0.8% after crude oil received a lift from the EU move to ban Iranian oil imports and after natural gas rallied after Chesapeake Energy (NYSE: CHK), one of the biggest natural gas producers in the U.S., announced that it was cutting the number of rigs it has drilling for natural gas amid soft prices due to a warmer than usual winter. Chesapeake jumped 6.3% to $22.28 on the news.

The cuts in production in natural gas also prompted a rally on shares of Southwestern Energy, sending shares to the top of the sector and the S&P 500. Southwestern rallied 10.3% to $32.46.

Halliburton (NYSE: HAL), the oilfield services provider, fell 2.10% to $35.44 on negative reaction to its quarterly results. Shares moved to the downside despite a jump of 50% in fourth quarter profits, as investors showed concern over its exposure to natural gas drillers.

Also in the sector, shares of ConocoPhillips (NYSE: COP), the third-largest U.S. energy producer, closed fractionally lower after the stock was downgraded to a Sell at UBS. And Apache (NYSE: APA) gained over 1.6% on news it will acquire privately held Cordillera Energy Partners for $2.85 billion in cash and stock to bolster its reserves in the Anadarko Basin in Oklahoma and Texas.

Financials were also in focus amid EU optimism that a deal on privately held Greek debt can be brokered soon and on a report of a call for relaxing global capital requirements. Bank of America (NYSE: BAC) jumped 2.55% to $7.25, posting the biggest percentage gain in the Dow Jones Industrial Average and the financial sector. BofA closed near its calculated resistance at $7.29.

On the flipside, KeyCorp (NYSE: KEY) was the worst performer of the sector ahead of its quarterly results scheduled for tomorrow before the open. KeyCorp fell 2.29% to $8.11. On average analysts expect a profit of $0.20 per share on revenues of $1 billion.

In tech land, Research In Motion (NASDAQ: RIMM), the maker of the Blackberry smartphone, plunged 8.5% to $15.56 despite the company announcing a top level management shake up, with both of its co founders and co CEOs resigning, while it named co COO Thorsten Heins as the new Chief Executive Officer. Participants had pushed the stock higher in pre-market on the news amid optimism that the new CEO will look at bold ideas to change the company’s direction, which has been losing market share to Apple’s iPhone and Google’s Android based phones.  However participants were disappointed amid comments of the new CEO that he will seek advise from the co founders on strategy and company direction.

Apple (NASDAQ: AAPL) climbed 1.69% to $427.41 after trading as low as $422.30 in trade that appear as consolidating ahead of its quarterly earnings report, which many analysts expect to yield records in earnings, revenues, and iPhone shipments. Brigantine Advisors was the latest of brokerage houses to increase its target price to $500 from $450 ahead of the earnings report. Last week, RBC Capital bumped its target price to $525 from $500, citing their expectations of a first quarter beat and healthy guidance for the second quarter. The firm expects the tech giant to have shipped 32 million iPhones during the Holiday quarter. On average analysts expect a profit of $10.03 on revenues of $38.78 billion. The highest estimate is for Apple to earn $11.45 per share.

Intel (NASDAQ: INTC), the world’s largest chipmaker, was one of the top performers in the Dow, along with Hewlett Packard (NYSE: HPQ) after a Barron’s article over the weekend speculated that the solid earnings report from Microsoft (NASDAQ: MSFT) last week bode well for Intel. The company also announced it had reached an agreement with QLogic to acquire product lines and assets related to its InfiniBand Business.

Also in the sector, Texas Instruments (NYSE: TXN) was sold ahead of its earnings report, with shares falling 1.34% after Needham downgraded the stock to a Hold last week, predicting a flat report. In after hours, the stock was an earnings mover, jumping 3.5% to $34.35 following better than expected on both the earnings and revenues sides. Texas Instruments beat by $0.09 per share on revenues that fell 3% year over year to $3.42 billion versus consensus of $3.26 billion. The company also issued inline revenue guidance for the quarter, with EPS on a range of $0.26 to $0.34 per share.

Elsewhere, weighing on the NASDAQ and the consumer discretionary sector was Netflix (NASDAQ: NFLX). The online video rental company tumbled more than 6% to the bottom of the S&P 500. Netflix announced that its Chief Marketing Officer would leave its role to assume a position at its board of directors. Northland Capital also added to the downward pressure after setting its target price at $50, while maintaining its Underperform rating. The firm cited margin compression and uncertainty regarding international growth.