Stocks Had Lackluster End to Best January since 1997

Published on Tuesday, 31 January 2012 19:36 Written by Christopher Lynn

New York, January 31^st (TradersHuddle.com) – Stocks were able to cut most of their earlier losses to end near the unchanged line, with both the S&P 500 and the Dow posting their best January performance since 1997. The worse than expected consumer sentiment reading and Chicago PMI changed investor sentiment, taking the market to their worst levels of the session.

The Dow Jones Industrial Average fell 20.81 points, or 0.16%. The S&P 500 index lost less than 1 point, or 0.05%, while the NASDAQ climbed 1.90 points, or 0.07%.

The market started with modest gains amid overseas strength following yesterday’s fiscal agreement at the EU summit in Brussels and on optimism that Greece should be able to reach an agreement with the private bondholders on debt restructuring that should avoid a messy default. The gains came amid sharper drop than expected on home prices and amid a flurry of earnings reports.

Archer Daniels Midland (NYSE: ADM), U.S. Steel (NYSE: X), Pfizer (NYSE: PFE), United Parcel Service (NYSE: UPS), and Exxon Mobil (NYSE: XOM) were just some of the quarterly results that participants digested ahead of the open. 

On the economic front, both consumer confidence and the Chicago PMI failed to meet expectations, casting doubts over the strength of the recovery in the world’s largest economy.

In Europe, equity markets closed higher as participants were hopeful that Greece could reach a deal on its debt swap plan. Stocks pared some of their gains after weaker than expected economic data in the U.S. weighed on sentiment.

The disappointing economic data weighed, pressuring the broad market, which during its descent paused at the neutral line, but later broke below that point to spend the next few hours slogging along in negative territory. Stocks eventually worked their way back to the flat line, but the S&P 500 was unable to muster enough momentum to make an actual advance on the day. Utilities, financials, and technology posted the biggest gains, while energy and industrials fell the most.

The energy SPDR ETF (NYSE: XLE) fell the most in the S&P 500 select sectors, weighed down by Exxon Mobil quarterly results that failed to impress investors and by coal stocks, which saw the biggest declines, along with a plunge in natural gas prices after the Energy Information Administration said U.S. production of the commodity is at record highs.

Exxon Mobil (NYSE: XOM) fell 2% to $8374, as results were just slightly below consensus. The largest U.S. energy producer said its fourth-quarter profit rose to $9.4 billion, or $1.97 per share, as revenue increased 15.6% to $121.6 billion. Profit at Exxon’s exploration and production business increased 18% while the company’s downstream operations saw profits fall 63%. Exxon was also under pressure due to its big exposure to natural gas, which saw prices drop to $2.50 per MMBtu.

The weak natural gas prices pushed the United States Natural Gas Fund (NYSE: UNG) down 7% on volume that was nearly double the daily average, while shares like Chesapeake Energy tumbled 2.58% to $21.13.

Alpha Natural Resources (NYSE: ANR), the steam and metallurgical coal producer, tumbled the most in the space following the weak economic data. The stock tumbled 4.7% to $20.12, posting one of the biggest declines in the S&P 500.

On the flip side, utilities saw the most increases, as margins seem to increase following the decline in natural gas prices. Dominion Resources (NYSE: D), the utility company serving the Mid-Atlantic region, gained the most in the space, with shares climbing 1.42% to $50.04. Dominion filed for a mixed shelf offering.

Financials also saw upside move, buoyed by optimism in the euro zone following the budget deal signaled by EU leaders at the summit and on hopes the debt swap deal in Greece gets completed this week.

American Express (NYSE: AXP), the credit card issuer, jumped more than 2% to $50.14, posting the biggest gain in the Dow Jones Industrial Average. Bank of America (NYSE: BAC) was also on the winning side, with share rebounding 0.85% to $7.13 after Guggenheim raised its target price on the stock to $9 from $6.50. Yesterday, Goldman Sachs downgraded BofA to a Neutral, citing execution risk.

The EU optimism also helped Morgan Stanley (NYSE: MS). Shares gained 2.47% to $18.65 after CNBC confirmed that Facebook would file for a $5 billion IPO tomorrow, with Morgan Stanley taking the lead on the offering. Yesterday, Morgan was upgraded to a Buy at Goldman Sachs, while adding the stock to its Conviction Buy list.

Technology also gained, helping the tech heavy NASDAQ to muster a slight advance. Apple (NASDAQ: AAPL), the maker of iPads and iPhones, climbed 0.77% to $456.48 after it posted a new all-time high of $458.24. According to reports, the company would be hiring John Browett Chief Executive Officer of UK electronics firm Dixons, to head up retail expansion for the company. Browett will be responsible for Apple’s retail strategy and in expanding Apple’s retail outlets around the world, which currently number about 300.  Yesterday, the stock gained on the back of a bullish research report from Morgan Stanley. The firm speculated the tech giant could sell 40 million iPhones in China during 2013. Morgan Stanley said that it sees $10 per share upside to Apple’s profit in calendar 2013, as the company adds China Telecom and China Mobile to the existing iPhone carrier China Unicom.

Elsewhere, RadioShack (NYSE: RSH) plunged close to 30% to $7.18, posting a new multiyear low of $7.15, after the electronics retailer warned of a decline in fourth-quarter profit below consensus, blaming the poor results on its performance of its Sprint Nextel Business (NYSE: S). Many brokerage houses slashed their price targets on the stock. Rival Best Buy (NYSE: BBY) felt the pressure as well, with shares falling 5.6% to $23.95, posting the biggest decline in the S&P 500. 

Shares of Sprint Nextel fell 1.85% to $2.10 after posting a new 52-week low of $2.10, following the RadioShack news.

And United Parcel Services (NYSE: UPS) slid 0.66% to $75.65 despite the logistics giant posting better than expected earnings on revenues that missed consensus. UPS guided fiscal 2012 EPS at the midpoint above consensus. The stock traded very close to its 52-week high of $77.