FOX Business: The Power to Prosper
In a further sign of the bullish sentiment on Wall Street, the Dow broke through the 12000 mark before closing just below it on Wednesday as the markets cheered a surprise jump in new home sales and the more business-friendly tone in the State of the Union.
The Dow Jones Industrial Average rose 8.25 points, or 0.07%, to 11985.44, the Standard & Poor's 500 advanced 5.46 points, or 0.42%, to 1296.64 and the Nasdaq Composite gained 20.25 points, or 0.74%, to 2739.50. The FOX 50 added 0.79 points, or 0.09%, to 928.09.
In addition to the upbeat economic data and the conclusion of the Fed's policy meeting, the markets benefited from the more business-friendly tone in the State of the Union speech. Those positive factors offset disappointing results from Boeing (NYSE:BA) and a dreary outlook from Xerox (NYSE:XRX).
While it failed to close above the threshold, the blue chips still managed to breach the 12000 mark on an intraday basis for the first time since June 2008. The Dow, which first crossed this threshold in October 2006, was also on track for its ninth weekly rally in a row, a feat Wall Street hasn't accomplished since 1995.
“It is a psychological level where it can remind people things are improving,” said Ryan Detrick, senior equities analyst at Schaeffer’s Investment Research. “It can bring along some confidence that things are getting better.”
Almost half of the 30 stocks on the Dow closed in the green, led by DuPont (NYSE:DD), Verizon (NYSE:VZ) and Alcoa (NYSE:AA). The index's weakest links were Walt Disney (NYSE:DIS) and Boeing, which slid 3%.
The Nasdaq Composite vastly outperformed the blue chips amid rallies for tech stocks such as Autodesk (NASDAQ:ADSK) and Microsoft (NASDAQ:MSFT).
Wall Street received a buy signal from the latest economic indicator as the Commerce Department said new home sales unexpectedly soared 17.5% in December to an annual rate of 299,000 units. The bullish report fueled buying in housing-related stocks like home builder KB Home (NYSE:KBH) and home improvement retailer Lennar (NYSE:LEN). The government also said median sale prices jumped 8.5% annually to $241,500, but 2010 was still the worst year on record for sales of new homes.
Meanwhile, the Fed, which kick-started the blue chips' 2,000-point surge back in August when it unveiled QE2, surprised no one by keeping interest rates at their historically-low levels. The central bank said the low rates are needed because the recovery is continuing at a rate "insufficient" to bring "significant improvement" in the labor market. While the Fed acknowledged the up tick in commodity prices, it said longer term inflation expectations are stable and underlying inflation is trending down, signaling policy makers remain unconcerned their easy-money policies will create a spike in inflation.
The vote was unanimous, an important sign of solidarity in the central bank, especially considering the Fed's four new voting members. The Fed also announced no changes to QE2, its controversial $600 billion bond-buying program, despite calls by some to end it early given the improving economy.
Stocks appeared to benefit from President Barack Obama's State of the Union address. Striking a more conciliatory tone toward the business world, Obama proposed a five-year freeze on non-security discretionary spending, called for lowering corporate taxes, retooling the tax code and putting a stop to spending on pet projects.
Energy stocks carried Wall Street higher, jumping 2.4% as a sector as crude oil ended its six-day slump and thanks to several upbeat earnings reports. Individual stocks such as Schlumberger (NYSE:SLB) and Halliburton (NYSE:HAL) enjoyed even heavier buying. Crude oil jumped $1.14 a barrel, or 1.32%, to $87.33. Gold gained 70 cents a troy ounce, or 0.05%, to $1,333.00.
On the other hand, market sentiment was hurt a bit by Boeing, which slumped after posting an 8.2% drop in fourth-quarter profits and an in-line non-GAAP profit of $1.11 a share. The Dow component's sales disappointed, sinking 8% to $16.55 billion, compared with the Street's view of $17.02 billion.
Likewise, Xerox (NYSE:XRX) sold off as its slightly better-than-expected non-GAAP profit of 29 cents a share was overshadowed by a cautious guidance for the current quarter and full year.
United Technologies (NYSE:UTX) beat estimates with a fourth-quarter profit of $1.31 a share on a 6% jump in sales to $14.9 billion.
Eastman Kodak's (NYSE:EK) stock plunged 18% as its fourth-quarter adjusted-loss of 37 cents a share was significantly worse than the loss of 2 cents a share Wall Street had been bracing for. Revenue tumbled 25% to $1.93 billion, coming in shy of estimates for $2.09 billion.
Sara Lee (NYSE:SLE) slumped nearly 6% as the company reportedly rejected a buyout bid from a group led by Apollo Global and Brazil’s JBS is said to be facing financing challenges in making its own offer. According to The Wall Street Journal, JBS may only be able to bid between $19 and $20 a share, a price Sara Lee may deem too low.
Intel’s (NASDAQ:INTC) $7.68 billion takeover of McAfee (NYSE:MFE) received the green light from European Union regulators under certain conditions. Intel has promised to give rival security companies the info needed to use its chips and to not prevent competitors’ software from running on its chips.
US Airways (NYSE:LCC) jumped 6.6% after blowing away estimates with a fourth-quarter profit of 17 cents a share. Analysts had been calling for EPS of just 6 cents. The airline also said its revenue increased 11% to $2.91 billion.
Yahoo! (NASDAQ:YHOO) lost ground after it warned its first-quarter revenue will likely range between $1.02 billion and $1.08 billion, compared with the Street's view of $1.13 billion. Yahoo! did manage to beat estimates with fourth-quarter EPS of 24 cents on revenue of $1.2 billion.
ConocoPhillips (NYSE:COP) hit 52-week highs after disclosing an in-line non-GAAP profit of $1.32 on $53.2 billion in revenue.
Wellpoint (NYSE:WLP) revealed an 80% decline in fourth-quarter profits amid a year-ago sale. Its non-GAAP EPS of $1.33 solidly topped estimates. Revenue fell 3.9% to $13.44 billion.
Valero (NYSE:VLO) posted an operating profit of 32 cents a share in the fourth quarter, up from 23 cents a share a year earlier and meeting consensus calls from analysts.
The U.K.'s FTSE 100 jumped 0.87% to 5969.21, Germany's DAX rallied 0.97% to 7127.35 and France's CAC 40 climbed 0.73% to 4049.07.
In Asia, Japan's Nikkei 225 fell 0.60% to 10401.90, Hong Kong's Hang Seng gained 0.23% to 23843.20 and China's Shanghai Composite closed up 1.17% to 2708.81.