Stocks Finish with Modest Gains
Indexes reached fresh 13-month highs Tuesday after mixed economic and earnings news
Major U.S. stock indexes finished higher Tuesday, resuming their recent rally to 13-month highs.
Oil and gold futures rose, benefiting stocks tied to commodities. Treasuries and the dollar index rose.
On Tuesday, the 30-stock Dow Jones industrial average finished higher by 30.46 points, or 0.29%, at 10,437.42. The broad Standard & Poor's 500-stock index was up 1.02 points, or 0.09%, at 1,110.32. The tech-heavy Nasdaq composite index gained 5.93 points, or 0.27%, to 2,203.78.
On the New York Stock Exchange, 17 stocks were lower in price for every 13 that advanced. Breadth on the Nasdaq was 14-12 negative.
After trading modestly lower or flat for much of the session, indexes strengthened in the late afternoon as the dollar moved higher. "It appears that [the dollar index] is hammering out a bottom around the October lows," notes S&P technical analyst Chris Burba. The significance for stocks? "An upturn in the dollar would signal a likely unwinding of carry trades, which would involve selling stock positions and repaying the loans that funded those purchases," Burba says.
Stock-market sentiment was dampened by news that Home Depot (HD) reported "a great deal of pressure" in all its markets despite better than expected profits after cost cutting countered weak demand.
The market weighed news on wholesale inflation, industrial production, and the housing market. The U.S. producer price index rose 0.3% in October, while the core rate, which excludes food and energy prices, dropped 0.6% -- the largest decline since September 2006. U.S. industrial production was up 0.1% in October, from a revised 0.6% gain in September [was 0.7%]. The NAHB November housing market index held at 17.
Among industry groups on the move Tuesday, the S&P Automobile Manufacturers index gained 2.56% on strength in Ford Motor Co. (F). Ford gained on news that George Soros' investment arm, Soros Fund Management, reported a new $53 million stake in the company.
The S&P General Merchandise Stores index fell 2.76% after Target (TGT) posted higher third-quarter earnings, but said that in light of the current and projected economic environment and expectations for a highly promotional holiday season, it remains "cautious about Q4 performance and is planning conservatively in both business segments."
Treasuries were mixed Tuesday after San Francisco Fed President Janet Yellen said it's "far from clear" whether the Fed should use interest rates to stem a surge in financial leverage. The 10-year note was higher in price at 100-14/32 for a yield of 3.332%, while the 30-year bond was higher at 102 for a yield of 4.25%.
The dollar index was higher at 75.38.
December gold futures were higher at $1,140.20 per ounce.
December West Texas Intermediate crude oil futures were higher at $79.23 per barrel.
European stock indexes traded lower Tuesday. In London, the FTSE 100 index declined 0.68%. The CAC 40 index in paris fell 0.88%. Germany's DAX index was lower by 0.45%.
Asian markets ended mixed Tuesday. In Japan, the Nikkei 225 index fell 0.63%, while the Hang Seng index in Hong Kong shed 0.13%. Shanghai's benchmark index rose 0.24%.
Richmond Federal Reserve President Jeffrey Lacker said Tuesday he believes the U.S. economy has hit bottom and that recovery is "solidly under way." While he acknowledged that "patches of lingering weakness" may continue to surface. he urged policy makers not to allow those blips to prevent them from tightening monetary policy when the time is right. "There is no doubt that we must be aware of the danger of aborting a weak, uneven recovery if we tighten too soon," he said. "But if we hope to keep inflation in check, we cannot be paralyzed by patches of lingering weakness, which could persist well into the recovery."
In other economic news Tuesday, the U.S. NAHB homebuilder outlook was steady at 17, according to the November survey. October's 18 print was revised down to 17. The index is still up from a reading of 9 a year ago, and an all time low of 8 in January. The current sales index was flat at 17. The 6-month outlook index rose to 28 from 26 in October [revised from 27]. The index of prospective buyer traffic was unchanged at 13 [the 14 from October was revised lower].
U.S. industrial production inched up 0.1% in October, from a revised 0.6% gain in September [was 0.7%]. August's 1.2% increase was revised up to 1.3%. Capacity utilization was pushed up to 70.7% from 70.5% -- the fourth consecutive monthly gain in this component, and is the second highest pace of the year [bested only by 71.2% in January]. Manufacturing production dipped 0.1% following an 0.8% September gain [revised from 0.9%], as auto production fell 1.7% from an 8.1% increase previously. Utility production rose 1.6%. Mining output fell 0.2%.
The U.S. PPI rose 0.3% in October, while the core rate dropped 0.6%. September's data were not revised, with a 0.6% drop in the headline and a 0.1% dip in the core. The decline in the core is the largest since September 2006. Energy costs rebounded 1.6% following a 2.4% decline in September. Wholesale gas prices increaseed 1.9% following a 5.4% drop previously. Food costs climbed 1.6%. Capital equipment costs dropped 0.7%. Passenger car prices fell 0.5%. Women's apparel prices edged up 0.1%.
The International Council of Shopping Centers [ICSC] and Goldman Sachs chain store index fell 0.1% in the week ended Nov. 14 after falling 0.1% the week before. Sales on a year-over-year basis rose to 2.4% after rising 2.9% the week before. ned positive overall.
Cleveland Fed President Sandra Pianalto said Tuesday that the economy has "certainly improved" since the start of the year, but the recovery will be a "gradual and bumpy" one after emerging from the most severe economic crisis since the Great Depression. The moderate non-voter explained that the housing industry and economy is not out of the woods yet, but there are some signs that the worst may be over. She noted that resource utilization levels remain low, banking lending constrained and credit terms tight.
Dallas Fed President Richard Fisher said the U.S. government's growing indebtedness could put upward pressure on borrowing costs. Fisher told a group of bankers and business executives that he was surprised at how low rates have remained despite what he termed a "significant" increase in debt issuance. Fisher said the economic recovery would likely be slow, adding that the originally reported 3.5% rate of annualized gross domestic product growth for the third quarter would likely be revised lower. "I'm willing to venture that growth was not as robust as originally reported," Fisher told a group of executives at a Texas conference.
San Francisco Fed President Janet Yellen said it's "far from clear" whether the Fed should use interest rates to stem a surge in financial leverage, and urged further research into the issue. "Higher rates than called for based on purely macroeconomic conditions may help forestall a potentially damaging buildup of leverage and an asset-price boom," Yellen said in the text of a speech today in Hong Kong. At the same time, "use of monetary policy for these ends necessarily compromises the attainment of other macroeconomic goals," she said. Yellen's remarks come just as debate rises over whether the Fed's current commitment to keep rates low for an extended period may be fueling rising asset prices in Asia.
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