Dow at 8-month high; Fed sees low rates until 2014

The blue chips close up 81 to their best level since May 2011. The central bank sees slightly lower growth but continued high unemployment. Apple briefly tops Exxon Mobil as the world's most valuable company. The dollar moves lower. Gold tops 1,700.

By Charley Blaine Jan 25, 2012 1:15PM
Charley BlaineUpdated: 7:50 p.m. ET

Stocks surged this afternoon, with the Dow Jones industrials ($INDU) closing at their highest level since May 2011, after the Federal Reserve decided to leave interest rates alone today and probably won't raise rates until late 2014.

The central bank conceded the economy has been growing modestly, but that won't bring unemployment down rapidly enough, nor will modest growth boost the housing market, the Fed said. At the same time,  Chairman Ben Bernanke told a news conference, Europe remains a big issue.

The central bank had expected low rates to be the norm until mid-2013. Today's projection that a rate increase may not come until 2014 reflects that the Fed now sees lower economic growth this year than it did in November. 

Stocks were lower ahead of the Fed decision, but the market turned solidly higher after the announcement. Apple (AAPL) had hit a record $454.45 but fell back to $446.66, up $26.25, after reporting blowout earnings late Tuesday. For much of the day, Apple was the most valuable company in the world, ahead of Exxon Mobil (XOM), but lost the position in the late afternoon.  

The Dow closed up 81 points to 12,757, its best close since May 3, 2011. The blue chips had been down as many as 95 points around 10:30 a.m. ET. The Standard & Poor's 500 Index ($INX) was up 11 points to 1,326. The Nasdaq Composite Index ($COMPX) was up 32 points to 2,818, while the Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks, had added 32 points to 2,466.

Article continues below.
The S&P 500's close was its best since July 26, 2011. The Nasdaq's finish was its best since July 22, 2011.

The close put the Dow up 4.4% for the month, with the S&P 500 up 5.4% and the Nasdaq up 8.2%. It's the best January performances for the Dow and S&P 500 since 1997and the best for the Nasdaq since 2001.

After hours, Netflix (NFLX) shares jumped $14.40 to $109 after fiscal-first-quarter results beat analyst estimates. The company earned $41 million, or 73 cents a share in the fourth quarter on revenue of $876 million. Earnings were down from $47 million, or 87 cents a share a year ago. Revenue was up 47% from a year ago.

But the company expects a first-quarter loss of $9 million to $27 million and a full-year loss as well.

Futures trading suggests a flat open on Thursday. Earnings are due from 3M (MMM), AT&T (T) and Caterpillar (CAT). The Commerce Department will report on new-home sales. 

The Fed trims its economic outlook
The Fed sees the economy growing at 2.2% to 2.7% this year, trimming its November projections 2.5% to 2.9%. The national unemployment rate could range from 8.2% to 8.5%, the rate the government reported in December. It sees unemployment coming down in 2013 and 2014 and perhaps settling in at 5% to 6%. At best, the long-run forecast is a guess.

At the same time, the Fed said it considers 2% annual inflation (measured by the index for personal consumption expenditures) to be consistent with its mandate of promoting economic growth and price stability.

It would commit to a long-run unemployment goal, largely because the factors that affect jobless rates are so complex.

The central bank did say it will continue to sell short-term Treasury securities and buy longer-term issues in a bid to keep long-term rate low. But it did not announce any new purchasing plans, as some on Wall Street had hoped.

The Fed's move pushed the dollar higher and longer-term interest rates lower. The 10-year Treasury yield, which mortgage rates are keyed on, dropped to 1.972% from Tuesday's 2.064%.

The Fed's decision was expected. There was deep skepticism -- in Washington, anyway --  that the Fed would do any more now to stimulate the economy. Many analysts believe, however, that the Fed will start a third quantitative easing program this spring. QE, as it is often called, involves buying in Treasury securities to keep interest rates low and stimulate the economy.

Two massive rounds of QE helped stock prices but did little to promote housing or general bank lending. The trauma of the housing bust and the 2008 financial crash has been too great.

There was just one dissent in the decision. Jeffrey Lacker, the president of the Federal Reserve Bank of Richmond, preferred that the Fed omit saying when it might raise rates.

Meanwhile, crude oil (-CL) in New York settled up 45 cents to $99.40 a barrel. Gold (-GC) settled up  $35.60, or 2.1%, to $1,700.10 an ounce, its first settlement above $1,700 since Dec. 9. The move started as soon as the Fed made its announcement and continued in electronic trading, with metal topping $1,710 an ounce.

Based on today's settlement price, gold has risen 8.5% this month after a 10.2% increase in 2011; crude oil is up 0.6%.

Silver (-SI) closed up $1.146 to $33.121 an ounce. Copper (-HG) was up 2.2 cents to $3.8295 a pound.

Energy prices -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Crude oil (-CL)

$99.40

$98.95

0.58%

0.58%
(per barrel)











Heating oil (-HO)

$3.0104

$3.0151

3.30%

3.30%
(per gallon)











Natural gas (-NG)

$2.7290

$2.5540

-8.70%

-8.70%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.8374

$2.8105

6.77%

6.77%
(per gallon)











Brent crude 

$109.81

$110.03

2.26%

2.26%
(per barrel)











Retail gasoline

$3.3790

$3.3810

3.36%

3.36%
(per gallon; AAA)












Apple soars to head of the pack -- until oil comes back
This may come as a shock for those cheering that Apple was the most valuable company in the world.

Apple was the most valuable until crude oil recovered from its lows, and energy shares moved higher.

Apple shares pushed higher after reporting a huge gain in fiscal-first-quarter profit. At the end of the day, Apple's market capitalization was $416.4 billion, just behind Exxon Mobil's $417.8 billion.

The oil giant's shares closed up 4 cents to $87.22.

Investors, especially hedge-fund managers, have been wild about Apple for years as the company was able to transform itself from a computer company to a merchant of devices, including computers, iPhones, iPads and iPods, becoming a stunningly ubiquitous global brand in the process.

After Apple and Exxon, the companies with the largest market caps are PetroChina (PTR), Microsoft (MSFT), Royal Dutch Shell (RDS.A) and IBM. (Microsoft publishes MSN Money.)

The gain for Apple's shares contributed about 22 points to the Nasdaq-100's 32-point gain.

Declines in shares of Google (GOOG), News Corp. (NWSA), Activision Blizzard (ATVI) and Yahoo (YHOO) subtracted nearly 4 points from the index.

The biggest companies by market capitalization
Company 

Current price
Market cap
Apple 

$446.66

$416,380,922,014
Exxon Mobil

$87.22

$417,783,805,847
PetroChina 

$146.31

$267,747,295,532
Microsoft 

$29.56

$248,008,395,519
Royal Dutch Shell

$71.91

$227,235,611,572
IBM

$191.75

$226,265,000,000
Data as of 4:35 p.m. ET.

Boeing sees lower profit in 2012
Boeing shares finished up 46 points to $75.82. The aerospace giant reported earnings of $1.39 billion, or $1.84 per share, on revenue of $19.56 billion in the fourth quarter. The Street was expecting $1.01 a share on revenue of $19.32 billion. Boeing noted its results reflected a 52-cents-per-share impact related to a favorable tax settlement and high pension expense. The company is expecting earnings of $4.05 to $4.25 a share for 2012. Wall Street was looking for $4.96.

General Dynamics (GD) reported a decline in fourth-quarter earnings to $1.68 per share or $603 million, missing analysts' expectations for $1.99 a share. Earnings took a hit from the company's Switzerland-based aircraft completions business, which totaled a charge of $189 million. The company's revenue rose to $9.14 billion, from $8.6 billion a year ago, but below the consensus forecast for $9.29 billion. Shares rose 23 cents to $71.57.

Corning (GLW) reported profit in line with estimates as sales rose. Fourth-quarter net income fell to 31 cents a share or $491 million, compared to $1.04 billion a year ago. Excluding one-time charges, profit came in at 33 cents a share. Corning is the world's largest maker of glass for flat-panel televisions. Earlier, the company had lowered its forecast because of price declines for liquid crystal display glass and a lost contract in South Korea. Shares fell $1.57 to $13.05.

Roche (RHHVF), the Swiss drugmaker, plans to offer $5.7 billion in cash to buy Illumina (ILMN), the U.S. DNA company. Roche said it would offer to buy Illumina for $44.50 a share in cash, an 18% premium to Illumina's closing price of $37.68 on Tuesday. Roche said it's making the hostile bid after it tried to negotiate a deal with Illumina. Illumina said its board will review the offer. Roche was off $2.81 to $174.19. Illumina was up $17.47 to $55.15.

Dow component United Technologies (UTX) shares were off 13 cents to $77.65. The company said earnings rose 11% to $1.47 a share in the fourth quarter as demand increased for aerospace parts from Boeing and Airbus. Revenue was $15 billion. The Street estimate had been been for $1.46 a share in earnings and revenue of $15.07 billion. The company expects to earn $5.80 to $6 a share in 2012, with sales reaching $60 billion. The Street has been looking for $5.72 in earnings and sales of $62.9 billion.
 
Yahoo (YHOO) shares closed down 13 cents to $15.56. Revenue fell 3% during the fourth quarter on weak display ad sales. The struggling Internet company reported adjusted earnings of 24 cents a share, flat with a year earlier. Revenue excluding traffic acquisition costs, or TAC, came in at $1.17 billion. Analysts had expected earnings of 24 cents a share on revenue of $1.19 billion.

Short hits from the markets -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0400%  0.040%

300.00%  300.00%
5-year Treasury note 

0.804%  0.901%

-3.13%  -3.13%
10-year Treasury note

2.007%  2.064%

7.27%  7.27%
30-year Treasury bond

3.149%  3.157%

9.00%  9.00%
Currencies











U.S. Dollar Index

79.717  80.026  -1.00%  -1.00%
British pound

1.5588  1.5627  0.33%  0.33%
(in U.S. $)

          
U.S. $ in pounds

£0.641  £0.640  -0.33%  -0.33%
Euro in dollars

$1.30  $1.30  0.03%  0.03%
(in U.S. $)

          
U.S. $ in euros

€ 0.772  € 0.767  -0.03%  -0.03%
U.S. $ in yen 

78.31  77.65  1.57%   1.57%
U.S. $ in Chinese

6.35  6.33  0.36%  0.36%
yuan

            
Canada dollar

$0.000  $1.009  -100.00%  -100.00%
(in U.S. $)

          
U.S. dollar 

$1.014  $1.009  -0.62%  -0.62%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,700.10

$1,664.50

8.51%

8.51%
(per troy ounce)











Copper (-HG)

$3.830

$3.808

11.45%

11.45%
(per pound)











Silver (-SI)

$33.1210

$31.9750

18.65%

18.65%
(per troy ounce)











Wheat (-ZW)

$6.4125

$6.3350

-1.76%

-1.76%
(per bushel)











Corn (-ZC)

$6.3450

$6.303

-1.86%

-1.86%
(per bushel)











Cotton 

$0.9736

0.9854

6.20%

6.20%
(per pound)











Coffee

$2.2015

2.235

-4.14%

-4.14%
(per pound)











Crude oil (-CL)

$99.40

$98.95

0.58%

0.58%
(per barrel)










 

120Comments
Jan 25, 2012 2:42PM
avatar
Inflation running at a realistic 6% + and 1% returns on new CD's means things are bad for retirees or soon to be retirees.  It also means that those who save are being laughed at by the banksters and those who are or were reckless spenders.  This amounts to confiscation of wealth in a most sinister way.  Over the long term, using precious metals or worse, buying in anticipation of further inflation spells problems.  Free money for banks, when fianancial institutions can get cash for 1/4% and charge 3% ... profits abound in shifting wealth.  All done in secret and using taxpayers to warranty the failures.  It also amounts to attempts in forcing savers out of banks and into far riskier investments, where wealth can disappear in fractions of a second. 
Jan 25, 2012 2:05PM
avatar
That is good new for my municipal bond, but bad for people with money in banks. Two more years of low rates will force them into other market that paying higher interest rates. I bought muni bonds two years ago and everyone said I was crazy, I am up 8% and plan on holding for the next 18 mos.
Jan 25, 2012 8:29PM
avatar
In one fell swoop the FED has damaged those that save, the elderly on fixed incomes, and guaranteed oil above $100/barrel.
Jan 25, 2012 2:42PM
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America on the move .. and any luck at all .. the DOW should hit 12,800 by the ringing of the bell, today.  Now where are all the the good paying jobs for the unemployed so we can keep this ticker tape parade on Main Street?
Jan 25, 2012 4:46PM
avatar
More FED Whitewashing.....As the Fed announces lower rates now until a revised 2014 it continues to tell you that more actions may be taken if economy falters original target was 2013......What happen to.." It is getting better"....? Even the committee does not believe in the numbers....If it was really getting better this announcement and subsequent actions like more QE would not be needed...WHO ARE THEY KIDDING... A FRAGILE RECOVERY? No..! It is a Fragile Recession mixed in with the shell game as SOP....The Debt is bigger the ceiling will have to be set higher...Real .Inflation is at 3.3% with fuel and food....yr over yr. Unemployment is really at 23.2% , Teen unemployment at 37%, Food stamp recipients climbing at new all time record this month ......THIS IS GETTING WORSE NOT BETTER....AND THE FED KNOWS IT....!!!!!
Jan 25, 2012 6:22PM
avatar
It is a darn shame that the Greedy Oil Traders are putting such hardships on the poor and working people in this country with their sky high oil prices when we are swimming in oil. Prices are so high that when I get done paying all of my bills, there is absolutely nothing left to put back into the economy and I am sure that I am not alone. These people are making a killing on oil at the expense of the rest of the country. They are screwing themselves because when there is poor consumer spending, the economy cannot grow and that translates into a stock market that sucks, compliments of Wall Street Pigs.If things continue down the same road, everything will crash again and its just a matter of time. Greed has a way of catching up with people.
Jan 25, 2012 3:14PM
avatar
In the meantime, we'll all be paying higher prices at the pump and grocery store with our worthless dollars just so this administration can continue to borrow.
Jan 25, 2012 4:49PM
avatar
The Fed lowers it's GDP estimate to 2.2% for 2012. Every number the government projects gets revised once, twice or ?  It appears that all the estimating agencies over hype the President's performance. Why should we believe the fed's projection of 5-6% unemployment and 2 % inflation. You note that inflation is only 2% IF you ;leave out energy and food. Energy and food are the two items that Obama has influence over with his energy policies and ethanol (corn) policies.  Time for some American reality and a decoupling of the Fed and Obama.
Jan 25, 2012 6:54PM
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As long as we maintain record deficits and the Federal Reserve Bankng System the economy will remain anemic for years to come and most jobs lost will never return.

Jan 25, 2012 5:57PM
avatar
LI NY

Reg. $ 3.85
Mid. $ 3.95
Prem.$ 4.15
Diesel $ 4.40 Why?

Man the prices have been jumping every day two ,three cents started like most said it would January 2.

So Obama said we use less foreign oil then ever and pricing is higher than ever .

We are in January folks not looking good for the unexpected summer driving season that is going to be expectedly lower or revised down to reflect higher pricing due to less use of fossil fuels. 
Just can't cut back enough on this domestically produced oil. 

Need to buy more from the Saudi's gas was less then SAD.
Jan 25, 2012 4:28PM
avatar

Just so I understand the Fed.  No jobs, no housing recovery, and no lending till 2014.  And this is good how?

 

And what is complex about having a good product or service, start a business, and hire people.  Nothing complex about unemployment, just have to do it in the US.  What I find complex in taking US dollars from 401K's, investing in overseas countries, then telling the out of work American to be happy.  Tack is complex, not job creation.

Jan 25, 2012 11:34PM
avatar

I would like President Obama to explain how he's going to cut taxes on anyone making under $250,000 annually and also pay for all these entitlement programs he wants to create.

 

Not once did I hear him talk about our Country's enormous debt and our unfunded liabilities last night.....there was nothing about cutting our Government's spending.

 

This guy has done nothing in 4 years but drive our Country to the CLIFF of financial collapse!

Jan 25, 2012 5:46PM
avatar

Gary-

zombies could be either.

 

And there are a lot a blind haters on both sides. But seems the most vocal and virulent are from the Right lately.

 

If the Republicans win in November, I'm sure the Lefties will come out of their caves and sling it  good and hard.  I thought some of the crap thrown at Bush was over the top, just as I think some of the accusations against Obama are a bit ridiculous. 

 

 

Jan 25, 2012 8:04PM
avatar

First let me say this...don't tell me to do my research!!!! This isn't a research paper, it's a comment blog.  I'm here to comment, not to further my education!! 

 

Nobody in the working class sector of American gives a sh$$ about what the stock market is doing because tomorrow it will change and the headline will be just the opposite of today's.

 

I want to see a headline that says, "Wall Street to Return all the Tax Payer Billions" , then maybe I will actually read the article and pay attention.  In the mean time, shut the F up!!!

Jan 25, 2012 7:00PM
avatar
did the stock market closing high today help the average person? i just got back from the grocery store i spent 178.00 dollars to feed a famileyof four and that is just about how many bags i had the stock market did not help me pay for those groceries and i am also out of work and i am not on food stamps only the rich will survive. just by saying something makes the market go up i just don't understand don't they look at what is really going on in this country?
Jan 25, 2012 9:14PM
avatar

Newt: "I only paid 2.6% to charities."

 

Mitt: "I paid almost 14%."

 

Obama: "I paid 14%."

 

Middle class: "Go pound sand."

Jan 25, 2012 8:41PM
avatar
I made my best buy this week in 5 years.  Got a guarteed 6% return for 7 years.  Hit my IRA and paid off my truck.  Did the same with my mortgage last year.  Debt free and happy boomer.  Wish I knew what to do with the rest of it next year..  I was well diversified in mutual funds and haven't had any growth since 07.     peace!
Jan 25, 2012 5:37PM
avatar
Portfolio up 3.4% today.  Sometimes it pays to be lucky instead of smart.
Jan 25, 2012 10:27PM
avatar

Here is my tax plan...

 

All people are treated equally.  No deviation.  All income is treat the same, regardless of source. All corporate taxes are abolished, and the first year corporations must lower all prices by the percentage of tax they actually paid.

 

The tax code cannot exceed 3 pages.  No more government picking winners and losers.  If they want to give away some money they have to vote on it as a seperate bill.

 

I would think that initially the rate could be about 18%.  Millionaries pay, homeless pay.  Everyone treated FAIR and EQUAL.  Then if Congress wants to give homeless people cash they can vote on that seperately.

 

Next Congress cannot SPEND more than tax revenue the tax brings in.  All tax increases MUST be approved by 3/4 of the states. 

 

We then abolish the Fed or at least recind its right to do as it pleases without oversight.  The FED cannot debased/print/QE 986 or whatever without Congressional approval.  If the FED is striving for 2% inflation, then to exceed that number REQUIRES congressional approval.

 

We need to end low interest rates.  We are PUNISHING savings and CAPITAL formation.  Something that is destroying jobs and exporting them overseas.  The FED must be out of setting interest rates period. 

Jan 25, 2012 8:35PM
avatar
The FED is swimming upstream here, in a global economy where the economies of Asia and Europe are slowing. There will be plenty of leakage. This will not make U.S. debt attractive either. Ben is blowing us another bubble watch for it in a market near you.
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[BRIEFING.COM] The stock market ended the midweek session on a mixed note. Blue chip listings bolstered the Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.3%), while the Russell 2000 (-0.4%) and Nasdaq Composite (-0.02%) underperformed.

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