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.
Updated: 7:50 p.m. ETStocks 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.
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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) | ||||||||||||
Stcok-schmocks, bonds-blonds whatever! When your a small USA manufacturer 'Proudly made in the USA since 1968!" you read things differently in the same article. we read " The Fed sees the economy growing at 2.2% to 2.7% this year, DOWN from its original projection of 2.5% to 2.9%" Well group, our fishing hole has been getting SMALLER and smaller and 2.5% Avg.growth will not add alot of fish! When you're a small USA manufacturer selling into the
manufacturing world ? Don't get me started!
Btw, get over yourself..........we all see that you really think you are something special and so much better than everyone else on this board..............but guess what............YOU AREN'T!
---------------
Only I have an education in finance and understand/employ the basic strategies that go into securities investing. I'm not just some schmuck that thinks the market is a rigged game and has a political axe to grind on a message board, talking out of their **** about something of which they have little understanding
This could not be more clear if it were a white flag of surrender!
IF,...........IF, THERE WERE ......ANY PROVABLE FACTUAL DATA OF ECONOMIC RECOVERY, ...........IN ANY FORM,
THIS REALLY INNOVATIVE AND UNIQUE APPROACH WOULD NOT BE NECESSARY!
Stocks and bonds are exactly the same instruments.........
------------
This comment perfectly displays your ignorance on securities. A bond is a loan, a stock is an equity, or ownership stake, in a company.
For crying out loud, why am I even discussing investments with you when you don't know the fundamental difference between a stock and a bond.
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.
Don't believe it.........How much are the bond holders of Greece getting .50 cents on the dollar, how about the GM stock and bond holders? Ask a few of the stock an bond holders from AMR who recently went belly up.
-----------
Corporate bankruptcies happen? No way! Meanwhile, I'm up nearly 15% from October and I'm getting dividends every month from PSEC. My only holdings under 10% are Oracle, Duke Energy, ConocoPhillips, and Halliburton.
You're the same person that equates stock prices to the unemployment rate; when earnings, margins, and revenues are the basis for stock valuation.
Didn't stocks rebound in early 2008 just before they went belly up in the summer? The Fed has been using the Permanent Open Market Operations (POMO) funds to prop up the market up to now because there would be too much furor over another round of QE that benefitted only the Banks and Wall Street. Bernanke can use POMO at his discretion and doesn't have to seek anyone's approval.
Truthseeker- I don't it will take 1 or 2 quarters to see this situation tank, it will only take a few months. Even those folks that normally prop up spending in January and february with their earned income credit refunds are going to hang on to their cash in order to pay for increased gasoline and food prices. The remaining seasonal emplyees will be laid off after inventory.
The Federal Reserve decided to leave interest rates alone today, saying the economic recovery needed continuing help, and it told the nation that rates probably won't rise before late 2014.
The economy has been growing moderately and will grow "modestly" in the months ahead, the Fed said, but unemployment will continue to decline gradually. "Strains in global financial markets continue to pose significant downside risks to the economic outlook," the Fed said.
The Fed 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 central bank now sees lower economic growth this year than it did in November.
India has agreed to pay the price of crude oil it imports from Iran in gold, which makes it the first country to drop the US dollar for purchasing the Iranian oil.
According to a report published by DEBKAfile news website, unnamed sources have stressed that China is also expected to follow suit.
India and China take about one million barrels per day (bpd), or 40 percent of Iran's total exports of 2.5 million bpd and both of them have huge reserves of gold.
The report added that by trading in gold, New Delhi and Beijing enable Tehran to bypass the upcoming freeze on its Central Bank's assets and the oil embargo which the European Union's foreign ministers agreed to impose on Monday, January 23.
The EU currently buys around 20 percent of Iran's oil exports.
On the other hand, experts say the vast sums involved in these transactions are expected to boost the price of gold and depress the value of the dollar on world markets.
“An Indian delegation visited Tehran last week to discuss payment options in view of the new sanctions. The two sides were reported to have agreed that payment for the oil purchased would be partly in yen and partly in rupees. The switch to gold was kept [in the] dark,” the report stated.
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