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Stocks pull ahead as earnings impress
Solid results in banking sector fuel buying; oil turns lower
By Mark Cotton, CBS.MarketWatch.com
Last Update: 1:31 PM ET Jan. 18, 2005


NEW YORK (CBS.MW) - U.S. stocks traded higher Tuesday as a two-week decline in the market and a raft of broadly positive earnings reports, notably in the banking sector, sparked some modest buying.



The Dow Jones Industrial Average ($INDU: news, chart, profile) rose 43 points higher at 10,601. In morning trading, the Dow fell as low as 10,500.58.

"The initial impact of rising oil prices hit stocks, but a lot of traders feel the market has overdone it on the downside over the last two weeks," said Michael Metz, chief investment strategist, at Oppenheimer & Co.

"I think we're going to have an up week. The downside was mostly momentum traders and I think they're largely out."

Within the benchmark index, Alcoa (AA: news, chart, profile) slipped 0.2 percent on concern about its outlook after Canadian rival aluminum maker Alcan (AL: news, chart, profile) warned on its fourth-quarter earnings.

3M (MMM: news, chart, profile) fell 2.7 percent as some analysts expressed concern about the fourth-quarter performance of some divisions, including the display and graphics group and the electro and communications division. 3M's overall results were in line with Street expectations, with the manufacturer also offering an upbeat outlook.

General Motors Corp. (GM: news, chart, profile) dropped 1.3 percent as the carmaker prepared to report results Wednesday. The company also said it would take a series of charges for its automotive manufacturing operations.

Moving higher, IBM shares ticked up 0.5 percent ahead of its quarterly earnings after the bell.

Shares of Boeing Co. (BA: news, chart, profile) rose 1.7 percent as the company shrugged off the publicity about European rival Airbus's launch of its A380 aircraft to compete with Boeing's 747.

The Nasdaq Composite Index ($COMPQ: news, chart, profile) climbed 12 points, to 2,100 while the S&P 500 ($SPX: news, chart, profile) was up nearly 8 points, at 1,192.

Oil turns lower

Crude-oil futures turned lower in afternoon trading amid uncertainty ahead of an upcoming meeting of the Organization of Petroleum Exporting Countries and the Iraqi elections later this month.

Traders also digested a forecast suggesting strong rising global demand for oil in 2005 and, in the short-term, the impact on supplies of a cold snap in the U.S.

Earlier, The International Energy Agency raised its global oil demand estimate for 2005 to 1.44 million barrels per day, with North America and the former Soviet Union accounting for the bulk of its 60,000-barrel-a-day estimated increase.

Crude for February delivery was last down 23 cents at $48.15 a barrel, off a morning high of $49.50. See full story.

Tuesday's economic data offered little in the way of cheer for investors.

Manufacturing activity in the New York area expanded at a slower pace in January, the New York Federal Reserve Bank said Tuesday. The bank's Empire State Manufacturing Index fell to 20.1 in January from 27.1 in December. The reading was lower than expected. See full story.

Dollar, bonds, gold, bonds

On the currency markets, the dollar was higher but off its best levels against the euro and yen on Tuesday.

The greenback climbed to session highs in the wake of a Treasury Department report that showed the largest amount of foreign money flowing into the United States in November in five months. Read about the report

Also, in the first of a long lineup of Federal Reserve speakers for Tuesday, Philadelphia's Anthony Santomero fueled expectations for additional rate increases by the U.S. central bank.

"A number of Federal Reserve speakers today could echo hawkish comments heard from monetary officials over the last two weeks. The market has bid the greenback higher recently on the prospect of a potentially more aggressive pace of monetary policy tightening from the Fed," said Alex Beuzelin, senior market analyst with Ruesch International in Washington.

The euro was last down 0.1 percent, at 1.3044. Against the yen, the dollar rose 0.3 percent, to 102.44.

Gold futures wiped out early weakness, to trade higher on expectations of solid demand for the metal in the months ahead.

The benchmark February gold contract was last up 80 cents to $423.80 an ounce. See full story.

Bonds were slightly lower in a muted reaction to this morning's manufacturing report. See bond report

Turning back to the broader market for equities, advancers outpaced decliners nearly 2 to 1 on the New York Stock Exchange, and by an 18 to 12 margin on the Nasdaq.

Volume in early trading was 882 million on the Big Board and nearly 1.2 billion on the Nasdaq.

Earnings parade

A further seven Dow components report this week, including International Business Machines (IBM: news, chart, profile), GM (GM: news, chart, profile), General Electric (GE: news, chart, profile), Citigroup, (C: news, chart, profile) Pfizer (PFE: news, chart, profile), United Technologies (UTX: news, chart, profile) and JP Morgan Chase (JPM: news, chart, profile).

Citigroup and JP Morgan's results will come on the heels of a number of earnings reports already posted by some of the country's leading financial institutions.

Shares of Bank of America (BAC: news, chart, profile) edged up 1.2 percent to $45.44 after the bank posted a solid fourth quarter, buoyed by the contribution of recently acquired Fleet Boston and strength in its asset liability management business.

The bank also got a lift from growth in consumer loans and deposits. See full story.

Wells Fargo shares (WFC: news, chart, profile) erased early weakness to edge higher as investors cheered a 10 percent rise in fourth quarter net income from year-ago levels. Well Fargo shares were last up 1.1 percent. See full story.

Among discount brokers, both Charles Schwab (SCH: news, chart, profile) and Ameritrade Holding (AMTD: news, chart, profile) saw their share rises after posting forecast-beating results.

Elsewhere, earnings from Fifth Third (FITB: news, chart, profile) of Ohio disappointed, while State Street (STT: news, chart, profile) offered a cautious 2005 outlook.

CEO resignations spark gains

In other news, shares of beleaguered doughnut maker Krispy Kreme got a shot in the arm Monday after the company confirmed the resignation of Chief Executive Officer Scott Livengood.

Krispy Kreme (KKD: news, chart, profile) said it was also mulling further restructuring of the company, which could include store closings.

The doughnut maker's shares shot up 12.4 percent to $9.80 in afternoon trading. See full story.

Meanwhile, shares of May Department Stores (MAY: news, chart, profile) climbed as much as 20 percent as investors applauded the resignation of Chief Executive Gene Kahn.

As a result of Kahn's departure, a number of brokers upgraded May before the markets opened Tuesday.

Banc of America Securities, for example, raised its rating to "buy," citing the potential for the new CEO, once named, to effect a turnaround or sell the company. May shares were last up 18.7 percent at $32.88.

M&A action

On the mergers-and-acquisitions front, the forest-products manufacturer MeadWestvaco agreed to sell its papers business to private investment firm Cerberus Capital Management for $2.3 billion.

Shares of MeadWestvaco Corp (MWV: news, chart, profile) were last down 1.9 percent at $32.29.