[BRIEFING.COM] Buyers returned after a two-day slump, weighing strong corporate profits and eased inflation concerns against a product delay from Microsoft that initially underpinned a sense of caution at the onset of trading.
Last night, Microsoft (MSFT 27.15 -0.59) announced it will delay the much anticipated Windows Vista operating system for consumers to early next year. Knowing that Microsoft is the fourth heaviest weighted constituent on the S&P 500, coupled with the plethora of PC suppliers that expected to benefit from the first software cycle upgrade in five years, it was anyone's guess how the market might react. Fortunately for the bulls and supporting our viewpoint that investors should sit tight in the midst of any knee-jerk selling activity since the consumer opportunity won't disappear, sellers were unable to keep bargain hunters at bay as better than expected earnings from blue chips like Morgan Stanley (MS 61.96 +1.55), Nike (NKE 86.84 +1.89) and FedEx (FDX 114.25 +1.03) provided investors with some reassurance that the profit picture may not be as bad as previously thought.
Providing another source of support was a rebound in Treasuries following their biggest decline in two weeks. The yield on the 10-yr note (+04/32) fell as low as 4.68% before closing at 4.70%, as overstated inflation concerns subsided and renewed buying interest in rate-sensitive stocks, which in turn with Morgan Stanley's strong report helped Financial post a solid gain. Despite an early uptick in oil prices following an unexpected draw on weekly crude oil inventories, which helped Energy provide some upside leadership, the commodity eventually closed down 0.9% near two-week lows, providing an extra source of comfort for investors.
Of the other seven economic sectors posting gains, Health Care turned in the day's best performance getting a big boost from strength in drug stocks. The latter benefited from multiple analyst upgrades on Bristol-Myers (BMY 25.28 +2.45) following reports that it and Sanofi-Aventis (SNY 47.80 +4.12) agreed to settle their U.S. patent litigation with Apotex. The Industrials sector got a lift FedEx's strong earnings but found even more support from Caterpillar (CAT 76.25 +1.94) -- the Dow's best performer on the day, both of which play into our Overweight rating on the sector. Consumer Discretionary was also a focal point following news that General Motors' (GM 22.05 +0.05) and its supplier Delphi reached a deal with the UAW, but the sector got a much larger lift from Nike whose Q3 earnings far outpaced expectations. NYSE Adv/Dec 2231/1049...Nasdaq Adv/Dec 1925/1053
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