[BRIEFING.COM] Monday's market reflected investors' wait-and-see stance ahead of a busy week in terms of both earnings and economic news. The major indices spent the session in flat line vacillation mode, and trading volume was notably lower than last week's.
The Energy sector led the session. Ahead of tomorrow's OPEC meeting, that area of the market received added attention. According to the Associated Press, the cartel has ruled out any change in production at its meeting this week, but oil ministers from Venezuela and Saudi Arabia said Monday that it has a consensus to cut output in March. The price of crude futures ($68.40 per barrel) gained 1.1% today, and helped drive buyers to the sector. A record fourth quarter earnings report from Exxon Mobil (XOM 63.12 +1.83) was also behind the rise, and strong results from Smith International (SII 44.35 +1.62) added more momentum. Those companies' reports underpin the Overweight rating that Briefing.com maintains on Energy. Refiners fared particularly well ahead of reports from SUN and VLO due out this week.
Largely to the credit of the hardware industry, the Technology sector advanced 0.5%. After declining about 17% over the past two weeks, Apple (AAPL 75.17 +3.14) attracted bargain hunters and was the particular bright spot. Relative weakness in semiconductors, due to some profit taking, capped the sector's advance. Materials (+0.2%) also closed higher, and Industrials finished on the flat line.
While gains, outside of Energy's, remained contained, losses were similarly limited. Due to weakness in pharmaceuticals, following a disappointing earnings report from Schering-Plough (SGP 19.60 -0.48), Healthcare (-0.5%) levied the weightiest loss. The biotech industry was also a sore spot, and Boston Scientific's (BSX 20.80 -0.83) extended decline pressured the equipment group. Ahead of tomorrow's FOMC meeting and accompanying policy statement, the market's most rate-sensitive areas reflected traders' cautious sentiment. Banks kept the Financial sector (-0.2%) in the red, and wide-spread selling took Utilities (-0.6%) lower. Investors within the stock and bond markets alike fully expect a 25 basis point hike in the fed funds rate, but there is less certainty over the Fed's policy statement. The market expects just one more rate increase following tomorrow's, and will attempt to glean confirmation of such in the statement's wording. Our forecast calls for two more rate hikes over the course of the next two meetings, after which the tightening cycle will pause. With respect to financials, brokers helped limit the downside.
Some broad-based selling sent the Consumer Staples sector (-0.4%) south, but Wal-Mart (WMT 46.40 +0.56) shares offered support. This morning, the world's largest retailer announced a preliminary 4.7% gain in January same-store sales. That figure, which is at the high end of its forecast, follows its disappointing December same-store sales gain. The rise in January suggests there was an accelerator effect from gift card spending that is likely to show up in the same-store sales results from other retailers. After Wednesday's close, the industry will begin to announce its January data. An encouraging fiscal Q2 report from Sysco (SYY 32.48 +1.91) lent further upside within the Staples sector.
Along with upgraded Gap (GPS 18.07 0.69) shares, General Motors (GM 24.19 +0.39) was the Discretionary sector's (-0.2%) strongest crutch. Upon reports that Citigroup (C 46.83 -0.04) is working with Cerberus Capital in offering $11.5 billion for its GMAC business, the stock jumped. On a related note, Wachovia (WB 54.75 +0.35) is also reportedly interested in making a bid. Further to the M&A front, Arcelor rejected Mittal's (MT 35.69 +1.43) unsolicited $23 billion cash proposal, and Fairmont Hotels (FHR 44.24 +0.42) will be acquired by Kingdom Hotels and Colony Capital for $3.9 billion in cash.
The economic calendar featured two items. Personal income was up 0.4% (consensus 0.4%); personal spending rose 0.9% (consensus 0.8%). As the data generally matched expectations, and because the Q4 GDP figures have already been reported, the markets essentially overlooked the data. Investors remain focused upon tomorrow's FOMC and OPEC meetings and Friday's employment report. NYSE Adv/Dec 1592/1702...Nasdaq Adv/Dec 1487/1629
DOW Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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