Closing Market Report

Star-Bulletin news services Tuesday, January 13, 2004

Stocks modestly higher
ahead of earnings season

NEW YORK >> Wall Street edged higher in choppy trading yesterday, with investors making few moves as they waited for companies to start reporting their fourth-quarter earnings this week.

With only a handful of firms issuing profit warnings and some others forecasting year-over-year earnings growth as high as 20 percent, analysts expressed confidence that the market would continue its advance.

"There's reason to be more optimistic than most people were after seeing that crummy jobs figure on Friday," said Philip S. Dow, managing director of equity strategy at Dain Rauscher Wessels in Minneapolis. "Whenever business begins to come back, that's not a recovery you measure in months, you measure it in years."

Advancers outnumbered decliners slightly more than 5 to 4 on the NYSE. Consolidated volume was moderate, with 1.97 billion shares traded, compared with 2.27 billion shares on Friday.

The Dow Jones industrial average closed up 26.29, or 0.2 percent, at 10,485.18.

The broader gauges were also higher. The Nasdaq composite index closed up 24.86, or 1.2 percent, at 2,111.78. This was a new 2 1/2-year closing high for the Nasdaq, which last closed higher on July 3, 2001, when it stood at 2,140.80. The Standard & Poor's 500 index gained 5.37, or 0.5 percent, to 1,127.23. The Russell 2000 index closed up 7.81, or 1.4 percent, at 583.01.

The price of the Treasury's 10-year note closed down 1/32 point, while its yield rose to 4.09 percent from 4.08 percent Friday. The price of two-year Treasury notes was unchanged and their yield held at 1.66 percent.

The market was still digesting Friday's employment data from the Labor Department, which said unemployment dropped to a 14-month low of 5.7 percent while payrolls increased by just 1,000 jobs, a sign that many have given up the search for work.

For the most part, though, investors were focused on the strong earnings outlook. But analysts also warned that some of the expected profit gains may already be reflected in stock prices, as companies have anticipated for some time that they would benefit from easy year-over-year comparisons. It may be more difficult for them to best last year's returns in future quarters, said Neil Massa, equity trader at John Hancock Funds.

"In the short term, there's no danger earnings will disappoint, it doesn't look like interest rates will be hiked for a while, so that all bodes well," Massa said. "However, I think we're definitely in an overbought position, and bound to sell off a little bit. But I think the trend is still upward."

Also yesterday, Nasdaq officials announced it will list the shares of six firms that trade on the New York Stock Exchange, including Hewlett-Packard Co., Charles Schwab Corp. and Walgreen Co., under a new dual-listing program. Analysts said dual listing will allow investors a greater chance to find the best price for a stock.

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