US stocks in search of direction

Pending home sales data weighs on stocks

US stocks lacked direction for almost the entire day on Tuesday, 05 January 2009. Stocks started the day in the red. But with the help of a late rally, two of the three major indices managed to finish in the green. Economic data that checked in for the day were mixed in nature. The dollar pared early losses and reversed its course following disappointing housing data.

At the end of the day on 05 January, 2010, the Dow Jones Industrial Average ended lower by 11.94 points at 10,572.02. Nasdaq ended higher by 0.29 points at 2308.71. S&P 500 ended higher by 3.53 points at 1136.52. Dow was trading lower by almost 46 points earlier during the day.

Six of the ten economic sectors ended higher for the day led by materials, energy, and financial sectors. Utilities and healthcare sectors lagged. Technology sector remained almost unchanged. Alcoa was a main Dow laggard while Kraft was a major Dow gainer.

Leadership from the broader financial sector helped stocks recover from some midmorning pressure that arouse from the home sales data.

In the currency market on Tuesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 0.2% following disappointing home sales data. Earlier, dollar index was down by almost 0.2%.

The Commerce Department in US reported on Tuesday, 5 January 2009 that U.S. factory orders increased in November, 2009. Factory orders increased 1.1% in November, greater than the 0.8% expected by the market. This was the seventh increase in the past eight months. Excluding transportation goods, factory orders rose 1.9%. Excluding defense goods, orders rose 1.1%.

The report detailed that core capital equipment orders rose 3.6% in November. Orders for machinery rose 3.3%. Orders for electronics rose 3.1%. Orders for nondurable goods rose 1.8% led by petroleum products.

Separately, the National Association of Realtors in US reported on Tuesday, 5 January 2009 that pending home sales plunged a seasonally adjusted 16% in November 2009 from October 2009. The pending sales index, which had risen nine months in a row before falling in November, was 15.5% higher than in November 2008. October's increase was revised higher to 3.9% from 3.7% previously reported.

The federal tax credit for first-time buyers was set to expire on 30 November, 2009. But the same was ultimately extended through the first half of 2010, and it was also expanded to repeat buyers.

Kraft shares got a major boost today after the company announced that it has opted to sell its North American pizza business to Nestle in order to offer cash as part of its bid for Cadbury. Meanwhile, Kraft's proposal to issue stock to help it acquire Cadbury received criticism from Berkshire Hathaway's Warren Buffett, who suggested that Kraft's shares constitute an expensive currency. Berkshire reportedly owns less than 10% of Kraft's outstanding shares.

Crude prices ended little higher at Nymex on Tuesday, 05 January 2010 after it pared most of its gains as dollar reversed its course. Prices also went up as traders anticipate tomorrow's weekly inventory report to show drop in crude and gasoline stockpiles.

On Tuesday, crude-oil futures for light sweet crude for February delivery closed at $81.77/barrel (higher by $0.26 or 0.3%). Yesterday, crude had settled above $81 for the first time in two months. Prices have now risen for nine consecutive sessions and have gained 13% in that stretch.

Traders are anticipating that tomorrow's weekly inventory report by energy department will show crude and gasoline stockpiles to have dropped by 0.2 million and 0.5 million barrels last week respectively.

Barring Tata Motors, all the Indian ADRs registered healthy gains today. VSNL and MTNL were the largest gainers soaring 5.6% and 10.6% respectively. Tata Motors skid by almost 1%.

For tomorrow, there are a few economic and earning reports expected. The job cut and ADP employment reports are the economic ones expected.