US stocks linger in the red

Alcoa's earning report weighs on US stocks

An earning miss from Alcoa last evening weighed on US stocks since the very start of the day on Tuesday, 12 January 2010. Broad-based losses ensued and left the stock market mired in weakness. In addition, commodities and technology stock also lingered in the red thereby providing no absolute support to the broader market.

At the end of the day on Tuesday, 12 January, 2010, the Dow Jones Industrial Average ended lower by 36.73 points at 10,627.26. Nasdaq ended lower by 30.1 points at 2282.3. S&P 500 ended lower by 10.76 points at 1136.22. Earlier in the day, Dow was down by almost 83 points.

Nine of ten economic sectors ended in the red led by materials, financial and technology sectors.

Alcoa, Bank of America, Chevron, and Caterpillar were the main Dow components that led Dow's decline today. On the other hand, Dow components like Procter and Gamble, Johnson & Johnson and IBM tried to provide some support.

Though Infosys Technologies posted better than expected results for the latest quarter and went on to issue an upside forecast, weakness continued to dog large-cap tech issues as a whole. Their losses caused the Nasdaq Composite to underperform its counterparts in recent sessions and left the Nasdaq 100 worse off. Big names such as Google and Intel weighed on the sector.

Consumer staples sector tried to support the Dow after its key component Procter & Gamble was upgraded by analysts at Bank of America's Merrill Lynch. But Colgate and Palmolive saw a downgrade.

After yesterday's close, Alcoa kicked off the earnings session reporting its fourth quarter earnings which it missed. As per the company, "This was a tough year for the aluminum industry - a price crash, demand destruction, and credit crunch. Yet, today Alcoa is stronger than when the year started." The company posted a $277 million loss with lower sales in its construction, aerospace, commercial building, and gas-turbine markets. The same dragged on the metals and mining players. The weakness dragged the materials sector also.

A profit warning also came from Chevron, the energy giant, which also led stocks tumble today.

Crude oil prices ended substantially lower on Tuesday, 12 January 2010. Prices fell on demand concerns as China signaled a bias to tighten monetary conditions recently. Crude also fell as traders focused on the fact that crude's recent gains were overdone as extreme cold temperature is expected to give way to some warmer temperature in the next few weeks.

On Tuesday, crude-oil futures for light sweet crude for February delivery closed at $80.4/barrel (lower by $2.12 or 2.6%). Earlier during the day, prices fell to a low of $84.26. Crude ended last week higher by 4.3%. On a year to date basis till date, crude is higher by 1.4%.

In its monthly short-term outlook, EIA reported today that West Texas crude-oil prices, which averaged about $62 a barrel last year, will average about $79.83 this year and about $83.5 in 2011. Prices should average $77 in the first quarter and $85 in the fourth quarter this year. The forecast assumes U.S. growth of 2% this year and 2.7% in 2011. In its December outlook, the EIA forecast that world oil consumption will grow in 2010 by 1.1 million barrels a day to put the total daily figure at 85.2 million barrels.

In the currency market on Tuesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies fell by almost 0.2%. Earlier in the day, it rose by almost 0.4%.

Indian ADRs ended mixed on Tuesday. The technology ADRs were big gainers. Wipro Tech and Infosys soared by 5.6% and 5% respectively. HDFC Bank and ICICI Bank were the largest losers shedding 5.2% and 4.2% respectively.

Earnings reports will start to pick up next week mainly. Tomorrow, there are no economic or earning data expected.