Gains ahead of Greenspan

[notiCIas]

Gains ahead of Greenspan

Dow hits another new high as investors await testimony from Fed chairman Wednesday.

February 15, 2005: 6:11 PM EST
By Alexandra Twin, CNN/Money Staff Writer


NEW YORK (CNN/Money) - Stocks posted slim gains Tuesday, backing off from earlier highs, as investors tread cautiously ahead of Fed chairman Alan Greenspan's congressional testimony, due to start Wednesday.

The Dow Jones industrial average (up 46.19 to 10,837.32, Charts) added around 0.4 percent, closing at a new high for the year for the third time in the last four sessions.

The broader Standard & Poor's 500 (up 3.98 to 1,210.12, Charts) index and the Nasdaq composite (up 6.30 to 2,089.21, Charts) both gained around 0.3 percent.

Stocks were modestly higher in the early going amid news of a buyout offer for Circuit City and stronger-than-expected January retail sales.

Stocks see-sawed throughout the day, rising more sharply near noon, and declining more abruptly in the early afternoon, before moving higher near the close.

The midday selloff was alternately attributed to program trading, a trading error at a large firm, and speculation that Greenspan might make some market-moving comments as part of his testimony, analysts said.

However, the session's back and forth motion may have just been part of the typical sway of the market, rather than something more unusual, said Paul Mendelsohn, chief investment strategist at Windham Financial Services.

"I think there's several things going on here," he added. "You have Greenspan speaking Wednesday and Thursday, you have the balance of the economic data for the week, and you have options expirations Friday."

The market is at an in-between place right now, where most of the earnings are already out, and the economic news on tap this week is relevant, but not hugely market moving, said Mark Bryant, senior vice president at Brean Murray & Co.

"We made a short term bottom on January 25, we've seen some gains off of that, and now we're trying to see if we can make new highs," he added.

Whether the market can make new highs after the recent advance will be determined by a few factors, Bryant said, including whether there is still new money being put into mutual funds, whether the sentiment improves and whether the trend can push the market higher.

After the close, Applied Materials (up $0.36 to $17.49, Research) reported fiscal first-quarter sales and earnings that grew from a year ago and topped estimates. The company forecast that current-quarter earnings would beat expectations. However, the chip gear maker also warned that new orders could weaken amid an industry slowdown.

Applied Materials shares were little changed in after-hours trade.

Coca-Cola (Research) reports quarterly earnings Wednesday morning. Also due: January reads on housing starts, building permits, industrial production and capacity utilization.
Awaiting Alan

Fed chairman Greenspan will give his semi-annual testimony on the economy and monetary policy before a Senate panel Wednesday and a House panel Thursday.

"Unless he should say something really out of the ordinary, which is unlikely, I think his comments will likely have a limited effect on stocks," said Peter Cardillo, chief market analyst at S.W. Bach & Co.

Greenspan is expected to address issues including the federal budget deficit, the future of Social Security and the outlook for short-term interest rates, all of which could sway both the bond and equity markets.

"I think the understanding is that he might admonish congress a bit on spending, but otherwise, he is unlikely to say anything that would ruffle the markets," Bryant added. "He knows how the markets jump on his every word, so he'll be careful."
On the move

Shares of Circuit City soared after the electronics retailer said it got an unsolicited buyout offer from Highfields Capital Management, a Boston-based hedge fund.

The figure marked a 19.5 percent premium over Monday's closing price and promptly sent Circuit City (up $2.30 to $16.53, Research) shares up more than 16 percent.

The potential deal also added to the day's broader gains, supporting sentiment, as merger talk generally implies corporate confidence.

Within the tech sector, gains in chips, Internet and networking stocks paced the advance.

The tech-heavy Nasdaq composite was the only one of the three major gauges to end last week lower, reflecting tough sledding for tech stocks so far this year. As such, the sector was more likely to see a bounce.

The Philadelphia Semiconductor (up 3.02 to 439.24, Charts) index, or the SOX, which gauges the chip sector, rose 0.7 percent.

Google (up $2.24 to $195.23, Research) and eBay (up $1.08 to $85.40, Research) were among the stocks lifting the Internet sector. The Goldman Sachs Internet (Charts) index rose around 1 percent.

Apple Computer (up $3.78 to $88.41, Research) gained after Merrill Lynch boosted its 12-month price target to $102 from $85.

Search engine Mamma.com (up $1.66 to $6.28, Research) bounced 35 percent on speculative buying, as rumors circulated that the company was a potential takeover target.

Market breadth was mixed. On the New York Stock Exchange, advancers narrowly edged decliners on volume of 1.52 billion shares. On the Nasdaq, losers beat winners on volume of 2.06 billion shares.

Tuesday's economic news was mostly upbeat, including reports on retail sales and manufacturing in the New York region.

Retail sales in January fell 0.3 percent after rising a downwardly revised 1.1 percent in December, the Commerce Department reported. Economists surveyed by Briefing.com thought sales would fall 0.5 percent. Excluding autos, sales rose 0.6 percent after climbing 0.3 percent in December. Economists thought ex-auto sales would be up 0.4 percent.

The New York Empire State index, a regional read on manufacturing, fell to 19.2 in February from 20.1 in January. Economists thought it would decline to 20.0.

U.S. light crude oil for March delivery slipped 18 cents to settle at $47.26 a barrel on the New York Mercantile Exchange.

Treasury prices inched lower, pushing the yield on the 10-year note up to 4.10 percent from 4.07 percent late Monday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar fell modestly versus the euro and more substantially versus the yen.

COMEX gold ended the session unchanged at $427.30 an ounce.