Disappointing consumer confidence data pulled the benchmarks down from the day’s highs during late trading, leading to a marginal fall decline for the markets on the last day of the month. However, this was still the best January the markets have enjoyed since 1997. The Street’s gains were driven by positive economic reports. Some encouraging corporate results also pitched in, though concerns about global financial markets continued to linger.
The Dow Jones Industrial Average (DJI) dropped 0.2% to close the day at 12,632.91. The Standard & Poor 500 (S&P 500) declined 0.05% and finished the day almost unchanged at 1,312.41. The Nasdaq Composite Index was the sole gainer, edging up 0.07% to close yesterday’s trading session at 2,813.84. The fear-gauge CBOE Volatility Index settled slightly higher at 19.44. Consolidated volumes on the New York Stock Exchange (NYSE), Amex, and Nasdaq were roughly 7.07 billion shares, lower than the 200-day moving average of 7.76 billion shares. For 56% of the stocks that gained, 40% stocks traded lower, and the remaining 4% stocks were left unchanged on the NYSE.
Markets had been moving higher during early trading hours. News from the other side of the Atlantic was relatively better, after Greece looked close to cutting a deal with the private creditors. The Dow gained nearly 66 points, but finally settled in the red zone thanks to disappointing economic data. Coming at a later stage during the trading session, neither consumer confidence data, nor the S&P/Case-Shiller report on U.S. home prices had anything positives in store for investors.
The Conference Board reported that the Consumer Confidence Index had declined in January, reversing its gains in December. The index dropped from December’s figure of 64.8 to 61.1 in January, and was also below consensus expectations of 68.0. Lynn Franco, Director of The Conference Board Consumer Research Center, said: "Consumer Confidence retreated in January, after large back-to-back gains in the final two months of 2011. Consumers' assessment of current business and labor market conditions turned more downbeat and is back to November 2011 levels…Recent increases in gasoline prices may have consumers feeling a little less confident this month". Also, the regional indicator of the economic health of the manufacturing sector in Illinois, Indiana and Michigan, the Chicago PMI index dropped to 60.2 in January from 62.2 in December 2011.
Separately, both the 10- and 20-City S&P/Case-Shiller Home Price Indices dropped 1.3% in November. The dismal reading from the group of indexes that tracks changes in home prices throughout the United States negatively impacted housing sector related stocks and PHLX Housing Sector (HGX) was down 1.4%. Among the stocks, Lennar Corporation (NYSE:LEN), KB Home (NYSE:KBH), Toll Brothers Inc. (NYSE:TOL), PulteGroup, Inc. (NYSE:PHM) and Beazer Homes USA, Inc. (NYSE:BZH) declined 2.9%, 4.5%, 1.6%, 2.4% and 2.9%, respectively.
Corporate results also failed to bring any cheer to investors. The pharma bellwether Pfizer, Inc. (NYSE:PFE) managed to beat estimates but lowered its 2012 earnings guidance. Subsequently, shares of the company declined by 0.8%. Energy major Exxon Mobil Corporation (NYSE:XOM) posted fourth-quarter earnings that failed to beat the Street’s estimates. The company’s shares were down 2.1%. Radioshack Corporation (NYSE:RSH) plummeted 29.8% after reporting a slump in its earnings.
Those were the concerns that eroded the day’s gains and benchmarks ended slightly lower. However, investors were enthused by monthly performances of the benchmarks. Both the Dow and S&P 500 enjoyed their best January since 1997. The Dow surged 415 points or 3.4%, and the S&P 500 leapt 54 points or 4.4% in January. The Nasdaq too shared the laurels, with a 8% jump in January. The tech-laden index has posted its best January performance since 2001.
What mostly helped the benchmarks in recording their best January in over a decade, were positive economic reports. Since late-December economic data have been by and large encouraging. The jobs and housing markets have provided enough impetus and initial claims are still below the 400, 000 mark. Unemployment rate stands at 8.5%, which is the lowest in roughly three years. Corporate results were not impressive in each case, but a few bellwethers impressed the Street and also made a strong comeback from their lack luster performances in the last quarter. For example, financial bellwethers, Goldman Sachs (NYSE:GS), Bank of America Corporation (NYSE:BAC) and Morgan Stanley (NYSE:MS) posted encouraging results. Tech-giant Apple Inc. (Nasdaq:AAPL) also made a strong comeback this quarter.