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schaeffer's market recap

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    Market Recap

    The latest economic news was quickly overshadowed by earnings news this
    morning. The Labor Department reported that initial jobless claims for last
    week dropped by 11,000 to 343,000. In addition, the Empire State
    Manufacturing Survey (which is an index of current business condition)
    skipped to a record 39.2 in January from December's revised 36.2.
    Meanwhile, December's retail results looked fairly grim, rising only 0.5
    percent compared to November's upwardly revised 1.2-percent gain. Tomorrow
    will bring the release of December industrial production and capacity
    utilization, November business inventories, and the preliminary January
    University of Michigan consumer sentiment index.

    IBM made an unexpected move today, announcing earnings well in advance of
    its scheduled January 20 earnings release date. Big Blue posted solid
    gains, reporting fourth-quarter earnings at $1.56 per share, up from $1.11
    per share from the same quarter last year. The numbers also bested Thomson
    First Call estimates of $1.50 per share. What's more, fourth-quarter
    revenues continued the upside surprise, besting consensus estimates by $0.9
    billion at $25.9 billion.

    Disappointment reared its ugly head as Intel failed to impress investors
    with its earnings announcement last night. While the chipmaker topped its
    revenue and profit forecast for the fourth quarter, its revenue outlook for
    the current quarter was lackluster. The midpoint of Intel's first-quarter
    sales target range came in at $8.2 billion, flat with analysts'
    expectations. Investor expectations were let down again as Yahoo! said it
    earned a fourth-quarter profit of $75 million, or 11 cents a share. The
    news, while up eight cents over the same quarter for the previous year,
    fell flat with analyst expectations of 11 cents per share.

    Topping out the trio that reported last night, Apple Computer announced
    first-quarter earnings of $63 million, or 17 cents per share. This was a
    substantial improvement over its loss of two cents per share for the same
    period a year ago. Sales for the quarter also came in at $2 billion.
    Analysts had forecast a profit of 15 cents per share on sales of $1.93
    billion. Despite its overall positive report, investors grew concerned over
    the company gross margins, which dipped from 27.6 to 26.7 percent, and
    PowerMac sales. The computing giant now anticipates second-quarter earnings
    between eight and 10 cents per share, edging past the Street estimate of
    seven cents per share.

    The banking sector was the hot spot of the day following news that J.P.
    Morgan Chase will buy Bank One for about $58 billion in the biggest
    financial deal Wall Street has seen in six years. The merger will create a
    financial-services behemoth second only to Citigroup in terms of total
    assets. The merger is also expected to bring about 10,000 job cuts
    including executive positions. Meanwhile, speculation was rampant over
    which banking firm would be the next to be snatched up. Earnings news also
    kept things hopping, with Bank of America posting a fourth-quarter profit
    of $2.73 billion, or $1.83 per share. The Street had forecast earnings of
    $1.77 per share. What's more, Commerce Bancorp raked in $56.6 million, or
    71 cents per share, for the fourth quarter. This profit easily trumps its
    profit of 57 cents per share for the same period a year ago and the
    consensus estimate of 69 cents per share.

    The Dow Jones clawed its way back into positive territory by midday, but
    never ventured far from the break-even mark. The average ended the day up
    only 15 points, while 18 of the 30 components finished in the red. Among
    today's list of losers are Alcoa, Citigroup, Intel, International Paper,
    and United Technologies. IBM was one of the strongest gains within the
    blue-chip group, followed by American Express, Hewlett-Packard, and 3M
    Company.

    The tech-laden Nasdaq Composite briefly broke above the surface before
    dipping back into the red. The index closed out the session down by two
    points. It appears that the index is currently consolidating into support
    at its rising 10-day moving average at the 2080 level.

    Levels to watch for in Friday's trading :


    Dow Jones Industrial Average (INDU) - support at 10,000; resistance at 10,
    600


    S&P 500 (SPX) - support at 1090, resistance at 1160


    Nasdaq Composite (COMP) - support at 2000; resistance at 2200
 
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